More consumers will ride motorcycles to offset high gas prices, aiding demand for insurance
Los Angeles, CA (PRWEB) February 15, 2012
Over the five years to 2012, IBISWorld estimates that revenue for the Motorcycle Insurance industry will rise at an average annual rate of 0.8% to $10.4 billion. According to IBISWorld industry analyst Mary Nanfelt, “as gas prices increased prior to the recession, many Americans explored alternative forms of transportation that put less pressure on their wallets.” As a result, a number of consumers chose to ride motorcycles because of their excellent gas mileage. This tendency toward motorcycles continued through the recession and into 2010 and 2011, as consumers looked for ways to cut down their expenses during high unemployment and low disposable income. An increase in the number of motorcycle riders caused demand for motorcycle insurance to rise, boosting revenue. Nevertheless, this revenue growth was slightly offset by the decline of registered high-end motorcycles. During the recession, fewer expensive motorcycles, such as racing bikes, were sold, which lowered the average insurance premium for this industry. In 2012, IBISWorld expects that industry revenue will increase by 1.3%, as consumers continue to ride motorcycles due to high gas prices.
Industry firms provide a variety of consumer motorcycle-related insurance products, including collision insurance, property damage liability insurance and bodily injury insurance. Insurers pool premiums (i.e. funds) from policyholders to pay for losses that some individual policyholders may incur, making the industry an indispensable part of risk management for consumers. Nanfelt says, “demand for motorcycle insurance varies little from year to year, because drivers must have insurance to operate their motorcycles and be protected from potential liabilities and losses.” Consequently, the industry is often compared to a utility because demand does not fluctuate strongly with the economic cycle. In the five years to 2017, IBISWorld projects that industry revenue will continue to grow. During that time, operators will likely benefit from a continual increase in registered motorcycles as consumers try to offset high gas prices. Furthermore, the investment income that companies receive will improve as the stock market recovers from the recession. In addition to rising revenue, profit margins are expected to expand slightly in the next five years. As demand for motorcycle insurance continues growing, firms will be able to distribute risk more evenly and be better able to pay off claims and invest more capital, increasing profit.
The Motorcycle Insurance industry is divided among large insurance companies (e.g. State Farm and Allstate) that offer a range of other policies, medium-size firms (e.g. Progressive and Geico) that champion motorcycle insurance, and smaller firms that cater to local, niche markets. While the larger firms are known for carrying a large volume of insured customers, smaller firms can succeed in this industry by catering specifically to motorcyclists. Smaller firms carry a competitive advantage by grasping better knowledge of the consumer, allowing them to tailor policies to entice consumers to insure their vehicles with them. This increase in competition among larger and smaller firms has raised the level of concentration over the past five years. This trend has led to increased consolidation, as larger firms typically attempt to merge with or acquire niche firms that have proven to be successful. Over the next five years, IBISWorld expects consolidation will continue and competition will rise, creating an opportunity for higher concentration.
For more information visit IBISWorld’s Motorcycle Insurance in the US industry page
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This industry underwrites (i.e. assuming the risk and assigning premiums) motorcycle insurance policies. Motorcycle insurance provides financial protection against physical damage to the vehicle and bodily injury resulting from traffic collisions. It can also protect against resulting liability.
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