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PROPERTY & CASUALTY INDUSTRY IN NEW YORK STATE IS OVERTAXED, YET NEW BUDGET HITS INSURERS FOR $64M IN NEW TAXES, FEES: PRICE WATERHOUSE STUDY

PROPERTY & CASUALTY INDUSTRY IN NEW YORK STATE IS OVERTAXED, YET NEW BUDGET HITS INSURERS FOR $64M IN NEW TAXES, FEES: PRICE WATERHOUSE STUDY
 NEW YORK, April 13 /PRNewswire/ -- Nearly $64 million in new income taxes, corporate taxes, and fees will be levied on an already overtaxed property and casualty insurance industry in New York state when Governor Cuomo signs this year's budget bill into law, the Alliance of American Insurers said here today.
 "New York's 1992-1993 budget legislation levies substantial new taxes on the P&C industry at a time when it is being overtaxed compared to other industries in the state," said Alliance Vice President John Cucci.
 "A study just compiled by Price Waterhouse clearly shows that the property and casualty industry in New York state was subject to an effective tax rate of 22.7 percent over the five-year period from 1985- 1989, while the effective tax rates for comparison industries in the manufacturing, retail trade, and banking sectors ranged from 5.1 to 10.6 percent over the same period," he continued.
 The Alliance official also pointed out that "the amount of state income tax paid by New York insurance companies increased 80 percent from approximately $161 million in 1985 to $290 million in 1989. By contrast, total state collections by the New York State Department of Taxation and Finance increased by 29 percent for the same period."
 According to the Alliance, "$37 million of the total new property and casualty tax is directly attributable to the state's failure to protect New York insurers from changes in the federal tax law, a protection it extended to other industries similarly affected. As a result, property and casualty insurers now face new state income tax liabilities and they and their policyholders will be adversely affected in the following way:
 -- The new tax is regressive since companies with modest profitability are the most severely impacted because of the way the tax is structured.
 -- The new tax could pose solvency problems for marginal insurers, jeopardizing their ability to provide necessary insurance for their customers.
 -- The new tax sends the wrong signals to companies struggling to provide markets in New York state and could influence them to redirect their capacity to other jurisdictions."
 The Alliance said that workers compensation insurance would be hit especially hard by this portion of the new tax burden.
 "Workers compensation has already been subject to high double-digit rate increases, placing a burden on business costs, making it more difficult to remain in New York and still be competitive with business in other states. Workers compensation rates rose approximately 29 percent in 1990 and 15.3 percent in 1991. These were average increases and for some businesses the rate of increase was substantially higher," the Alliance noted.
 The trade group also pointed out that rising health care costs are a critical issue in New York state and countrywide and that "accident and health insurance coverages written by property and casualty companies are directly subject to the new $37 million tax, contributing to rising health insurance costs and indirectly increasing health care provider fees which add to the spiraling cost of health care in New York state."
 "This year's budget bill also imposes a permanent one-dollar fee on all auto insurance policies statewide. The fee will raise about $11.5 million which was supposed to be earmarked to fight the state's critical auto theft problem by hiring more police and prosecutors to be assigned only to anti-car theft duties. Instead, most of the money was diverted to general revenues where it will be used for general operating expenses of the state police," Cucci said.
 "Right now, car thieves are apprehended, accept a plea bargain and are out the next day stealing more cars. The $11.5 million to be paid in by our policyholders was to be used to set up an Auto Theft Prevention Authority (ATPA) modeled on the highly successful Michigan program. The trade-off for the one-dollar fee was to initiate a program to reduce car thefts, which would lead to a substantial reduction in car insurance rates as was the case in Michigan," said Cucci.
 "In 1990, New York City alone led all U.S. cities in the number of cars stolen. Statewide there were 171,007 auto thefts. Data for 1991 shows only a slight improvement in this bleak picture. Because of a lack of police resources and prosecutors to assign to auto theft cases, only 3/10 of 1 percent (or 206) of the state's prison population of 55,000 inmates are serving time for grand theft auto.
 "When auto theft rates go up in an area, so do insurance rates. As an area becomes a bigger risk, insuring vehicles becomes more costly for insurers. And when insurers pay more, so do their customers," he continued.
 "Thanks to the efforts of Senator Guy Velella (R-Bronx-Westchester), chairman of the Senate Insurance Committee, about $2 million of the $11.5 million will be used only for the detection, prevention or reduction of automobile theft for a two-year trial period with not less than 50 percent of the $2 million earmarked for cities with populations of one million or more.
 "Senator Velella fought hard for this portion of the program and has been a strong advocate of anti-car theft and insurance fraud legislation," Cucci said.
 "New York state's property and casualty industry also took an additional $15 million hit in this year's budget when a so-called temporary corporate tax surcharge on all insurers that was supposed to be reduced this year and expire next year was raised to 15 percent for 1992 and extended through 1993.
 "The property and casualty industry is well aware of the state's budgetary and fiscal dilemma and the need for additional revenues. We would caution, however, against an assumption that it is in the best economic interest of New York state to keep taxing the insurance industry more than other businesses. This is a very shortsighted tax policy that is economically harmful, regressive, disruptive, and adversely impacts, most severely, on very sensitive lines of insurance. It also unfairly raises the price of essential insurance coverages for our millions of policyholders statewide," he concluded.
 The Alliance of American Insurers is a national insurance trade group representing 170 member companies, who write over $2 billion for all lines of insurance in the state of New York.
 -0- 4/13/92
 /CONTACT: Sarah Phillips of Alliance of American Insurers, 212-608-8800/ CO: Alliance of American Insurers ST: New York IN: INS SU: LEG


GK-TS -- NY034 -- 7694 04/13/92 11:22 EDT
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Date:Apr 13, 1992
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