Premium Taxes

  • The States feared the loss of large revenues received from taxation of the insurance business.1  (p221)'

1948 - LR - Statutory Regulation of Life Insurance Investment, by W. Page Keeton, Yale - 21p 

  • As you may know, Alabama has a $1.3 billion per year insurance business, resulting in $240 million of insurance premium taxes every year.
    • A proposed optional Federal insurance charter not only could reduce this important source of State revenue in an era of tight State budgets and dwindling State income taxes but will also threaten the ability for States to adequately fund their State insurance departments.
    • Issues such as state insurance premium taxes must be addressed as part of any optional Federal insurance charter.  (p6)

--  Senator Spencer Bachus (R-AL)

2003 1105 - GOV (House) - Reforming Insurance Regulation: Making the Marketplace More Competitive for Consumers - [PDF-200p, VIDEO-?] 

  • By the 1940s, taxation of insurers was the single largest source of revenue to the states.
  • Thus, when the Supreme Court reversed itself in 1944, ironically in an antitrust action under the federal Sherman Antitrust Act, and held that the business of insurance was “in or affecting interstate commerce”, the states faced the loss of a significant source of revenue.
  • Utilizing their own trade association, the National Association of Insurance Commissioners (the “NAIC”), the states drafted and the next year with a few modifications Congress enacted legislation, the McCarran-Ferguson Act, exempting the business of insurance from federal antitrust laws to the extent regulated by state law.
  • Since 1945 the states in the United States have continued to be the regulators of insurance even as taxation of insurance has declined as a relative source of revenue to state treasuries.
  • Attached hereto as Appendix A is a summary of the McCarran-Ferguson Act and of recent judicial decisions interpreting the Act.  (p201)

1998 - OECD - Competition and Related Regulation Issues in the Insurance Industry, Organisation for Economic Co-operation and Development -  272p

  • MR. BRONSTEIN: One of the things we noticed, too, was that on 1035 exchanges on life insurance products, we couldn’t identify one of the systems.
    • At least the output couldn't identify that it was a 1035 exchange, so we were paying premium tax twice.

2001 - SOA - Data Quality, Society of Actuaries - 25p