The Impact of State Taxes on Self-Insurance: Closing remarks

5. Closing remarks
In summary, this paper finds self-insurance of property-casualty risks increases in state taxes. Tests are conducted assessing the relation between a state’s property-casualty insured losses and its tax levy on the insurance industry. As expected, a negative relation holds for nonautomobile coverage and automobile physical damage coverage. Similar relations are detected for workers’ compensation benefit payments. These findings are consistent with consumers opting to self-insure rather than bear the incidence of higher insurer taxes. Continue reading

The Impact of State Taxes on Self-Insurance: NOPRIVATE

North Dakota and Wyoming are excluded from the analysis because they prohibit selfinsurance, and Texas is excluded because 1993 was the first year that it permitted self-insurance. For the 47 remaining states, the percentage of workers’ compensation not covered through selfinsurance ranges from 54 percent to 92 percent with a mean (median) of 77 (79) percent and a standard deviation of 9 percent. A categorical variable (NOPRIVATE) is added to the explanatory variables to identify the four states (Nevada, Ohio, Washington, and West Virginia) that restrict coverage to self-insurance or state funds. Continue reading

The Impact of State Taxes on Self-Insurance: Workers’ compensation

4.6 Workers’ compensation
The preceding section shows that the results hold when premiums are employed as the dependent variable capturing insurance coverage. This section extends the robustness checks by employing a different dependent variable to test the relation between taxes and self-insurance of a specific line of property-casualty insurance, workers’ compensation. Workers’ compensation is essentially mandatory for all employers. Most states permit businesses to cover workers’ compensation through private insurance, government funds, or self-insurance (assuming the business can show sufficient wherewithal). Continue reading