The industry will grow as consumers return to work and make big-ticket purchases again
New York, NY (PRWEB) August 05, 2014
The Product Warranty & Liability Insurance industry underwrites factory warranties for manufacturers and extended warranties for retailers and consumers. Product warranties insure major electronics, household appliances and other products against defects or damage and cover repair and replacement costs. A number of trends have put downward pressure on warranty premiums in recent years, hurting underwriting revenue for industry operators. Declining prices for electronics, the largest product group for which industry operators underwrite warranties, have decreased the prices of premiums needed to insure these goods. Moreover, electronics and appliances are increasingly produced and sold abroad, and many of the largest manufacturers, such as Samsung and LG, are foreign-owned. Globalization in the industry's main markets has contributed to fewer warranties that are underwritten domestically.
In addition to premiums, investment income has suffered over the period. Operators earn a portion of their revenue from returns on invested assets, primarily fixed-income securities. Since the recession, the US Federal Reserve has kept interest rates low to spur consumer spending and business investment. As a result, operators' returns on fixed-income securities have decreased, reducing investment income. For these reasons, industry revenue is forecast to decrease at an annualized rate. The recovering housing market, as well as rising disposable income levels, is anticipated to help bolster downstream sales of appliances and electronics in 2014, limiting the decline in revenue to a modest drop over the year.
The Product Warranty & Liability Insurance industry has a low level of market share concentration. Despite these negative trends, third-party providers that underwrite warranties directly for consumers are growing strongly due to their low-cost model, online convenience, highly-rated customer service and rapid claims response teams. Innovative solutions from third-party providers will help return the Product Warranty Insurance industry to growth over the next five years. This growth will be supported by improvements in the housing market and household wealth. As the unemployment rate continues to decline, disposable incomes will rise, increasing consumers' ability to purchase big-ticket items that they may have delayed in recent years, such as home appliances and electronics. This trend will benefit product warranty insurance providers, helping to increase revenue at an annualized rate over the five years to 2019.
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IBISWorld industry Report Key Topics
This industry comprises establishments primarily engaged in underwriting product warranty policies, which protect the buyer of the product from defects and damage. The industry excludes warranty programs for homes, automobiles and other vehicles. It also excludes companies that perform repair services for products under warranty.
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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