Insurance Companies Who Invest in Developing Their Technology to Improve Services for Agents, Customers and Other Associates May be Able to Take Advantage of Tax Credits
Insurance companies have started to shift away from the traditional methods in which they provide customers and partners with insurance services. The main change has been the integration of technology in the insurance industry which has made it much easier for people to navigate and access the benefits and services these companies provide.
Keeping up with and being able to transition to technology efficiently, however, requires a good deal of research and development. What insurance companies don’t know is that these investments in technology can actually qualify them for substantial R&D tax credits.
What are R&D Tax Credits and How Do They Apply to Insurance Companies?
R&D tax credits are federal and state tax credits that were formed to incentivize businesses to grow through innovative research and developmental projects or activities. The tax credits given to businesses are based on a percentage of the qualified research expenses (QREs) needed to complete research or development projects compared to prior years. This tax credit can either decrease what a company owes on taxes or is a direct credit your business can pocket.
Many of the activities that insurance companies invest in do fall under these QREs, but they are unaware of this and the large benefit they could receive on their taxes. Typically any investment that uses technology or an automated process to maximize workflow, efficiency or a historically manual process will be considered a research expense because you are providing customers with an easier way to receive services and access information.
What Types of Activities Would Count as R&D Expenses?
Technology plays a huge role when it comes to R&D tax credits for insurance companies because it involves innovative development, is not commercially available and requires economic risk. Some examples of this include:
- Any technology that improves how insurance companies analyze data, track policies or process claims for a customer
- Improvements to the portal experience in which people can access their insurance information or services (i.e. app developments where patients can view medical documents and records easily, submit claims, or view alerts)
- Systems that provide support for certain office functions such as automated billing or accounting
- Systems that track customers’ behavioral patterns to improve services and plans for customers (i.e. car insurance companies who track safe driving and provide rewards or discounts to safe drivers)
- Any other technological updates that help make services better, faster and safer for customers
How Would You Claim These Credits?
Getting together and calculating these credits can be a complicated process that includes accurately tracking the time and expenses that meet the eligibility requirements. Credits can be calculated by comparing current-year numbers to figures from the three preceding years.
To get the most on your return, having a team of tax professionals to help get your expenses together and break down what your company can claim will make the process a lot smoother. National Tax Group has an extensive team of tax experts that can help. Call (561) 257-3436 and set up your free assessment to see if your insurance company qualifies for lucrative R&D tax credits.