AN ANALYSIS OF PROPERTY-CASUALTY INSURERS: Other specification checks

The findings in this study are robust to a battery of additional specification checks. One, some states permit insurers to credit guaranty fund assessments against premium taxes. In those states, the statutory tax rate likely overstates the premium tax burden, and insurers have an incentive to overstate premiums. To assess the effect of guaranty fund assessments on the findings, the regression model was reestimated excluding insurers from six states (Arizona, Florida, Georgia, Hawaii, Louisiana, and Texas) that account for 82 percent of all assessments in the U.S.19 Inferences are qualitatively unaltered.

Two, to control for possible cross-state variation in the demand for insurance, we added the gross state product per capita (as reported in the 1997 U.S. Statistical Abstract) as a regressor. Its coefficient is not significantly different from zero, and its inclusion did not overturn any prior inferences.

Three, the correlation matrix in Table 2 shows no relation between the tax variables and RESTRICT, a measure of a state’s regulatory climate. However, it is conceivable that state tax avoidance might be curtailed in more regulated states. To assess whether tax management varies with an insurer’s operational freedom, we interacted ETR with a categorical variable determined by whether the state’s RESTRICT value exceeded the mean RESTRICT value. When the interaction term is included in the regression, it is not significantly different from zero and other coefficients are qualitatively unaffected. Electronic Payday Loans Online

Four, to determine whether the results vary between large and small insurers, we segregate the sample into the 8,860 insurer-states with greater than $500,000 in premiums and the remaining 3,713 smaller insurers. Conclusions about the effect of state taxes on insurance prices do not vary between subsamples.