 Insurance
 Industry
Overview
The insurance industry provides protection against financial losses
resulting from a variety of perils. By purchasing insurance policies,
individuals and businesses can receive reimbursement for losses due to
car accidents, theft of property, and fire and storm damage; medical
expenses; and loss of income due to disability or death.
 The
insurance industry consists mainly of insurance carriers (or insurers )
and insurance agencies and brokerages. In general, insurance carriers
are large companies that provide insurance and assume the risks covered
by the policy. Insurance agencies and brokerages sell insurance policies
for the carriers. While some of these establishments are directly
affiliated with a particular insurer and sell only that carrier's
policies, many are independent and are thus free to market the policies
of a variety of insurance carriers. In addition to supporting these two
primary components, the insurance industry includes establishments that
provide other insurance-related services, such as claims adjustment or
third-party administration of insurance and pension funds.
Insurance carriers assume the risk associated with annuities and
insurance policies and assign premiums to be paid for the policies. In
the policy, the carrier states the length and conditions of the
agreement, exactly which losses it will provide compensation for, and
how much will be awarded. The premium charged for the policy is based
primarily on the amount to be awarded in case of loss, as well as the
likelihood that the insurance carrier will actually have to pay. In
order to be able to compensate policyholders for their losses, insurance
companies invest the money they receive in premiums, building up a
portfolio of financial assets and income-producing real estate which can
then be used to pay off any future claims that may be brought. There are
two basic types of insurance carriers: direct and reinsurance. Direct
carriers are responsible for the initial underwriting of insurance
policies and annuities, while reinsurance carriers assume all or part of
the risk associated with the existing insurance policies originally
underwritten by other insurance carriers.
 Direct
insurance carriers offer a variety of insurance policies. Life insurance
provides financial protection to beneficiaries--usually spouses and
dependent children--upon the death of the insured. Disability insurance
supplies a preset income to an insured person who is unable to work due
to injury or illness, and health insurance pays the expenses resulting
from accidents and illness. An annuity (a contract or a group of
contracts that furnishes a periodic income at regular intervals for a
specified period) provides a steady income during retirement for the
remainder of one's life. Property-casualty insurance protects against
loss or damage to property resulting from hazards such as fire, theft,
and natural disasters. Liability insurance shields policyholders from
financial responsibility for injuries to others or for damage to other
people's property. Most policies, such as automobile and homeowner's
insurance, combine both property-casualty and liability coverage.
Companies that underwrite this kind of insurance are called
property-casualty carriers.
Some insurance
policies cover groups of people, ranging from a few to thousands of
individuals. These policies usually are issued to employers for the
benefit of their employees or to unions, professional associations, or
other membership organizations for the benefit of their members. Among
the most common policies of this nature are group life and health plans.
Insurance carriers also underwrite a variety of specialized types of
insurance, such as real-estate title insurance, employee surety and
fidelity bonding, and medical malpractice insurance.
A relatively recent act of Congress allows insurance carriers and other
financial institutions, such as banks and securities firms, to sell one
another's products. As a result, more insurance carriers now sell
financial products such as securities, mutual funds, and various
retirement plans. This approach is most common in life insurance
companies that already sell annuities; however, property and casualty
companies also are increasingly selling a wider range of financial
products. In order to expand into one another's markets, insurance
carriers, banks, and securities firms have engaged in numerous mergers,
allowing the merging companies access to each other's client base and
geographical markets.
 Insurance
carriers have discovered that the Internet can be a powerful tool for
reaching potential and existing customers. Most carriers use the
Internet simply to post company information, such as sales brochures and
product information, financial statements, and a list of local agents.
However, an increasing number of carriers are starting to expand their
Web sites to enable customers to access online account and billing
information, and a few carriers even allow claims to be submitted
online. Some carriers also provide insurance quotes online based on the
information submitted by customers on their Internet sites. In the
future, carriers will allow customers to purchase policies through the
Internet without ever speaking to a live agent.
In addition to
individual carrier-sponsored Internet sites, several "lead-generating"
sites have emerged. These sites allow potential customers to input
information about their insurance policy needs. For a fee, the sites
forward customer information to a number of insurance companies, which
review the information and, if they decide to take on the policy,
contact the customer with an offer. This practice gives consumers the
freedom to accept the best rate.
The insurance industry
also includes a number of independent organizations that provide a wide
array of insurance-related services to carriers and their clients. One
such service is the processing of claims forms for medical
practitioners. Other services include loss prevention and risk
management. Also, insurance companies sometimes hire independent claims
adjusters to investigate accidents and claims for property damage and to
assign a dollar estimate to the claim.
Other organizations in
the industry are formed by groups of insurance companies, to perform
functions that would result in a duplication of effort if each company
carried them out individually. For example, service organizations are
supported by insurance companies to provide loss statistics, which the
companies use to set their rates.
Employment
 The
insurance industry employed about 2.3 million wage and salary workers in
2004. Insurance carriers accounted for 62 percent of jobs, while
insurance agencies, brokerages, and providers of other insurance-related
services accounted for 38 percent of jobs. In addition, about 151,000
workers in the industry were self-employed in 2004, mostly insurance
sales agents.
