Insurance companies are getting a wakeup call – in the form of new premium tax laws and enforcement actions by state and local governments and courts. In Kentucky, Florida, South Carolina, and other states, uncollected or improperly allocated premium taxes are seen as money left on the table by cash-strapped local governments – and now these municipalities are demanding that insurers pay up.

“Premium taxes are a necessary evil of doing business,” says Brett Whitcomb, Hartford-based senior manager in charge of Deloitte Tax’s insurance tax group. These assessments are levied by all state governments, usually on the net premium income collected in that state by insurance companies. Naturally, no insurer likes states’ premium taxes – but historically, insurance companies haven’t worried about them much either.

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