By Kolie Sun Chang, Senior Research Analyst, DECD

Introduction

So, class, what do Aetna, The Hartford, Hartford Steam Boiler, Phoenix, and Travelers all have in common? If you guessed the City of Hartford, Connecticut, the insurance capital of the world, then go to the head of the class. You guessed right!

Despite the diversification of our economy in the last decade, recent data shows that the insurance industry continues to be one of the most important industries in Connecticut.

Insurance carriers (SIC 63) and insurance agents, brokers & service (SIC 64) are two major industries within the finance, insurance, real estate (FIRE) sector. Insurance carriers are companies that design, offer and market insurance policies, while insurance agents and brokers sell insurance policies for the carriers and either work independently or are employed by them.

In 2000, employment in these two industries alone reached over 71,000 and accounted for more than half of FIRE employment. And, importantly, insurance carriers had 60,249 jobs in Connecticut, representing the fourth highest total in the State among two-digit SIC groups, trailing only health services, business services, and eating and drinking places.

The insurance carrier industry has lost over 10,000 jobs (or 14.4 percent) from its peak employment level of 70,400 in 1991. The employment of insurance agents, brokers & service remained flat over the same period.

The number of establishments in the insurance carriers and insurance agents, brokers & service industries increased at a faster rate (3.7 and 5.0 percent, respectively) in 2000 than a year earlier. However, this is primarily attributed to changes in firms’ reporting status, rather than actual new business start-ups.

The financial sector leads all industries in terms of wages and earnings. In 2000, insurance carriers average wages, at $70,264, was 53 percent higher than that of the private industry statewide average ($46,027), while wages for insurance agents, brokers & service employees, at $59,659, was 30 percent higher. Wages almost doubled from 1990 to 2000 for insurance carriers, and rose 62 percent for the insurance agents, brokers & service group.

Gross State Product (GSP) is the total value of all final goods and services produced in the State and is considered a key measure of the overall health of the economy. The two aforementioned insurance industries have continued to emerge as an integral part of the State’s economy, as illustrated by the fact that their share of GSP has grown from 4.1 percent in 1990 to 7.3 percent in 1999.

According to the Career Guide to Industries, published by the U.S. Bureau of Labor Statistics, employment in the insurance industry nationally is projected to increase six percent between 2000 and 2010, more slowly than the 16 percent average for all industries combined. Connecticut’s forecast follows the national trend. According to a recent Connecticut Department of Labor forecast, the insurance industry is projected to gain 7.9 percent in employment between 1998 and 2008, while all other industries will do slightly better at 9.7 percent.

Despite the recent reduction in industry employment, the outlook for insurance carriers and agents, brokers & service remains positive. As this analysis demonstrates, they continue to serve as an important economic foundation for the State of Connecticut.