To qualify for the tax exemption, insurers have to maintain a minimum farm/fishing premium of 25% of their total written premium. According to the Department of Finance, in 2014, some 40 companies were still benefiting from the tax exemption, 37 of which were farm/fishermen mutual insurers, most of them small mutuals.
A number of these farm mutual insurance companies report that their continued existence depends on the tax exemption.
The three non-mutual insurers benefiting from the tax exemption do so through a special tax exemption giving them an unfair advantage over mutual insurers.
Because of the evolution of the rural landscape, and the resulting effect on insurance, the average farm mutual insurance company reports doing 15% of its business with farmers and fishers. In CAMIC's pre-budget submission, we recommended that the qualifying threshold be reduced to 5% of the total written premium, in concert with the elimination of the special tax treatment given to the three non-mutual insurers. The suggested measures would have been cost revenue neutral to the federal government.
While the government has not agreed to bring about the recommended changes, we fear that the elimination of the total tax exemption, as proposed under Bill C-44,, will have a very negative effect on mutual insurers of farmers and fishers.
We, therefore, recommend that paragraph 149(1)(p), and subsections 149(4.1) to 149(4.3) of the Income Tax Act be maintained as they are currently exist.
In closing, let me point out that farm mutual insurance companies provide significant benefit to the small rural communities in which they are located. They ensure that insurance is available at all times, even when the market is tight. Mutual insurers are also significant employers in their community. They purchase locally sourced goods and services whenever possible, and participate in the betterment of their community.
Thank you for considering CAMIC's recommendation.