The majority of
establishments in the insurance industry were small; however, a few
large establishments accounted for many of the jobs in this industry.
Insurance carriers tend to be large establishments, often employing 250
or more workers, whereas agencies and brokerages tend to be much
smaller, frequently employing fewer than 20 workers.
Many insurance
carriers' home and regional offices are situated near large urban
centers. Insurance workers who deal directly with the public--sales
agents and claims adjusters--are located throughout the country. Almost
all insurance sales agents work out of local company offices or
independent agencies. Many claims adjusters work for independent firms
in small cities and towns throughout the country.
Working
Environment
 Many
workers in the insurance industry -- especially those in administrative
support positions -- work a 5-day, 40-hour week. Those in executive and
managerial occupations often put in more than 40 hours. Many insurance
sales agents, claims adjusters, and investigators work irregular hours
outside of office settings. Often, sales agents and adjusters arrange
their own hours, scheduling evening and weekend appointments for the
convenience of clients. This accommodation may result in these
individuals working 50 to 60 hours per week.
Insurance sales agents
often visit prospective and existing customers' homes and places of
business to market new products and provide services. Claims adjusters
and auto damage appraisers frequently leave the office to inspect
damaged property; occasionally, claims adjusters are away from home for
days, traveling to the scene of a disaster--such as a tornado, flood, or
hurricane--to work with local adjusters and government officials.
Insurance investigators often work irregular hours to conduct
surveillance or to contact people who are not available during normal
working hours.
 A
small, but increasing, number of insurance employees spend most of their
time on the telephone working in call centers, answering questions and
providing information to prospective clients or current policyholders.
These jobs may include selling insurance, taking claims information, or
answering medical questions. Because such centers operate 24 hours a
day, 7 days a week, some of their employees must work evening and
weekend shifts. The irregular business hours in the insurance industry
provide some workers with the opportunity for part-time work. Part-time
employees make up 8 percent of the workforce. As would be expected in an
industry dominated by office and sales employees, the incidence of
occupational injuries and illnesses among insurance workers is low. In
2003, only 1.5 cases per 100 full-time workers were reported among
insurance carriers, while just 0.6 cases per 100 full-time workers were
reported among agents and brokers. These figures compare with an average
of 5.0 for all private industry.
Industry
Forecast
 Wage
and salary employment in the insurance industry is projected to grow
about 10 percent between 2004 and 2014, compared to the 14 percent
growth projected for wage and salary employment in all industries
combined. While demand for insurance is expected to rise, corporate
downsizing, productivity increases due to new technology, and increasing
use of direct mail, telephone, and Internet sales will limit job growth.
However, some job growth will result from the industry's expansion into
the broader financial services field, and employment in the medical
service and health insurance areas is anticipated to grow. Also,
thousands of openings are expected to arise in this large industry to
replace workers who leave the industry, retire, or stop working for
other reasons.
Medical service and health insurance is the fastest growing sector of
the insurance industry. In recent years, increasing health insurance
premiums and relatively high unemployment have left some unable to
afford health insurance, but over the long term, significant growth is
expected. As the share of the elderly population rises, more people are
expected to buy health insurance and long-term-care insurance, as well
as annuities and other types of pension products sold by insurance sales
agents. If legislation is passed to make health insurance affordable to
more people, demand should increase further for this type of insurance.
Population growth will stimulate demand for auto insurance and
homeowners insurance. Population growth also will create demand for
businesses to service the needs of more people, and these businesses
will need insurance as well. Moreover, large liability awards are
motivating growing numbers of individuals and businesses to purchase
liability policies to protect against lawsuits brought by people
claiming injury or damage from a product.
 Many
successful insurance companies will recognize the Internet's potential
as a powerful marketing tool. Not only might this reduce costs for
insurance companies, but it also could enable many clients to turn to
the Internet first to get information on their policies, obtain quotes,
or submit claims. As insurance companies begin to offer more information
and services on the Internet, employment in some occupations, such as
insurance sales agent, could be adversely affected.
Insurance companies
will continue to face increased competition from banks and securities
firms entering the insurance markets. As more of these firms begin to
sell insurance policies, increasing numbers of insurance sales agents
will be employed in them, rather than in insurance companies. In order
to stay competitive, insurance companies have begun to expand their
financial service offerings or to establish partnerships with banks or
brokerage firms.
Productivity gains
caused by the greater use of computer software will continue to limit
the growth of certain jobs within the insurance industry. For example,
the use of underwriting software that automatically analyzes and rates
insurance applications will limit the employment growth of underwriters.
Also, computers linked directly to the databases of insurance carriers
and other organizations have made communications easier among sales
agents, adjusters, and insurance carriers, so that all have become much
more productive. Furthermore, efforts to contain costs have led to an
increasing reliance on customer service representatives to deal with the
day-to-day processing of policies and claims. In addition, the Internet
has made insurance investigators more productive by drastically reducing
the amount of time it takes to perform background checks and by allowing
investigators to handle an increasing number of cases, thus limiting
their employment growth.
Related
Degree Fields
Professional
Associations/Other Resources
Note: Some resources in this section are provided by the US Department
of Labor, Bureau of Labor Statistics.
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