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Revenue for the industry remained relatively strong during the recession due to the constant need for insurance coverage, in times of economic growth and decline. Still, the recovery will likely cause demand and revenue to pick up, as high unemployment and other adverse economic effects subside. As more people resume buying cars and homes, as well as purchasing health insurance, demand for insurance brokers and agents will rise. However, the industry will also face competition from online brokerage businesses and direct insurance sales models. For these reasons, industry research firm IBISWorld has updated its report on the Insurance Brokers & Agencies industry.
Los Angeles, CA (PRWEB) October 07, 2012
The Insurance Brokers and Agencies industry, which includes independent firms that act as intermediaries during insurance purchases, is a vital part of the insurance sector. Industry participants distribute insurance policies and provide advisory services to businesses and consumers. The majority of the industry's income is associated with insurance transactions, so revenue generally depends on three things: policy pricing, demand for insurance and the popularity of using agents and brokers as channels for distributing and purchasing insurance. During the five years to 2012, the industry's revenue is estimated to grow at an annualized rate of 2.6% to $154.0 billion. During this period, strong transaction activity has supported industry expansion. However, according to IBISWorld industry analyst Eben Jose, “weak insurance premium prices have somewhat dampened this growth because the primary insurance market has been in the midst of a soft cycle since 2007.” The industry's recovery began slowly in 2010 before revenue expanded 6.9% and an estimated 4.5% in 2011 and 2012, respectively.
In the five years to 2012, the industry has faced increased competition from underwriters, such as Liberty Mutual, State Farm and Geico, which provide insurance services directly to clients. These companies have looked to reduce their reliance on independent brokerages and agencies by expanding their sales capabilities through investing in company-owned sales websites and diversifying their sales divisions. To counteract this trend, the Insurance Brokers and Agencies industry has positioned its employees as insurance advisory service experts. Brokers and agents now emphasize their ability to provide risk-management and insurance consulting services, rather than just acting as liaisons during the insurance transaction process. “This trend is pushing companies to hire more skilled and educated employees in an attempt to offer advanced services that will complement insurance transactions and sales,” says Jose.
In the five years to 2017, IBISWorld expects the industry to grow substantially as the economy improves. Revenue is forecast to rise strongly on the back of improvements in car sales, homeownership rates and employment. Such factors will drive insurance demand and stimulate industry growth. In addition, the industry will face considerable pricing pressure from competitors, like online carriers, which will keep profit margins from fully recovering to prerecession levels. Although profit will remain limited, larger industry operators are expected to gain market share and bolster margins through increased merger and acquisition activity. Prior to the recession, the market was highly fragmented, as rise in smaller, specialized firms focused on niche markets, such as risk management or reinsurance. Going forward, however, larger firms will look to acquire smaller firms that struggled during the recession in order to more effectively compete for contracts. For more information, visit IBISWorld’s Insurance Brokers & Agencies in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes individuals and businesses that primarily act 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 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
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.
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