Ind. Legislative Proposal Would Lower Premium Tax to 1 Percent

A national insurance trade group provided supporting testimony this week, as Indiana took a step forward in attracting more insurance jobs to the state by lowering its insurance premium tax to 1 percent.

“The House Insurance Committee’s unanimous approval of HB 1250 is a tremendous start for the bill, but there is a long legislative road ahead,” said Tami Stanton, NAMIC Central Region State Affairs manager for the National Association of Mutual Insurance Companies (NAMIC). “By lowering the premium tax, Indiana will be more competitive with states such as Illinois, Iowa, Nebraska, South Carolina and Wyoming that, in general, have lower premium tax rates than Indiana’s current 1.3 percent.”

Stanton added that HB 1250 will be assigned to the Ways and Means Committee for another hearing due to the fiscal impact on the state. According to fiscal analysis testimony provided by the state and the insurance industry, the amount of money Indiana’s general fund receives from insurers will continue to grow but at a lower percentage rate under HB 1250. The National Association of Insurance Commissioners (NAIC) reports Indiana’s total revenue from the insurance industry in 2004 was $183,455,189.

Insurance Institute of Indiana President Steve Williams testified that this bill would make Indiana’s premium tax among the lowest in the nation. This would eliminate any retaliatory penalties Indiana domestics pay to write business in other states.

“This is a fantastic financial incentive for insurers to bring their business, their employees and their investments to Indiana,” Williams said. “Lowering the premium tax and minimizing the retaliatory taxes is no small thing.”

Authored by Rep. Craig Fry, D, HB 1250 lowers the premium tax rate over a 3-year period, beginning with a reduction to 1.2 percent in 2008, followed by 1.1 percent in 2009 and, finally, down to 1 percent in 2010. The bill emanates from the Indiana Economic Development Council, the entity created by Gov. Mitch Daniels, R, to strengthen the Hoosier state’s economic development strategy.

In testifying for the bill, Insurance Commissioner Jim Atterholt said when he meets with CEOs currently headquartered in other states, their first question is always about Indiana’s premium tax rate.

Indiana previously lowered its premium tax with legislation passed in 2001, which dropped the rate from 2 percent to 1.3 percent over a five-year period.

Source: NAMIC, Insurance Institute of Indiana