A statewide analysis of the insurance industry’s $37.1 billion economic impact provides a basis to lure more players to Michigan, as well as highlights the need for training new talent to replace an aging workforce.
The insurance industry directly employs 41,000 people in Michigan and overall supports 114,000 jobs directly and indirectly, according to the analysis by the Anderson Economic Group of East Lansing.
But an aging workforce requires insurance companies, agents and educators to work even more collaboratively to attract and train young talent to replace people who will retire over the next decade.
“The insurance industry has a very aging population,” Michigan Association of Insurance Agents CEO Bev Barney said during a recent legislative hearing on the insurance industry’s economic footprint in the state. “We know we need young people and new blood (coming) into our industry, and that training does not happen overnight.”
Barney cited an association study that indicated as much as 55 percent of the industry’s workforce in Michigan may retire in the next four to seven years. Other reports cited during the legislative hearing from the Insurance Institute of Michigan estimate that 40 percent of the insurance professionals will reach retirement age within the next decade.
Either way, that will create 45,000 to 63,000 job vacancies in the years ahead, making talent recruitment and training a big issue for an industry that today’s younger generation doesn’t view as particularly glamourous, Barney said.
“What we like to tease in the insurance industry is we don’t look very sexy. Our industry is not attractive to young people,” Barney said. “Until they’re in it and see what we do and how we serve, they’ve not thought of insurance.”
Barney was among the speakers to address a joint meeting of two state House and Senate committees to review the Anderson Economic Group study on the industry’s presence in the state.
The study found that property and casualty carriers in Michigan collectively paid $3 billion in wages in 2014 and together spent another $3.3 billion on goods and services. Carriers two years ago also paid $13 billion in commissions to agents across the state and $50 billion in insurance claims, as well as $500 million in state and local taxes, according to the analysis.
In grooming new talent, both Barney and Lansing Regional Chamber of Commerce CEO Tim Daman offered a number of examples where carriers, schools and universities collaborate to introduce the industry to students and offer training for entry-level positions.
Farm Bureau Insurance in Lansing, for instance, works with Olivet College and the Eaton Intermediate School District on a program where high school students earn college credit, serve internships, job shadow professionals, and receive on-site instruction at the insurance company. The Insurance Institute of Michigan has similar initiatives going on in Ingham County and Flint.
In another example that Daman cited, Jackson National Life opened the $12 million Jackson Zone development center in 2013 in downtown East Lansing in a move to work closely with Michigan State University students.
Such initiatives are important to areas such as Lansing, where a number of insurance carriers have headquarters or large operations and where about 20 percent of the industry’s jobs in Michigan are clustered, Daman said. Insurance companies invested $500 million in the Lansing area over the last five years in new facilities, creating 2,000 jobs, he said.
“Clearly, as we look throughout the region, the most dynamic growth sector we have is insurance,” he said. “These are the very types of jobs that other regions and states across the country are trying to attract and grow.”
Those jobs pay quite well, too, according to the Anderson Economic Group. The firm’s report indicates that the insurance industry in 2014 paid an average annual wage of $85,032, versus $59,245 for all jobs in the state.
IMPORTANCE OF I.T.
The industry’s economic impact is felt in “virtually every community on the state,” said Alex Rosaen, senior consultant and director of public policy and economic analysis at the Anderson Economic Group. The impact “can be even more important” for communities such as Lansing that are home to an insurance carrier’s headquarters or operations that serve the whole state or nation, Rosaen said.
Much like the state’s sizeable manufacturing sector, the insurance industry brings money into Michigan from business conducted elsewhere, Rosaen said.
“And that can help provide the basis of our prosperity in actually a very similar way to manufacturing,” he said. “What you want to do is produce goods and services that you can sell outside of your community so you bring the money in that supports the rest of the important jobs that people do.”
One surprise in the study was that the insurance industry employs about 7,000 information technology professionals, Rosaen said. That equates to about 7 percent of all I.T. jobs in Michigan, he said.
“They’re a disproportionate employer of I.T.,” Rosaen said. “For an industry that does not directly sell I.T. products, it’s a pretty major employer of I.T. professionals.”
Overall, the industry employs people in a “wide variety” of professions, from agents, sales representatives and actuaries, to accountants, lawyers, claims investigators and marketing professionals, according to the report. Nearly 14,000 of the 41,000 direct jobs in the industry are for office and administrative support positions, and 11,000 are in businesses and finance.
The Anderson Economic Group based its report and estimates on information gathered from surveys of insurance carriers, plus data available through state Department of Financial and Insurance Services and the federal government.
The study was commissioned by the Michigan Chamber of Commerce, Lansing Regional Chamber of Commerce, Lansing Economic Area Partnership, the Insurance Institute of Michigan, the Michigan Insurance Coalition, the Michigan Association of Insurance Agents, and the Michigan Economic Development Corp.
Also of note in the study was the $1.5 billion in assets that insurance carriers invested in Michigan through real estate, shares in state-based corporations, and municipal bonds. Because not all carriers answered the survey, Rosaen termed the estimate of assets the industry invested in the state as “very conservative.”
“A lot of people don’t think of the fact that a lot of their assets are assets held in the state of Michigan,” Rosaen said. “That’s the type of investment in Michigan that I think is often overlooked.”
Michigan’s top insurance regulator views the report as a tool to not only generate awareness of the industry’s footprint and its need to ramp up more training, but also as a way to possibly draw further industry investments to Michigan.
Department of Insurance and Financial Services Director Patrick McPharlin talks “from time to time” with insurance carriers about opening a claims or call center or a regional office in the state. A couple of insurance companies are “considering the first steps of moving something here,” McPharlin said.
“Most people outside of the state have no idea the size of the insurance industry in Michigan, nor the talent we have in Michigan,” he said. “This will help tell that story.”
INSULATING LANSING’S ECONOMY
McPharlin credits the industry with lessening the impact of the Great Recession on the Lansing area. As the former CEO of Michigan State University Federal Credit Union before coming out of retirement in 2015 to become DIFS director, McPharlin served during the economic downturn on the executive committee for the Lansing Economic Area Partnership.
He told legislators that he and others were “pretty smug” and doubted an economic slowdown for Michigan would hit the area hard because of the economic influence of state government, General Motors and Michigan State University.
The deep financial crisis in state government over the last decade and GM’s bankruptcy proved otherwise, and even MSU had to cut back on spending during the Great Recession, McPharlin said. As the Lansing area felt those impacts, insurance carriers clustered in the region continued to prosper, added jobs, maintained profitability, and even developed new facilities that helped the local construction trade, he said.
When the Lansing-area economic developers sought to understand what happened to the area’s economic mainstays, and how to lessen the impact of a future downturn, leaders learned that insurance does not follow the economic cycles of other industries that are key to the region, McPharlin said.
“It became very obvious to all of us that the insurance industry, especially in the Lansing area here, was one of the things that made the area get through it with far less adverse impacts,” he said.