Insurance Career Field Structure
According to the U.S. Department of Labor, the insurance industry, including both insurance carriers and agents and brokers, employed about 2.3 million wage and salary workers in 2004. Insurance carriers provided nearly three out of five jobs in the insurance industry; insurance agents, brokers, and providers of other insurance-related services held about two out of five jobs. In addition, there were about 151,000 self-employed workers in 2004, most of whom were insurance agents or brokers.
The insurance industry is divided into three main branches: life insurance, health insurance, and property and casualty insurance. Companies may specialize in one or all three types of coverage.
Life Insurance Careers
Life insurance is basically a means by which one person provides for the financial security of others, usually other family members, in the event of that person’s death. Using life insurance in its simplest form, a person pays an insurance company a small amount on a regular basis (monthly, semianually, annually) for a policy that guarantees that the family will receive a relatively large amount of money if the person dies while covered by the policy. However, many life insurance policies combine this form of protection with others. Some provide for the policyholder to receive a regular income after reaching retirement age. Some provide funds for a college education for the policyholder’s children. Some will pay off the mortgage on a person’s home if he or she dies or becomes unable to work.
A new type of insurance being offered by some life insurance companies is critical care insurance. This insurance helps defray the costs of treatment for cancer and other critical illnesses. With medical advances and more patients surviving years with critical illnesses, this insurance provides benefits for patients and their families while the insured is still alive instead of only providing for the family upon the death of the insured.
Health Insurance Careers
Health insurance pays all or part of hospitalization, surgery, medicine, and other medical costs. This helps protect the policyholder against large medical bills in the case of an illness or accident.
In Canada and other countries, people are covered by government health insurance. In the United States, health insurance is usually provided by insurance companies or managed care plans, which include health maintenance organizations (HMOs) and preferred provider organizations (PPOs). Usually, an employer pays part of the insurance premiums for employees. The government helps defray medical costs for the elderly and disabled through the Medicare program and for the poor through Medicaid. Supplemental medical insurance is often purchased to cover some costs not covered by Medicare.
Property and Casualty Insurance Careers
Property and casualty insurance comes in a wide variety of forms. It includes the different kinds of insurance that protect people from financial loss if their property is destroyed, damaged, or stolen. It also includes all forms of liability insurance, the insurance that protects people from financial loss if they are responsible for injury to another person or damage to another person’s property. An example of liability insurance is medical malpractice insurance.
Within the property and casualty field, there are several specialized branches, or lines of insurance. Some companies write all lines, while others write only one. In addition to insurance on homes, business places, automobiles, and personal property, this field includes marine insurance, which covers boats and ships and their cargoes, and inland marine insurance, which covers almost anything capable of being transported or which is used in transportation. Inland marine insurance covers everything from furs and paintings to locomotives and bridges.
Also included in the property and casualty field is worker’s compensation insurance, which pays a person for loss of wages and medical expenses if he or she is disabled because of an injury or illness connected with a job. Worker’s compensation also provides death benefits for dependents if death is due to a work-connected injury or illness. Fidelity bonds, which protect an employer from loss due to dishonesty of an employee, and surety bonds, which guarantee that contracts will be carried out properly, are other forms of insurance written by property and liability companies.
Insurance agents and insurance brokers deal constantly with the public. In addition to selling insurance policies, they are responsible for advising each client about the particular kinds and amounts of insurance that will meet the client’s individual needs. In some cases, they also help settle claims when a loss occurs by working out a payment agreeable both to the policyholder and the insurance company. Agents who sell certain types of life insurance also may collect premiums.
Some agents are employed by a single insurance company and are paid either a salary, commission, or a combination of both. (Commissions are a percentage of the premiums paid to the agent based on the value of the policies an agent sells.) Many other agents are independent businesspeople who are under contract to represent several companies.
Insurance brokers are independent businesspeople who represent no particular companies but order policies from many insurers. Brokers represent the insurance buyer. They determine the buyer’s needs and procure the appropriate insurance. Some brokers are paid on commission while others negotiate a fee based upon the amount of risk they assume.
Agents and brokers often specialize in certain types of insurance. Life insurance and health insurance are usually handled exclusively by agents. Property and casualty insurance is handled by both agents and brokers. Some agents and brokers specialize in only one line of property and casualty insurance, such as automobile coverage. Others handle a diverse range of business.
