April 21, 2010 by Canadian Underwriter
Slightly more than 11% of the $38.4 billion of the insurance industry’s 2008 revenues went towards regulatory and tax costs, according to a PricewaterhouseCooper’s (PwC) report.
Insurance Bureau of Canada commissioned PwC to study, for the first time, both the tax burden and the regulatory costs borne by the insurance industry.
Total taxes borne by the industry in 2008 amounted to $4.3 billion, of which $0.6 billion was income taxes, PwC found.
“This means that for each $1.00 of income taxes the industry paid, it absorbed an additional $5.63 in other taxes,” the report’s executive summary says.
Twenty-eight insurers provided survey data on regulatory costs to PwC, representing about 54% of the industry’s total market share.
Those survey respondents reported $45 million in borne regulatory costs in 2008. When PwC extrapolated this to the entire industry, it estimates this figure to be about $85 million.
The distribution of the regulatory costs were as follows:
• 53% – funding regulators;
• 19% – statistical reporting;
• 18% – auto insurance rate regulation and compliance;
• 5% – licensing fees;
• 3% – regulatory service charges; and
• 2% – market conduct surveys.