Insurers Oppose Premium Tax to Fund Washington’s Wildfire Prevention

Lobbyists for the property and casualty insurance industry are trying to prevent a $125 million increase in Washington state premium taxes that would fund wildfire prevention and suppression.

The tax would affect home, auto and business insurance in an action that would be unfair to consumers, argues the American Property Casualty Insurers Association, the National Association of Mutual Insurance Companies and the Northwest Insurance Council.

The groups claim that Washington’s existing premium tax – a 2 percent tax on all insurance premiums paid ultimately by consumers – currently generates $1.4 billion in revenue to help fund state government programs and services, including fire services and agencies.

“Taxes on insurance companies and our customers are contributing to support the state budget – including efforts to train wildland firefighters, prevent loss and improve forest health – and insurance consumers are doing their part to protect the investment they make in their homes, vehicles and businesses when they buy insurance,” said APCIA’s State Government Relations Vice President Mark Sektnan. “Improving forest health and protecting wildlands and communities is a societal good, and should be a priority shared by all taxpayers, not just insurance consumers.”

Senate Bill 5996, introduced the same week as House and Senate Democrats proposed a $54 billion two-year state budget, would impose an additional 0.52 percent tax on all lines of property and casualty insurance, on top of the existing 2 percent insurance premium tax, the lobbying groups said. Revenue from the tax increase would go into a newly-established “Wildfire Prevention and Suppression Account” to add funding for the state Department of Natural Resources and other state agencies, including the military department, the state parks department and the Washington State Patrol.

Supporters argue the money is needed to pay for wildfire suppression and prevention, as part of a 10-year plan to reduce wildfire risk.

The insurance lobbyists insist that carriers aren’t disputing whether such programs are needed or valuable. Instead, they worry that that legislators are replacing funds currently available in the state’s general fund budget – paid for by all taxpayers – with funds that will come from a single source: insurance premiums paid by P&C insurance policyholders.

NAMIC Senior Regional Vice President Christian Rataj argued in prepared remarks that the proposed legislation amounted to a “hidden tax” on insurance consumers for matters that “are or should be addressed in the state’s taxing system.”

As proposed, the 25 percent tax increase will apply to not just personal or commercial property insurance, the insurance lobbying groups argue. SB 5996 would increase the tax on all P&C lines including home, auto, commercial property, business owners’ liability, medical malpractice, inland marine, construction contractor liability, municipal and school district excess liability, umbrella policies, even insurance for mobile phones.

In addition to the state’s existing 2 percent premium tax, P&C insurance companies also pay a .125 percent (one-eighth of one percent) premium tax surcharge that fully funds the operation and staff of Washington’s Office of Insurance Commissioner.

NWIC President Kenton Brine, whose members include Washington-domiciled insurers, warned that the tax increase would put Washington-based insurers at a competitive disadvantage to out-of-state companies as they compete for business in neighboring states and lower-tax states across the country.

SB 5996 was scheduled for a public hearing in the state Senate Ways and Means Committee on Monday, April 8. At the hearing, insurance agents and companies, along with some of the state’s major employer industries, were to testify against the tax increase, urging legislators instead to use existing revenues, which include $1.4 billion in taxes paid by insurance companies and insurance consumers.

Sources: APCIA, NAMIC, NWIC

This story first appeared in our sister publication, Carrier Management.