Despite strong revenue growth over the past five years, the industry faces intensifying competition from underwriters and banks
Melbourne, Australia (PRWEB) July 21, 2014
In the Insurance Brokerage industry, rising premiums and a strong consumer preference for purchasing insurance from brokers have been pushing industry revenue upwards. Insurance brokers provide impartial advice and expertise to commercial and private consumers purchasing insurance. Brokers are able to explain the insurance process and match the client to the most suitable products. Brokers benefit insurers in that they act as a distribution network and sales team. Strong insurance sales have led to increased commissions for the industry, with industry revenue forecast to rise by an annualised 2.6% over the five years through 2014-15. This growth includes a rise of 3.4% in 2014-15, to reach $12.3 billion. According to IBISWorld industry analyst Stephen Gargano, “despite the strong revenue growth over the past five years, the industry faces intensifying competition from underwriters and banks.” Underwriters are investing in online sales capabilities and new sales channels such as bancassurance, whereby insurance is sold through partnerships with banks. These efforts aim to reduce insurance providers' reliance on agents and brokers.
“Brokers have successfully guarded their distribution share by providing knowledge-intensive services to augment traditional insurance policy sales and by focusing on more profitable markets such as the commercial segment,” says Gargano. This new focus from brokers is expected to continue as direct competition from insurers intensifies. The industry is expected to grow further over the next five years. Profit is expected to strengthen, as premium prices rise and many brokers consolidate to save costs on administration. Increasing consolidation will allow operators to combine revenue streams, improve operating efficiency and maximise profit. This trend towards consolidation is expected to reduce the number of enterprises operating in the industry over the next five years.
The Insurance Brokerage industry is subject to a low level of market share concentration. The market is highly fragmented and has many small businesses and independent insurance brokers. Major insurance broking companies in Australia include Aon Corporation, Marsh Mercer and Jardine Lloyd Thompson, all of which are internationally owned. OAMPS, previously Australia's largest insurance broker, was acquired by Arthur J. Gallagher & Co in June 2014. Former owner Wesfarmers had previously scaled back the operations of OAMPS, which decreased industry concentration significantly. There are many very small firms operating in the industry that do not have the resources or expertise to service large clients or clients that require specialist services, such as risk consultation, in addition to regular broking services. Many of the larger agents and brokers usually contract business from smaller agents (sharing commissions) and in return provide the smaller agents with services (such as research, agent training and computer software).
For more information, visit IBISWorld’s Insurance Brokerage report in Australia industry page.
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IBISWorld industry Report Key Topics
This industry includes individuals and businesses that act primarily as agents or brokers in selling annuities and insurance policies. Industry participants earn commission income, mostly as a percentage of the premium of insurance policies sold. They also earn fee income for risk management consulting and claim assessment and adjustment services. Foreign-based insurance underwriters that mainly engage in insurance broking domestically are also included in this industry.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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