Insurance – A Cog in the Economic Engine

multiple cogs

Sometimes the ah-hah moments of our lives come at the most unexpected times. Such was the case for my eyes being opened to how intertwined the various cogs of our economy are.

I was standing at the Seneaquoteen cemetery after the funeral of a client and very dear friend. She was the wife of a dairyman; bronco buster when a young woman; mother of six wonderful children; a lady who survived a stroke and went on to get her college degree in history even though she had only limited use of her left arm and hand and had to type her senior paper using one finger; and drove the farm tractor plowing, harrowing, planting, mowing, and baling the hay for their dairy herd. She sold raw unpasteurized milk for her own spending money.

As I stood by the graveside, my daughter came over to me. As we were reflecting on this wonderful lady’s legacy, another attendant at the funeral, a big burly logging truck driver and one of my insureds, came over to converse. As I introduced him to my daughter, he very courteously removed his hat to acknowledge her. He then mentioned how he had become acquainted with Marge and Eldon when he did some log hauling for them. He mentioned how friendly they were to him and how they always made sure they had a gallon of milk ready for him as he drove by their dairy on his way home with his logging truck. He mentioned how she just trusted people to put their used gallons in the milking parlor and their payment in the jar next to the bulk tank.

When he told that story, my daughter Sherry stepped up to him, started shaking his hand, and exclaimed, “Thanks, Mr. Hester, for buying insurance from my Dad so I eat and can have shoes on my feet.” He just stood there not knowing how to respond to such an expression of thanks. It didn’t really strike me then as to its profundity, but later on I realized how the simple act of Marge providing the gallon of milk to a logger who took her trees to market and how my providing insurance to protect both of them from financial loss were so dependent upon one another. What an ah-hah moment!!

All of us have financial dreams which can only come to pass if someone buys something from someone else. I’m certain Apostle Paul did not have the wheel of economy in mind when he said, “. . . and the eye cannot say unto the hand, I have no need of thee: nor again the head to the feet, I have no need of you. Nay, much more those members of the body, which seem to be more feeble, are necessary. . . . And whether one member suffer, all the members suffer with it; or one member be honoured, all the members rejoice with it.” (1 Cor 12: 21, 22, 26) Yes, there are some parts we miss if they are not functioning, but there are some parts that if they quit functioning, everything shuts down.

A case in point is the insurance industry cog in the economic wheel. One would be hard pressed to pick any other cog in the wheel and determine that insurance plays no role in its function–just how big is it in our economy.

My wife and I decided to go to dinner the other night, and on our way to town I suggested we drive through town and count the various insurance agencies people can buy their insurance products from. In our little town of less than 6000, Sandpoint, we counted 20 different locations vying for local insurance business.

Being familiar with the marketplace, having sold insurance here for 38 years, I can make some assumptions with relative certainty.

If each agency employs four people as customer representatives and have an average of two salespersons, 100 people draw a paycheck for their labors. Supposing the customer reps average $18 per hour and work a 40-hour week, salaries alone would deposit $2,304,000 in our local banks. Let’s suppose the sales personnel commissions generate an average of $146,000 annually, you can add another $2,920,000 to the local bank. Then let’s suppose each agent is generating $1,500,000 of new and renewal sales another $30,000,000 goes to local banks. With claims being paid at a 65% loss ratio, another $9,750,000 goes into the local banks–for a total $44,974,000. Pretty impressive, but then if we use just a $7.00 multiplier ratio this little group of 20 offices affects our local economy by $314,818,000.

I think with the analogy of parts of the body being important, we can easily say this part of the economy needs a place of prominence. It reminds me of when I was working on my Master’s degree and we went to visit a steel rolling mill. A man with an oil can in his hand was walking up and down the long conveyor belt squirting oil onto bearings encased in oil reserves as the heavy steel bars rolled along. Someone asked him a question about how important his job was. He looked up for just a moment and said, “If I ain’t keeping these bearings oiled, this mill don’t run” and walked away.

To this day, I can’t drive by Marge and Eldon’s dairy, which no longer operates as a dairy, nor wave to Mr. Hester as he goes by in his old gray logging truck loaded with logs, without a special feeling of being part of something greater than just myself. America, the great industrial engine miracle!

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