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“The 2004 Fiscal Year budget proposal newly released by the Massachusetts House Ways and Means Committee would make it more expensive for insurers to do business in the Commonwealth and open insurers domesticated in Massachusetts to the possibility of retaliatory taxes from other states,” said the Alliance of American Insurers (AAI) in a written statement.
According to the Alliance the proposals in HB 4000, “establishes a new assessment on insurers to fund the Division of Insurance, creates two new insurance claim intercept requirements and consolidates several existing fire service assessments into one larger assessment.”
Frank O’Brien, VP of the Alliance’s New England Region, stated, “The Massachusetts insurance industry already pays substantial sums to the Commonwealth, yet this budget bill asks for even more.” Traditionally, the division is primarily funded via a combination of the General Fund and the Division of Insurance Trust Fund, which is, in turn, funded by agent licensing fees. In addition, insurers already pay to fund a substantial portion of the Department of Fire Services. “Any increase in these fees will ultimately increase the cost of insurance in Massachusetts,” O’Brien explained.
He also pointed to the troubling unintended consequences increases in such levies might have. “The increased assessments contained in this budget would almost certainly provoke retaliatory taxes from other states on Massachusetts-based insurers in attempts to get back the increased income their domestics are depositing into the Commonwealth’s coffers,” O’Brien stated. “This will create a ripple effect in other states and increase the cost of doing business for many non-Massachusetts-domiciled insurers.”
Meanwhile, the claim intercept portion of the bill would impose additional costs on insurers by requiring them to check if certain claimants have received medical assistance or transitional assistance benefits from the state. “This section of the budget bill is vague and impractical,” O’Brien indicated. “It will produce significant delays in claims processing and create additional expense for every insurance transaction in the Commonwealth. Not enough thought has been given to whether the costs of imposing this unique requirement will outweigh its potential benefits.”
“For these and other reasons, the Alliance will oppose the assessment funding of the Division of Insurance and the insurance claim intercepts,” O’Brien continued. “The Alliance will work to educate members of the legislature on the nuances of retaliatory taxation, the reality of a hardening market, and the impact of the perfect storm of guaranty fund assessments, lower investment returns, higher reinsurance costs and higher loss ratios.”