Insurance Agencies & Brokerages
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 123,700 insurance agencies and brokerages in the US act as the “sales arm” of the insurance industry. Insurance agencies represent insurance carriers and sell policies to customers looking to minimize risks. “Captive” agents are affiliated with a single carrier. Independent agents may represent a variety of carriers. Brokers represent customers, and work with multiple carriers to determine the policy that best fits customer needs.
Cyclical Sales
The insurance industry is cyclical and premiums vary considerably depending on market conditions.
Government Regulation
Government regulation can affect insurance premiums, coverage, and commissions.
Industry size & Structure
A typical insurance agency or brokerage operates out of a single location, employs about 7 workers, and generates $1.2 million annually.
- The insurance agency and brokerage industry includes 123,700 companies that employ about 853,400 workers and generate about $153 billion annually.
- For property/casualty insurance, "direct writers" (captive agents, direct sales via Internet, and affinity groups) account for 46% of sales and "agency writers" (independent agents and brokers) account for 54%, according to A.M. Best.
- Direct writers account for about 64% of personal P/C insurance sales, while agency writers account for 76% of commercial P/C insurance sales.
- Independent agents account for 49% of new life insurance sales, captive agents account for 38%, direct marketers for 7%, and others (such as stockbrokers) for the remaining 6%.
- The industry is highly fragmented with the top 50 firms accounting for 28% of industry sales.
- Large companies include Marsh & McLennan Companies, Aon Corporation, and Arthur J. Gallagher.
Industry Forecast
Insurance Agencies & Brokerages Industry Growth
Recent Developments
Mar 9, 2023 - Biden Administration Announces Cybersecurity Strategy
- The Biden administration revealed a new National Cybersecurity Strategy that seeks to rebalance the responsibility to defend cyberspace by shifting the burden for cybersecurity away from individuals, small businesses, and local governments, and onto the organizations that are most capable and best-positioned to reduce risks, according to a White House statement. Insurance providers may benefit if demand for cyber insurance increases among organizations onto which the burden is shifted. The initiative is intended to expand the use of minimum security standards for critical infrastructure and establish a common set of regulations to make it easier to comply with that baseline. It would also shift some liability for software and services to developers that ignore recommended cybersecurity practices or ship products with known vulnerabilities. A safe harbor provision would protect companies that make a sincere effort to develop secure products.
- The number of fraudulent instruction scams, also known as phishing scams, increased 13% year over year in 2022, according to specialist insurer Beazley’s Cyber Services Snapshot report. Fraudulent instruction scams are the use hacking and phishing techniques to accumulate information that allows the sending of plausible-looking requests to transfer funds to bogus accounts. Organizations lose money in the process, but they may also have to conduct an extensive systems analysis to ensure that individuals’ personal and private data have not been compromised. “Current trends indicate that threat actors will continue to pursue fraudulent instruction as a profitable tactic in 2023,” Beazley researchers said. Legal risks were also highlighted in the report, with cyber extortion with data exfiltration driving class-action lawsuits in 2023, Beazley predicted. The insurer has also noticed that plaintiffs are filing more class actions with a smaller potential class size.
- The Ohio Supreme Court overruled a state appeals court by ruling that there must be “direct” physical loss or physical damage in the company’s computer software for insurance policy coverage of a ransomware attack on computer software. Defendant Owners Insurance Company asserted that the insurance contract unambiguously stated only “direct physical loss” or “direct physical damage” to media would be covered under the insurance policy. The court said that a computer might have physical electronic components that are “tangible” in nature but the information stored there has no “physical presence”; thus a ransomware attack on the company software has no coverage under the company’s insurance policy. The judgment against medical billing software maker EMOI concludes that a software developer can’t use its property insurance to cover losses.
- Insurance fraud can cost up to $309 billion a year, according to the Coalition Against Insurance Fraud (CAIF). Fraud comes in many forms, such as misrepresenting facts on an insurance policy to receive a lower premium, exaggerating an injury in the hopes of gaining additional benefits, and large-scale organized fraud whereby organized international criminal groups and terrorist cells launch highly detailed campaigns targeting specific insurance carriers. CAIF cites the insurance system's gaps in how claims are processed, which make it a very easy target, as a key cause of the high cost.
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