Agencies will rely on rising homeownership and falling unemployment for solid growth
Los Angeles, CA (PRWEB) November 19, 2013
As a vital part of the insurance sector, the Insurance Brokers and Agencies industry experienced subdued growth over the five years to 2013 due to declining disposable income levels and delayed purchases of homes and consumer durables. The industry includes independent firms that act as intermediaries during insurance purchases. The majority of the industry's income is associated with commissions from insurance transactions, so revenue depends on three factors: policy pricing, demand for insurance and the popularity of using agents and brokers as channels for distributing and purchasing insurance.
Over the five years to 2013, the Insurance Brokers and Agencies industry has faced increased competition from underwriters that provide insurance services directly to clients. These companies have looked to reduce their reliance on independent brokerages and agencies by expanding their sales abilities through investing in company-owned sales websites and diversifying their sales divisions. According to IBISWorld Industry Analyst Stephen Hoopes, “To counteract this trend, brokers and agents have positioned themselves as insurance advisory service experts.” Industry operators now emphasize their ability to provide risk management and insurance consulting services, rather than just act as liaisons during the insurance transaction process. This trend is pushing companies to hire more skilled employees in order to offer advanced services that will complement insurance sales.
Over the five years to 2013, industry revenue is expected to grow at an annualized rate of 0.7% to $134.9 billion. “This muted growth has been caused by strong transaction activity being offset by weak insurance premium prices, a result of the soft cycle that the primary insurance market has been in the midst of since 2008,” says Hoopes. The industry's recovery took longer than expected, but rebounded sharply in 2012 and 2013, with estimated growth rates of 4.5% for each year.
Over the five years to 2018, the industry is anticipated to grow substantially as the economy improves. Revenue is forecast to rise due to, due to improvements in car sales, homeownership and employment. Such factors will drive increases in insurance demand that will stimulate commissions for industry operators. However, the industry will face considerable pricing pressure from competitors like online carriers, which will keep profit margins from fully recovering to prerecession levels.
Market share concentration within the Insurance Brokers and Agencies industry is low. The majority of industry operators are smaller firms that specialize in specific regions or industries, largely explaining this low level of concentration. The industry has become more concentrated over the past five years due to the recession and the inability of some smaller firms to compete for new contracts.
For more information, visit IBISWorld’s Insurance Brokers and Agencies in the US industry report page.
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IBISWorld industry Report Key Topics
This Insurance Brokers and Agencies industry includes individuals and businesses that primarily act as agents or brokers in selling insurance policies and annuities. Industry participants earn commission income, mostly as a percentage of the premium of insurance policies sold. They also earn some fee income for providing risk management consulting and other value-added services. This industry is only composed of independent brokers and agencies.
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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