By Dr. Steven Weisbart, chief economist, I.I.I.
How significant a role does the insurance industry play in the U.S. economy? There are many ways to quantify the answer to this question, and even then the answers do not capture all of the valuable ways insurance contributes to economic growth. Still, it might be instructive to consider briefly one indicator.
The U.S. Commerce Department’s Bureau of Economic Analysis calculates and reports quarterly industry-by-industry contribution to the U.S. $19.25 trillion GDP. In the latest report, for the second quarter of 2017, the insurance industry’s value added contribution was $596.5 billion (seasonally-adjusted at an annual rate). This is 3.5 percent higher than for the same quarter in 2016.
The nearly $600 billion value-added puts the insurance industry ahead of both the information industry (if broadcasting and telecommunications are excluded) at roughly $500 billion, and the transportation industry, at roughly $525 billion. Within the broad field of financial services, the value added by “Federal Reserve banks, credit intermediation, and related activities” was $543.6 billion.
It might be surprising that the insurance industry’s contribution to the GDP exceeds that of banks, but this has been true every quarter since the fourth quarter of 2014—11 quarters and counting. So, relative to banks, the insurance industry’s contribution to the economy has been growing faster.
The historical record for the past five and a half years, expressed as value added as a percent of GDP for banks and insurance is shown in the accompanying graph.