KPMG: Big insurers’ tax burden depends on election results

Heading into the US presidential and congressional elections is a mixed bag for major insurance companies, according to government and tax experts from KPMG, who spoke at the insurance industry consultancy’s recent annual conference.

Members of Congress “know that the insurance industry is present in all their cities,” said Libby Coffin, managing director, government affairs and public policy office, KPMG LLP.

“People in their towns often know who their insurance agents are, and their auto insurers or their homeowners insurance are people in their communities who put their names and businesses on softball jerseys and show up in the community. There is a counterbalance there. that they think the industry is necessary and provide a very good service.”

“On the other hand,” she continued, politicians are “always sensitive to the costs that affect their constituents, and there is a skepticism about any business that is seen as big.”

Coffin added that the best course for large insurers, who likely have their own government relationships and engagement with members of Congress and local officials, is to cultivate those relationships on a regular basis, so when there’s a crisis in the industry, insurers “step into the door with this. credibility and have the ability to share facts that complement what might appear in the news.”

Another possible political factor is a shift in Republican attitudes toward big corporations, found in Pew Research data was presented at the conference. Positive attitudes toward banks among party members polled fell from 63 percent in 2019 to 38 percent in February 2024. Republicans’ overall opinion of big corporations fell from 54 percent in 2019 to 32 percent this year.

The outcome of the election will shape the tax impact for large corporations, including insurance companies, especially since the Tax Cuts and Jobs Act, passed in 2018, expires in 2025. It included certain tax increases for the insurance industry, according to John Gimigliano, director . , fee, KPMG LLP.

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“A lot of people in the industry have said, ‘Why did we, like no one else, seem to get hit with specific tax increases that apply to one industry?’ It’s a really interesting question,” he said. “It’s kind of a cautionary tale, that as we go into this exercise in 2025, where we’re looking at the strong possibility of further tax increases, you have to ask, are we going to be treated differently? And if so, why?”

Where Congress and the government go with taxes for insurers and everyone else will depend on the outcome of the election. Republican control will make tax cuts a priority, Gimigliano noted, while Democrats won’t move as quickly on tax legislation. If Democrats control only the House, where tax legislation is constitutionally required to begin, that would be the case even without control of the Senate.

Another issue for insurers that could be affected by who wins power in the election is regulators’ calls for data from insurers. The National Association of Insurance Commissioners (NAIC), the group of state insurance regulatory authorities, data collected earlier this year and worked on a report that will go to the Federal Insurance Office, a unit of the US Treasury.

While the data call is “limited to industry concern,” Coffin said, a Kamala Harris victory or Democratic control of the Senate would bring greater leverage to Sen. Elizabeth Warren in her efforts to extract data from the private sector. as with NAIC’s data callto support government regulation.