INDIANAPOLIS – The Indiana House Insurance Committee took the first step toward a more favorable insurance tax climate by unanimously passing a premium tax reduction. The panel voted 11-0 to phase down the state’s premium tax from 1.3 percent of premiums written to 1.0 percent over three years.
House Bill 1250, authored by Insurance Committee Chairman Craig Fry (D-Mishawaka) and co-authored by Ranking Minority Member Mike Ripley (R-Monroe), is an effort by the Indiana Economic Development Corporation to encourage companies to bring jobs to Indiana.
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."
Currently, the insurance industry provides jobs to 56,000 Hoosiers. Insurance employees in the state earn an average of $54,000 a year – more than 150 percent of the state’s average income.
"Indiana is actively recruiting insurance companies to this state," said Mike Chrysler, the IEDC’s Director of Insurance Initiatives. "We are exploring all aspects of the taxation and regulatory environment."
Due to the retaliatory nature of premium taxes, Indiana’s option to pay corporate income tax, and the economic development benefits of the tax reduction, the state would lose very little revenue and the amount of jobs created would cancel any losses.
A 2006 Purdue University study showed that the lower tax would cost the state about $5.2 million. However, additional jobs and economic activity spurred by the tax cut would make the net gain $4.7 million.
"I believe this state is serious about job creation," Williams said. "This is a great way to encourage job growth in the insurance industry."
Principal testimony in favor of the measure was provided by the IEDC, Insurance Commissioner Jim Atterholt, the Association of Indiana Life Insurance Companies, and the Insurance Institute of Indiana. Other industry groups and national trades provided supporting testimony. The bill will now be sent to the House Ways and Means Committee.
The Insurance Institute of Indiana is a non-profit trade association representing insurance companies in the state of Indiana. Its ultimate purpose is to create and maintain a business, legislative and public awareness climate in Indiana that promotes the continued success of the insurance segment in the free enterprise system. Visit us on the web at