III. Industry Analysis
Last year, according to IBISworld.com, U.S. insurance brokerage and agencies brought in revenues of $117 billion and employed 965,000 people. There were 381,116 businesses in this market, for an average of $308,000 per business. The average wage paid to an insurance industry employee was $55,736.
Overall, the insurance sector has fundamentally changed. The old practice of incurring underwriting losses, offset by large investment gains, is a thing of the past. As underwriting performances have improved, risk has been priced appropriately. This has triggered soft market conditions, revenue volatility is expected to remain low and the state of primary insurance markets will continue to have a strong bearing on industry prospects.
Key players in the industry include Marsh and McLennan Companies, Inc, Aon Corporation, and Willis Group Holdings LimitedWhile there are major players, most of the industry consists of small, independent insurance brokers and firms. Large firms often pay significant amounts for an independent broker to join them and bring their client base along.
The following are industry trends identified:
- “The U.S. is a very litigious climate,” says Bob Prox, senior vice president commercial insurance for Forrest Scherer in Terre Haute. “When someone gets hurt, they get a doctor and a lawyer almost in the same breath. One trend we see is for bigger dollar judgments. The plaintiff attorneys are seeking and demanding greater recovery.” (Allbusiness.com)
- “Employment Practices Liability Insurance (EPLI) protects employers against lawsuits brought against them by employees, or previous employees, including, wrongful termination, sexual harassment, failure to promote and hostile workplace environment. While it isn’t a new type of coverage, it is becoming more important.” (Allbusiness.com)
- Flood insurance is a higher interest for areas prone to flooding in the wake of the Hurricane Katrina disaster.