Out-of-pocket bail payments hurt revenue, but the industry will grow as the savings rate drops
Los Angeles, CA (PRWEB) September 13, 2012
After facing a rough climate over the past five years, the Bail Bond Services industry will be bailed out by improvements in the national economy. Revenue losses averaged an annual 5.2% over the past five years as consumers began to save more money and use their own cash reserves to pay bail. The personal savings rate skyrocketed 125.0% in 2008, allowing more consumers to pay bail using cash reserves. Over that year, industry revenue plummeted 22.2%. Further, an annualized 2.4% decline in the number of crimes over the past five years reduced the number of incidences requiring bail. “Savings began to fall in 2011 and are expected to continue decreasing in 2012, reducing the number of alleged criminals able to pay bail out-of-pocket,” says IBISWorld industry analyst Justin Waterman. This trend is expected to stimulate demand for bail bonds provided by industry participants, prompting a 1.4% revenue increase to $698.2 million over the year. The Bail Bond Services industry has a low market share concentration, with only one major player, Aladdin Bail Bonds, holding a significant share of industry revenue. Over the five years to 2012, concentration has increased as many firms exited the industry due to low profitability stemming from falling crime rates and higher fixed costs.
Continued gains are expected in 2013, stemming from rising interest rates and falling savings. “Rising interest rates make paying for bail more expensive for the consumer, reducing the demand for this method of paying bail,” adds Waterman. “Further, the savings rate is anticipated to continue falling over the year, leading to fewer alleged criminals paying for bail out-of-pocket.” Both of these factors will stimulate demand for the Bail Bond Services industry. Over the next five years, interest rates are forecast to continue rising, while the personal savings rate is expected to fall. As a result, demand for bail bonds will rise.
Revenue gains over the next five-year period will be slightly offset, however, by a falling crime rate that will reduce the number of bails to be paid. In addition, and more impactful, regulation is anticipated to increase over the next five years. States could prohibit industry operators from selling bail bonds altogether, as four states have already done. More likely, some states will eliminate the payment plan option allowing consumers to put a down payment on a bail bond, then make monthly payments. Not only will this reduce the number of clients able to purchase bonds from industry operators, it will also decrease profit margins. For more information, visit IBISWorld’s Bail Bond Services in the US industry report page.
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IBISWorld industry Report Key Topics
This industry provides security bonds backed by insurance companies that cover the risk involved in releasing a defendant in judicial custody until a trial's conclusion. Bail bond agents guarantee payment of the full amount of the bond if the defendant fails to appear for their scheduled court appearance. Insurance companies that underwrite bond contracts are not included in this industry.
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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