SIC 6311 Life Insurance

Encyclopedia of American Industries | 2005 | Copyright

SIC 6311
LIFE INSURANCE

This classification provides coverage of establishments primarily engaged in underwriting life insurance. These establishments are operated by enterprises that may be owned by stockholders, policyholders, or other carriers.

NAICS Code(s)

524113 (Direct Life Insurance Carriers)

524130 (Reinsurance Carriers)

Industry Snapshot

The insurance industry in America, particularly the life insurance industry, is considered a pillar of the economy, with assets of $3.3 trillion in 2001. Tied as it is to the public interest, the life insurance industry has been subject to governmental scrutiny and legislation almost since its inception more than two centuries ago. There were about 1,549 companies that underwrote life insurance and annuities at the end of 2000, with premiums totaling $472 billion in 2001, compared to $405 billion in 1997. Thanks to an unprecedented level of consolidation in the late 1990s and early 2000s, the top 10 life and health insurance companies accounted for more than 40 percent of these premiums in 2001.

Organization and Structure

Although insurance companies may operate according to similar principles, the life insurance industry is hardly homogeneous. Companies do not charge the same amount for premiums, do not charge for expenses the same way, do not pay the same amount of commission to sales agents, do not provide the same kind or amount of training, do not sell the same products, and are not equally solvent. The one commonality throughout the industry is that licensed life insurance salespeople act as agents for their companies. These agents write several different kinds of life products, or policies, that the company offers.

Companies usually have a number of field offices, or branches. Large insurance organizations strategically place these around the country so that agents may market to as many potential clients as possible. Agents order or issue policies, collect premiums, renew and change existing coverage, and help clients with questions or problems related to coverage. Many agents who previously worked for large life insurance organizations branch out on their own and become independent agents. They will often continue to retain the company they worked for to under-write the policies they sell.

Nearly all life insurance is issued by either mutual or stock life insurance companies. Mutuals have no stockholders, only policyholders, and the policyholders elect the board of directors who run the company. In this way, mutual policyholders participate in the fiscal management of the company and share in decisions regarding mortality expense, overhead costs, and investment rate of return. With $5.2 billion worth of life insurance in force, mutuals accounted for 35.7 percent of all the life insurance in force with U.S. life companies in 1995. Stock companies, on the other hand, are owned by their stockholders. They provided $9.4 billion worth of life insurance, or 64.3 percent of the total. Other sources of life insurance include fraternal societies and the federal government. Taking all of these sources into account, there was $12.9 trillion of life insurance in force at the end of 1995, or an average of $131,600 per American household.

There are four major categories of life insurance: ordinary, group, industrial, and credit. Ordinary life insurance accounted for approximately 60 percent of all life insurance in force at the end of 1995. More than doubling...

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