Agents may work in large offices with a number of other agents or in small, one-person agencies. Some work out of their homes. Many agents combine their insurance business with other types of business. It is not uncommon, for example, for a property insurance agent to be in the real estate business as well.
In addition to selling and performing services for their clients, insurance agents spend considerable time on paperwork, record keeping, and correspondence. Depending on the size of the agency, an agent also may supervise a number of clerical workers and a staff of salespeople.
Because an agent’s income depends on the amount of insurance policies he or she sells, the agent devotes a lot of effort to finding new prospects and establishing contacts with people who might buy insurance. This frequently involves considerable civic and social activities.
Large insurance companies that use independent agents and brokers hire field representatives to promote their line of insurance. Field representatives make regular calls on each agent in their territory who handles their company’s insurance. They instruct the agents on new types of insurance and changes in policies. They help find new business and assist agents in examining their clients’ insurance programs to make sure the clients have the right kind of coverage in sufficient amounts. They also encourage the agents to conduct vigorous sales campaigns.
Field representatives are, in effect, district sales managers, but they must be exceptionally good at getting along with people because the agents they manage are independent businesspeople and not employees of the company. Their job is to encourage local agents to sell more of the company’s insurance.
Because their job is to instruct agents about changes in their business, field representatives must keep up to date on all policy changes and be able to explain them clearly and thoroughly. Field representatives frequently conduct educational meetings at which agents are informed about developments in insurance and sales methods.
After an agent fills out an insurance application with a client, the application goes to an underwriter. The underwriter considers all of the information available about the risk involved and then decides whether it should be accepted. If, for one reason or another, an underwriter decides that the hazards involved in insuring a particular risk are far above average, he or she may turn down the application or may accept it but reduce the company’s risk by reinsuring part of it with another company. Some companies specialize in reinsurance. If the underwriter decides that the company should accept the risk, he or she then sees that the proper kind of policy is issued and the proper rates are charged.
In large companies, underwriters are usually specialists in a particular type of insurance. Life insurance actuaries, for example, study statistics on how long people live, what causes people to die, and what types of people live longer than others. From those statistics, they can project how long persons in certain statistical categories can be expected to live; life expectancy is the term they use. They cannot, of course, predict when a particular person will die, but they can predict with great accuracy how long an average person of a given age, sex, occupation, and so forth will live. With that knowledge, they can determine the amount of premiums that must be collected on each life insurance policy so that the insurance company will have enough to make payments when policyholders die and still earn a return for the company.
Actuaries in the property and liability field make many of the same kinds of studies and predictions. They can predict, for example, how many auto accidents will take place in a particular area and how much they will cost. That enables insurance companies to set rates that bring in enough money to pay their claims.
Not all actuaries work for insurance companies. Some actuaries are employed by industry associations that propose insurance rates for groups of companies. Others work for insurance departments of their states. Some are independent consultants who run their own businesses.
When an accident, death, or other loss has occurred, an adjuster examines the claim. An adjuster may work on a great many different kinds of claims. He or she may be required to estimate the amount of damage to a house struck by lightning, the cost of repairing a damaged fender on an automobile, the value of a stolen necklace, or how much income will be lost because a store owner’s shop burned down.
The adjuster also may be a specialist on one particular kind of claim. For example, the General Adjustment Bureau, an organization that handles much of the adjustment work for property and casualty insurance companies, set up one group of adjusters to work only on losses caused by missile tests.
Many adjusters travel to all parts of the country and sometimes to foreign countries. Large numbers of adjusters travel to the scene of major disasters, such as hurricanes and tornadoes, which result in thousands of insurance claims. In such cases, the adjuster’s job is to examine insurance policies to make sure each individual’s loss is covered by insurance, to inspect the damaged property and estimate the cost of repairing or replacing it, and to work out a fair settlement with the policyholder.
With the pool of money insurance companies collect from premiums, they invest in the national economy. Insurance companies invest huge sums of money in government, transportation, and utility bonds, thereby helping to finance many public improvements and further increasing their own income. In addition, they invest in stocks and insure many home mortgages.