IU report highlights insurance companies' premium value to Indiana
BLOOMINGTON, Ind. -- While Indiana strives to create new, high-paying jobs in the life sciences and other technologies, a familiar non-manufacturing industry is making a valuable contribution to the state's economy -- insurance companies, according to a new report from Indiana University's Kelley School of Business.
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Indiana's insurance industry is the highest-paying non-manufacturing sector and the third-best-paying sector overall, according to data from the Bureau of Labor Statistics.
"The insurance industry is often mentioned as a possible industry to attract. Its employment levels show long-term growth, and although it is not immune to recessionary conditions, the effects are less severe," wrote Ted Jockel, senior economist in the Indiana Department of Commerce. "The problem is that the insurance industry, like many service sector industries, is closely linked to population and little influenced by geographic conditions."
In 2003, the Indiana insurance industry employed 46,000 people after significant job growth throughout the previous decade. Also last year, the average weekly wage for insurance workers in Indiana was $917, well above the state average of $642.
Other fertile ground for insurance companies can be found in Connecticut, Nebraska, Iowa, New Hampshire, Minnesota and North Dakota. Common to these states are low tax rates for the insurance industry, Jockel found. Connecticut, a traditional insurance center, had a sharp decline in employment, especially between 1992 and 1996, but it then lowered its tax rates. As a result, employment has been relatively stable since 1997 and is slowly increasing.
"Overall, tax rates appear to be continuing to decline. Indiana is lowering its premium rate and Iowa's 1 percent rate is being phased in between now and 2006," he noted. "The competitive nature of lower premium taxes to attract new businesses and employees is most clearly seen in Colorado. Here, a new 1 percent rate is only for insurance companies with headquarters or regional home offices in the state."
While tax premiums are a fair indicator of employment growth trends, they vary over time. Jockel noted that the insurance industry is also a service sector that is strongly influenced by changes in population. This is especially true for the agents and insurance brokers of the industry.
"Another fact for consideration is that many of the states with the fastest growth also have the lowest wages. This suggests that a large segment of insurance sector job growth is lower-paying back-office functions and not high-wage headquarter operations," Jockel said. "Even low annual average wages, however, still run $40,000 and up."
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