Natural disasters and decreased consumer spending on boats have hurt industry profit
Los Angeles, CA (PRWEB) December 07, 2012
The Boat Insurance industry has struggled to stay afloat over the past five years due to low demand in the wake of the Great Recession, says IBISWorld industry analyst Eben Jose. An annualized 8.0% increase in oil prices also made boating more expensive over the period. Combined with low disposable income, new boat sales plunged more than 15.0% annually between 2008 and 2010. Likewise, existing boat owners chose to downgrade their boat insurance policies to cut costs. Consequently, industry revenue is projected to sink 0.9% annually on average to $25.9 billion over five the years to 2012. Higher competition stemmed from online retail, facilitating the comparison of boat insurance products. It also led to increased market share for major companies like Allstate and State Farm, which were best positioned to offer discounted insurance to consumers seeking savings.
The number of boat insurance companies increased slightly in the past five years at an annualized rate of 0.4% to 1,356 in 2012. Profit contracted in the past five years partly because insurance companies boosted marketing spending to better compete with other boat insurers as demand contracted. Further denting margins, damages from recent natural disasters have squelched industry profit, says Jose. Hurricanes and major storms, like Ike in 2008, Irene in 2011 and Sandy in 2012, caused significant damages to boats. Aside from storm damage boat insurance claims, the three most common claims according to the National Boat Owners Association include hitting a submerged object while cruising, theft while anchored and collision with other boaters. The Boat Insurance industry has a low market share concentration. The top companies include State Farm, Liberty Mutual and Progressive. Over the five years to 2012, market share concentration has increased slightly as the top four companies strengthened their hold on the market. Because of their well-known brands and wide range of product offerings, they have been able to capture a growing portion of the boat insurance market.
Many of the large players offer discounts on additional policies when a consumer has an existing home or auto insurance policy with the company. Because this packaging delivers cost savings to policyholders, they opt to expand their coverage within the same company. This strategy then increases large players' revenue faster than smaller players', boosting market concentration. Disposable income is estimated to recover 1.3% in 2012, so people are more likely to be out on the water. Therefore, consumers will be more likely to upgrade their boat insurance. As disposable income increases, industry revenue is expected to increase. Additionally, IBISWorld expects interest rates to rise as the economy improves, which will drive investment income and industry revenue throughout the period. For more information, visit IBISWorld’s Boat Insurance in the US industry report page.
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IBISWorld industry Report Key Topics
This industry underwrites (i.e. assuming the risk and assigning premiums) boat insurance policies for privately-owned watercraft. A boat owners' insurance policy can insure against risks of owning and operating a boat, its motor and its trailer. These risks include sinking, fire, theft, and collision. Insurers for commercial boating operators 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
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