AN ANALYSIS OF PROPERTY-CASUALTY INSURERS: State-specific Control Variables 4

Direct writers are identified based on a list of no-fault insurers in 1993 supplied by the A.M. Best Co. The population of each state in 1993 is collected from the 1994 U.S. Statistical Abstract.

The sample is limited to property and casualty insurance companies that operate in more than one state (multistate insurers). The sample is further restricted to stock insurers, the industry’s principal ownership structure, to control for possible variation across organizational forms (e.g., see Mayers and Smith 1988, 1994). The data produce 19,239 insurer-states in 1993. Observations with extreme values of PRICE (less than one-half or greater than three) are deleted from the sample, leaving 12,573 insurer-states.12 They include 920 insurers with the median insurer underwriting in nine states. itat on

Descriptive Statistics

Table 1 presents descriptive statistics for the regression variables. Mean and median PRICE is 1.61, reflecting a 61 percent markup from losses on insurance products. ETR ranges from 0.6 percent to 2.8 percent with a mean and median value of 1.5 percent, indicating that, on average, insurers remit 1.5 percent of a policy’s premiums in state taxes. Ten percent of the insurer-state observations are from the seven states that levy income taxes on property-casualty insurers. Mean (median) PREMRATE is 2.4 (2.3) percent. Mean INCRATE is 0.6 percent, implying that the 1,222 observations from states with insurer income taxes face an average income tax rate of 6.4 percent.