Rising demand for insurance will drive industry growth in the next five years.
Los Angeles, CA (PRWEB) April 05, 2013
The Global Life and Health Insurance Carriers industry protects people from the immediate and long-term costs arising from illness, injury, death and longevity. Industry firms primarily offer life and health insurance products, and are often referred to as life and health (L&H) insurers. Insurers provide this protection at a fraction of the potential loss by pooling risk. Annuities provide policyholders with protection against their longevity by guaranteeing an income stream until death. The role of L&H insurers is growing as populations age and life expectancies advance, propelling industry demand. “Population aging is boosting public healthcare expenditure,” says IBISWorld industry analyst Eben Jose. “In response, governments are further privatizing healthcare by strengthening incentives for purchasing health insurance.” Additionally, demand for insurance is growing in developing economies, which have financial markets that are rapidly becoming more sophisticated. As the wealth of these regions grows, individuals will be more interested in insuring their wealth and income against death, illness or accident.
Operators in the Global Life and Health Insurance Carriers industry generate revenue through insurance underwriting and investing. Insurance underwriting is the process of assuming risk in return for a premium. Insurers then invest premiums in stocks, bonds and property to generate income streams and capital gains. “This exposure to financial markets means revenue and profitability exhibit significant volatility,” adds Jose. “The financial market collapse caused industry revenue to plummet in 2008.” This was followed by a further decline in 2010, as the rebound many expected did not eventuate. However, operating conditions have since improved markedly, allowing the industry to return to growth in 2011 and 2012. As a result, industry revenue is expected to increase at an annualized rate of 3.3% to $4.0 trillion, with growth of 3.3% in 2013.
The industry's size and global nature makes it particularly difficult for any one company to win substantial market share, giving the industry a low level of concentration. Concentration levels vary significantly across the various lines of life and health insurance written. Grabbing substantial share in multiple health insurance markets is particularly difficult due to the structural diversity of health systems. Weakened capital positions because of the financial crisis have provided impetus for merger and acquisition activity, which is expected to continue over the next five years. A number of life insurers will use business disposals to shore up their balance sheets, improve liquidity and raise cash to repay government assistance. Major player ING is one company that implemented such a strategy, listing its emerging market businesses for sale in late 2009. The Royal Bank of Scotland and AIG are two of the other large enterprises in this industry that have gone down a similar path. However, such merger and acquisition activity will not offset the addition of new life and health insurance carriers in emerging economies.
Market conditions are forecast to improve over the next five years. Increasing demand for insurance will be the primary reason for growth as improvements in the global economy decrease unemployment and increase individuals' disposable income. Furthermore, changes in demographics, higher investment earnings and increasing sophistication of developing economies will drive industry growth throughout the period. For more information, visit IBISWorld’s Global Life and Health Insurance Carriers industry report page.
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IBISWorld industry Report Key Topics
Insurers in this industry directly underwrite insurance policies relating to life, health, accident and medical risks. Underwriting insurance policies involves assuming risks and assigning premiums. Life and health insurers generate revenue not only through the specific activity of insurance underwriting, but also by investing premiums and annuity contracts. The industry excludes social health insurance programs that are established and funded by governments.
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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