Falling disposable income and corporate profit reduced spending on insurance
Los Angeles, CA (PRWEB) May 25, 2012
The Online Insurance Brokers industry has benefited in part from an increasing percentage of services conducted online and in part from the economic recession. These factors contribute to estimated revenue growth of 4.9% per year on average during the five years to 2012, including 8.6% growth in 2012 that will push revenue to $16.9 billion. The majority of insurance policies are now initiated online; however, most are still completed using an agent. According to IBISWorld industry analyst Sophia Snyder, “The potential to convert more consumers to completing the purchase online points to stronger growth during the next five years.” Annualized revenue growth is forecast to accelerate, fostered by further consumer movement to online services, the improving economy and healthcare reform.
Indeed, during the five years to 2012, the economic recession motivated more consumers to search online to save money. At the same time, the Great Recession also caused disposable income and corporate profit to fall, reducing the amount that individuals and companies spent on insurance. Similarly, home and car ownership declined, which lowered the need for insurance products that cover these goods. Insurance carriers consequently lowered premiums to attract more business, which pressured commission (the primary revenue source for online insurance brokers). Moreover, large insurance carriers like Geico, Progressive and Esurance increasingly sold directly to consumers, effectively bypassing operators in the Online Insurance Brokers industry and causing competition to mount. Says Snyder, “Heightened competition has caused profitability to decline moderately, yet profit margin remains higher for online brokers than for brick-and-mortar brokers due to lower overhead costs.”
Competition from insurance carriers is forecast to increase during the next five years and will be augmented by entrants to the industry. The industry is fragmented and largely comprised of self-employed brokers who typically serve one or several states; therefore, no operator holds a significant market share. With moderate barriers to entry and strong anticipated growth during the foreseeable future, the number of participants is steadily increasing. The major effects of the healthcare reform legislation of 2010 are expected to hit the industry in 2014, when online insurance exchanges are scheduled to be implemented. Consumers will have more incentive to shop online due to the establishment of the insurance exchange, the federal mandate that requires individuals to have health insurance and more liberal subsidies for lower-income individuals. For more information, visit IBISWorld’s Online Insurance Brokers in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes independent individuals and businesses that act as intermediaries between consumers and insurance carriers through online web portals and websites. Industry participants earn commission income from insurance carriers and may earn fee income for providing value-added services. Industry revenue includes sales that are initiated and completed online.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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