Insurance companies in the United States are expected to benefit from a reduced corporate tax rate, which fell to 21 percent from 35 percent on January 1, but that doesn’t mean you should expect a break on car-insurance premiums anytime soon. Like other big businesses, insurers applauded when tax-reform legislation was signed into law near the end of 2017. Property and casualty insurers are less enthusiastic, however, to hear consumer advocates argue that a break in taxes means policyholders should get a break on rates.
In late January, the Consumer Federation of America (CFA) and the Center for Economic Justice (CEJ) sent a joint letter to insurance commissioners in 50 states and the District of Columbia, calling on them to immediately require insurers to lower rates, which the groups described in the letter as already “excessive.” The CFA and CEJ point out that the lower tax rate will have a positive impact on the insurers’ profit provision, which is baked into insurance rates?along with claims and other expenses?that they submit to state regulators. The groups said that if state insurance commissioners do nothing to force lower rates, the profit windfall for insurers will be $25 billion or more, with no benefit to consumers. “No matter how you calculate it, it’s a big windfall [for insurance companies],” J. Robert Hunter, the CFA’s director of insurance, told Car and Driver. Not surprisingly, insurance lobbyists disagree...