ALBANY— “For New York to enjoy a robust recovery from this recession we will need a healthy financial services sector. The insurance industry is a key part of that sector,” said Kenneth Adams, president and CEO of The Business Council of New York State. “Yet, proposed tax and assessment increases on this industry in the Executive Budget could do great harm.”
New York's domestic life insurers are very important to the state's economy. They maintain headquarters in New York City, Binghamton, Syracuse and Albany and directly employ more than 30,000 New Yorkers.
“If the taxes proposed in this budget are enacted, the domestic insurers that have maintained a long commitment to this state will be placed at a serious competitive disadvantage that could threaten New York jobs,” said Adams.
New York's domestic property-casualty insurers are also an important part of the state's economy and employ workers in many parts of the state.
The budget proposal calls for shifting at least an additional $300 million in primarily health care spending that is currently paid for by the General Fund to the Insurance Department budget. By doing this, the state shifts the obligation for paying for these programs to the domestic insurance companies of New York, which are obligated to fund the Insurance Department budget by section 332 of the insurance law.
The laundry list of programs being proposed to be shifted to the Insurance Department budget include, as an example: fire prevention safety programs, early intervention services programs, a forge-proof prescription program and cancer screening programs. Although some of these programs may be worthy, they should not be funded by the domestic insurance companies of New York, which eventually must pass these expenses along in their rates.
The budget is also proposing to increase the premium tax for life and health insurers, even though that tax was last increased just a short time ago in 2003. All told, these tax and assessment proposals will increase the effective tax rate for insurers doing business in New York to an estimated 3% of premium, well above most other states in the nation.
The budget proposal would also extend the section 332 assessments to insurers who are not headquartered in New York. If enacted, the combined proposals to increase the taxes and extend the base of the assessments to out-of-state insurers would trigger retaliatory taxes on New York insurers when they do business in other states, which hurts the companies with their home offices in New York and makes them less competitive.
“These tax and assessment proposals will have a severe economic impact on the life insurance companies of New York, which are already under significant pressure in the current economic environment,” said Thomas E. Workman, president and CEO of the Life Insurance Council of New York (LICONY). “If they are enacted as proposed, these new expenses will be passed along to policyholders of all types of insurance. It is very likely they will be included in the rates of new life insurance policies, making these products more costly at a time when people who need life insurance are least able to bear increased costs."
“Not only would these taxes and assessments damage our domestic insurers, they would increase the costs for businesses and consumers on virtually all insurance products,” said Adams. “These taxes will damage the insurance market in New York.”
Contact: Bill Stroh, BCNYS, 518-465-7511; Diane Stuto, LICONY, 518-436-8417
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