When people think about the insurance industry, they seldom think of it in terms of employment, tax base and investment capital. In truth, it's a major player in each of these categories. Rather, most people think about their last insurance premium they paid. Or perhaps they think about the peace of mind they gain when they purchase an insurance policy.

The ability to insure automobiles and houses is essential to everyone. Without insurance, few people could afford the risk of owning a home or car. Lenders could not afford the risk of making automobile or home loans. Similar to home and auto owners, entrepreneurs could not afford to make investments without insurance. Who could afford to build a new factory or store if they risked losing their entire investment to an accidental fire or other peril?  The availability of insurance services is essential to the functioning of a modern economy.

Beyond its role of providing a vital service, the insurance industry, and property/casualty insurers in particular, play other important roles in the U.S. economy. The insurance industry is a large employer with an estimated 2.3 million employees in 2006. Arizona's insurance industry employed an estimated 49,000 people in 2005 with a statewide payroll of $2,598,284,000.

The Insurance Industry as an Investor

The Insurance industry is also a large investor. Insurance companies must maintain a pool of funds to back up their promise to pay the claims of their policyholders. These funds are invested with government and private industry through insurer purchases of stocks, bonds and other investments. Insurance companies'financial assets totaled $1.2 trillion in 2005. Most of these assets were invested in highly liquid securities (high quality stocks and bonds, rather than real estate) which can be sold quickly to pay claims in the event of a major catastrophe.

In 2005, the insurance industry's investments were comprised of 28% in corporate and foreign bonds, 21% in stocks, 30.5% in municipal securities and 20.5% in US government securities.

Through the purchase of state and local government bonds, U.S. Government securities, corporate stocks and bonds the insurance industry represents an important source of funds to the nation's credit and equity markets. Without investment capital, our country could not build new factories, roads, schools, communication systems, and other facilities needed for economic growth.

The Insurance Industry as a Taxpayer

The insurance industry is an important source of tax revenue to the federal and state governments. In 2005, insurers paid $15 billion in premium taxes to the 50 states. Premium taxes accounted for 2.3% of all taxes collected by the states in 2005.

Choosing a Career in the Insurance Industry

Source: Insurance Information Institute; Arizona Department of Insurance