"Life insurers are vital to an efficiently functioning modern economy and society, and a key contributor to enabling robust long-term economic growth," writes Dr.
The study, "The Social and Economic Contributions of the Life Insurance Industry," explains the industry's roles, and uses industry data and academic research to highlight the industry's contributions to the
A Shield against Financial Loss for Individuals
According to the report, 60 percent of American households are covered by some form of life insurance, with an average policy coverage amount of nearly three times the annual household income. The total amount of financial protection provided by the life insurance industry in 2014 was
The study cites research showing that the purchase of life insurance has a positive impact on an individual's living standards. For example, following the death of primary earners, life insurance reduces the percentage of households experiencing severe financial deterioration from 33 percent (without life insurance) to just six percent (with life insurance).
On retirement security, the report highlights research showing that the private annuity market increases household net worth. Without private annuities, individuals have no way to hedge the risk of outliving their retirement savings except by consuming less and investing more in risky investments. For instance, a household headed by a 65-year-old in good health experiences a 16 percent increase in financial and housing wealth due to an investment in annuities, according to the research.
A Stabilizing Component of the
The life insurance industry also provides a stable source of funding for the credit markets, with private companies in all sectors of the economy relying on this funding channel. Fully 93 percent of the corporate bonds held by life insurers have a maturity greater than five years, and more than two-thirds have a maturity greater than 10 years.
This long-term focus has an added benefit – it makes life insurers an important source of financial stability during periods of broader market turmoil. Commercial banks and broker-dealers that rely on short-term wholesale funding are susceptible to liquidity crises. With life insurers, stable funding from policyholders greatly reduces the need for liquidity during financial panics. The paper quotes
Life insurers are also an especially important source of capital for privately held companies, which tend to be smaller enterprises that find the public markets expensive to access. In 2014, life insurers held nearly
Government and Taxpayer Benefits
The life insurance industry also provides a benefit to the government and taxpayers by alleviating pressure on social spending. From 2010 to 2014, the life insurance industry distributed
Using data from the
Top 10 States by Life Insurance
Contribution (select 2014 data)
All 50 States
"Life insurance is an important component of the
For more information and to download a copy of the white paper, please visit www.brattle.com.
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