N.H. to insurance companies: Come home

New Hampshire is making a full-court press to bring insurance companies that once were domiciled here back to the Granite State, but the state’s insurance-tax structure may muddy the welcome mat.

The state Department of Insurance and the Department of Resources and Economic Development have teamed up to exhibit at the American Council of Life Insurers Annual Conference, Oct. 17-19, in Baltimore, Md., to spread the word about the benefits of redomesticating to New Hampshire.

“We’re hoping to meet with key executives and decision-makers at the conference,” said Michael Bergeron, business development manager with DRED, speaking to NHBR from the conference. “Hopefully, we can drum up enough interest for formal discussions later in New Hampshire or at their headquarters.”

New Hampshire, however, may have a bit of a challenge ahead of it convincing carriers of the state’s insurance-friendly climate.
For many years, the state’s premium tax rate sat at 2 percent. The state also charged insurance companies domiciled in another state with a higher tax rate to pay that higher rate on New Hampshire premiums. Those domiciled in the Granite State but paying lower premium taxes elsewhere, ended up paying 2 percent in those lower-taxed states for the same defensive reason. The unintended effect was that insurance companies fled the state in dozens.

The state then attempted to rectify the situation in 2006 by phasing in a tax cut in increments down to 1 percent by 2011 – effectively giving New Hampshire the lowest rate in the region.But earlier this year, the Legislature repealed within the 2010 budget bill the last step which would have moved the tax rate from 1.25 percent to 1 percent in January, holding it instead at 1.25 percent.

And as of July 1, the surplus lines tax rate was raised to 3 percent, up from 2 percent. Originally, lawmakers had sought a 4 percent tax rate, said the industry publication Insurance Journal.

(Surplus lines insure individuals and businesses when they are unable to obtain policies through the regular market.)
This year’s budget bill also included a provision to study business taxes, including the possibility of offering tax credits to insurance companies that create net new jobs in New Hampshire.

Bergeron said he didn’t think recent insurance tax legislation nor possible future budget shortfalls would be a big detractor to having insurance companies redomicile in the Granite State.
“Budget deficits are a national issue,” he said. “Every state has a deficit.”

Instead, Bergeron said he felt there were far more positive incentives than potential negatives.

“The way to attract companies to New Hampshire is to have a business-friendly regulatory environment and low business taxes,” he said. “Furthermore, New Hampshire – even with a premium tax at 1.25 percent – is still one of the lowest in New England.”

To help communicate the advantages of redomiciling in New Hampshire, DRED and Epiphanies Inc., a Gilford-based Web marketing firm, are getting the word out on social media sites like Twitter and Facebook.

“Using social media tools is new in this arena and will help create visibility for New Hampshire,” said Bergeron. “People have such a positive emotional connection to the state – they vacationed here, went to school here. There’s a good argument to be made for New Hampshire with a low insurance premium tax and no personal income or sales tax. Social media provides us another way to communicate this.” – CINDY KIBBE/NEW HAMPSHIRE BUSINESS REVIEW