10 Ways Insurance Drives Economic Growth

10 Ways Insurance Drives Economic Growth

(source: Insurance Information Institute iii.org)


When asked what insurance does, most people are likely to say that it provides protection against financial aspects of a premature death, injury, loss of property, loss of earning power, legal liability or other unexpected expenses. All that is true. However, the industry’s contribution to the economy goes much further. One could point to the millions of people employed in insurance and related activities, to the billions of income taxes and premium taxes paid and to extensive charitable works. But, significant as they are, these are byproducts of the contributions of an industry that is at the heart of the growth and progress of every modern economy. Those contributions can be grouped under three broad categories: safety/security; economic/financial stability; and development. Under these headings, this paper describes 10 ways in which insurers and reinsurers drive economic growth. Briefly:


  1. Financial first responders.

Oftentimes on-site at the same time as emergency officials, insurers make every effort to restore claimants and beneficiaries quickly and reliably. This lessens the costs of unexpected losses and benefits even among those not directly affected by a loss.

  1. Risk mitigators.

Insurers sponsor and promote knowledge and activities that save lives and protect and preserve property.

Economic/Financial Stability

  1. Capital Protectors.

Insurers are not as susceptible to short-term liquidity crunches as are other financial services firms. Reinsurers further stabilize insurer exposure to loss by spreading or diversifying transferred risk.

  1. Partners in Social Policy.

Insurance is an instrument of social policy. By providing significant social benefits, such as compensation for injuries at work and rebuilding property after catastrophes, insurance contributes to the rebuilding of people’s livelihoods, as well as to the economy as a whole.

  1. Sustainers of the Supply Chain.

Insurance protects economic interdependence among businesses by insuring supply chains, which become increasingly vulnerable with more complex technological components.

  1. Capital Infusers.

Insurance reduces the need for “rainy day funds.” Rather than having to set aside a relatively large amount of money to pay for unexpected losses, consumers and businesses can buy insurance for a relatively small premium, thereby putting more working capital into the economy, producing and consuming more goods and services to create a higher standard of living.


  1. Community Builders.

Insurers are among the largest investors in the world, with more than $8 trillion in assets under management. Since these investments need to be available to pay long-term claims, investments often include private and municipal bonds that help communities grow and thrive.

  1. Infrastructure Enablers.

Insurance enables economy-boosting construction projects and events to take place.

  1. Innovation Catalysts.

Insurance allows innovators to take the risk that’s needed to spur modernization. For more than 300 years—including every industrial revolution—insurance has been a critical driving force, and thus is central to a developing economy.

  1. Credit Facilitators.

Insurance is critical to the borrowing process. With insurance, lenders are more likely to provide funding for large purchases, consumer durables and to businesses, and charge lower interest rates for these loans.


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