Insuring Prosperity

Connecticut's Insurance Industry Continues To Play A Vital Role In The State's Economy, New Study Indicates

December 10, 2006
By DIANE LEVICK, Courant Staff Writer

Despite mergers and layoffs, Connecticut's insurance industry is still kicking - even growing a little - and it's using a new study to trumpet the companies' vital role in the state's economy.

Whether you look at employment levels, payroll or other measures, Connecticut is still, by far, more dependent on insurance than any other state, according to the 48-page study done for the industry by the Connecticut Economic Resource Center Inc.

The study, which reinforces a recent ad campaign, is aimed at improving the business climate for insurers, raising consciousness among legislators and helping to recruit more young people into the local industry.

The report was done for Insure Connecticut's Future - a group of 10 insurers - and the Connecticut Insurance and Financial Services Cluster, a state-corporate partnership to foster those industries.

"There's a perception that insurance has a diminished role or diminished value in terms of the economy, and it's not the case at all," said Tom Bradley, vice president and executive director of public relations at Cronin and Company Inc., the Glastonbury firm that is working with the study's sponsors.

Wages paid in Connecticut by insurers, for instance, account for 6.1 percent of the state's total wages, the study says. That's nearly double the 3.2 percent in the next-highest state - Iowa - which has been aggressively recruiting insurance operations since the 1980s.

Connecticut also has the highest concentration of insurance company jobs of any state - 3.2 percent of total state employment in 2005, about the same as in 1995.

Nebraska, at 2.1 percent, ranked No. 2 in that measure, thanks to such companies as Mutual of Omaha, Lincoln Benefit Life (an Allstate company) and Physicians Mutual Insurance Co.

Iowa, at 1.9 percent, came in third. The state is often seen as a prime threat to Hartford's self-proclaimed status of Insurance Capital.

Iowa does surpass Connecticut for insurance company job growth.

From 1995 to 2005, insurance companies in Connecticut increased jobs 2.4 percent, from 51,820 to 53,050, the study says, citing numbers gathered from the state by the federal Bureau of Labor Statistics. Those numbers don't include insurance agencies, consultants or other insurance-related employment. However, other sources list employment at about 67,000, apparently because of differences in the way data are compiled and what's included.

In the same 1995-to-2005 time frame, insurers' operations in Iowa increased employment 8.8 percent, from 25,870 to 28,160.

"One of the things we frequently hear in Connecticut is that Iowa is eating our lunch in terms of [job growth], and although Iowa is doing better than us, much of the growth is actually occurring in the South and West, keeping pace with population growth in those areas," said Jeffrey W. Blodgett, vice president of research at the Connecticut Economic Research Center.

The study does not go back to the industry's major shrinkage in Connecticut in the late 1980s and early 1990s, a period of massive layoffs and insurers' losses on mortgage and real estate investments.

Insurance company employment in Connecticut is projected to grow 4.1 percent between 2004 and 2014 - more slowly than other financial businesses, according to state Department of Labor forecasts.

Connecticut's insurance industry has changed dramatically in the past 30 years, and is much more diversified, said Joel Freedman, a senior vice president and director of government affairs at The Hartford Financial Services Group, one of the Insure Connecticut's Future companies.

The state has fewer major insurer headquarters because of mergers and acquisitions, but it has offices of more insurance companies, whether they're based here or not, Freedman noted.

The St. Paul Travelers Cos. is now based in St. Paul, for example, although its personal lines and most commercial lines of insurance are based in Hartford. Lincoln National Corp., once based in Fort Wayne, Ind., and now Philadelphia, established a major Hartford presence by buying operations from CIGNA and Aetna.

Connecticut's insurance industry may not look like it used to, but still needs attention and nurturing to preserve and expand it, Travelers and The Hartford believe. Both companies have announced that they expect to add hundreds of jobs in the state.

Travelers said the new economic impact study will be used to educate the public and public officials, its own employees and students who are making career choices about opportunities in the insurance industry.

The study, well-timed in advance of the 2007 General Assembly session, will be one tool to promote a friendlier reception for the industry, but isn't meant to advance any specific legislation.

"We'd be happy to hear more discussion of the industry and its future in the legislature, but our primary focus is to make sure everyone in Connecticut understands what the insurance industry means to our state," Travelers spokeswoman Marlene Ibsen said. "We haven't been very good at telling that story in recent years."

The study and advertising aren't being done "just to influence one year's legislation," Bradley said. "This is much broader than that. It's really about restoring the place of insurance in the minds of the people of Connecticut as an important, significant part of our economy."

The study's sponsors are reticent to discuss what legislation the industry will promote, although Freedman noted that many companies want to see the sales tax on business services in Connecticut reduced from 6 percent. That would help attract and retain financial services companies, he said.

Connecticut's insurance industry has not just been lagging other states on job growth, but also on growth of "gross state product," an economic measure of wealth creation or "value added." Gross output includes the industry's sales, receipts and other operating income, minus what it buys from other industries.

Insurance companies' value added in Connecticut was about $12.2 billion, or 6.7 percent of the state's total in 2004.

Connecticut has 72 insurance company headquarters, the study reports. In addition to well-known insurers, such as Aetna and The Hartford, they include many that are small or not well known to the public, in such fields as surety, accident and health insurance, and reinsurance - the protection that insurers buy to protect themselves from high claims.

Other insurance company impacts on Connecticut include:

• One new job in Connecticut's insurance industry results in 1.35 additional jobs here.
• Wages paid to Connecticut insurance workers totaled $6.17 billion in 2004.
• Insurance companies generated an estimated $244 million of premium taxes in 2004-2005, and workers paid $210 million of state income taxes in 2004 on wages from their insurance jobs.
• Insurance companies buy nearly $1 billion a year of goods and services from other industries in Connecticut, on average.