Insurance affects everything, and everything affects insurance. It is generally understood that insurance allows those who participate in the economy to produce goods and services without the paralyzing fear that some adverse incident could leave them destitute or unable to function. However, few people are aware of the extraordinary impact the industry has on state, local and national economies. Here are five ways that happens:
Driving Economic Progress
The insurance industry is a major U.S. employer, providing some 2.6 million jobs, according to the Current Population Survey from the U.S. Department of Labor.
Insurers contribute more than $413 billion to the nation’s gross domestic product.
In 2013, property/casualty insurers and life insurers incurred federal and foreign taxes of about $20.6 billion. Insurance companies, including life/health and property/casualty companies, paid $17.4 billion in premium taxes to the 50 states in 2013, or about 2% of all state taxes.
Investing in Capital Markets
Insurance companies also help support the economy by investing the funds they collect for providing insurance protection. The industry’s financial assets were about $6 trillion in 2013, including $1.2 trillion for the property/casualty sector and $4.7 trillion for the life sector.
In 2013 alone, property/casualty insurers’ holdings in municipal bonds totaled $326 billion, according to the Federal Reserve. Life insurers held $1.8 trillion in corporate stocks and $2.2 trillion in corporate and foreign bonds in 2013, according to the Federal Reserve.
Supporting Resiliency and Disaster Recovery
Property/casualty insurers covered $35 billion in catastrophe losses in the U.S. in 2012 and $12.9 billion in 2013, according to the Property Claim Services (PCS) division of Verisk.
Supporting Businesses, Workers, Communities
Property/casualty insurers pay out billions of dollars each year to settle claims. Many of the payments go to local businesses, such as auto repair companies, enabling them to provide jobs and pay taxes that support the local economy.
Life insurance benefits and claims totaled $586 billion in 2013, including life insurance death benefits, annuity benefits, disability benefits and other payouts. The largest payout, $249 billion, was for surrender benefits and withdrawals from life insurance contracts made to policyholders who terminated their policies early or withdrew cash from their policies.
Specialized insurance products protect lenders and borrowers, shielding businesses such as exporters from customer defaults and facilitating the financing of mortgages and other transactions. These products include credit insurance for short-term receivables.
Credit insurance protects merchants, exporters, manufacturers and other businesses from losses or damages resulting from the nonpayment of debts owed them for goods and services provided in the normal course of business. Credit insurance facilitates financing, enabling insured companies to get better credit terms from banks.
For the full report from which this article is adapted, click here.