The overall insurance industry accounts for more than 234,000 jobs in California with a payroll of $16.8 billion, a new report finds.
Also, property/casualty insurers paid a total of $50.2 billion in claims and expenses in 2009, while life, health, disability and long-term insurers paid out $43.5 billion in benefit payments that year, the industry report notes.
The report, the 2011 Insurance Industry’s Impact on California’s Economy, was compiled by the Association of California Life and Health Insurance Companies (ACLHIC), the Personal Insurance Federation of California (PIFC), the American Insurance Association (AIA), the American Council of Life Insurers (ACLI) and the Association of California Insurance Companies (ACIC).
“This biannual report tells the story of how much economic power insurance injects into California’s economy and job market,” said Brad Wenger, ACLHIC president
California is the largest insurance market in the U.S. with 784 licensed property/casualty companies offering auto, homeowners, commercial liability and workers’ compensation insurance and 456 licensed companies providing life, disability, long-term care and health insurance coverage.
In addition to tallying the payroll and claims payments, the report highlights the investments and taxes paid by the industry.
In 1996, insurers collaborated with state regulators and lawmakers to create the California Organized Investment Network (COIN) to encourage investment in California’s moderate and low-income communities. By 2007, insurers had made 5,964 separate investments in qualified California Community Development Investments since COIN was created in 1996. These investments infused $19 billion into community development projects throughout California.
Insurance companies are among the largest investors in municipal bonds issued by state and local governments. A.M. Best data shows that insurers held $45.4 billion in California state and local bonds in 2009.
“The billions of dollars that insurers invest in municipal bonds enable communities to undertake critical projects including building schools, community colleges, health care facilities, roads and bridges. Insurers help fund pensions, urban development and public works projects,” said Marjorie Berte, AIA vice president, Western region.
According to the state, insurers will pay $1.9 billion in premium taxes, making the insurance premium tax the fourth largest source of General Fund revenue for the state of California. Insurance companies pay these premium taxes in addition to the fees and assessments needed to fund operations of the California Department of Insurance.
While most California corporations pay taxes based on their net income, insurers pay a gross tax on the insurance premiums they collect each year. Insurers take no deductions and pay premium taxes whether they are profitable or not. Thus, the insurance premium tax has been a highly predictable and steadily growing source of revenue for California, according to the report.
“Insurers doing business in California pay an effective state tax rate that is significantly higher than the rate paid by other financial institutions and corporations. In fact, California charges insurers the highest tax rate among the 10 largest insurance states,” said John Mangan, ACLI regional vice president.