US Finance and Insurance Sector
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 567,567 establishments in the finance and insurance sector engage in the creation, liquidation, and transfer of financial assets and/or support financial transactions. The sector connects savers and investors with borrowers and includes financial intermediaries, which use the funds of savers to make loans or investments. Firms may also act as agents and invest on behalf of others. The infrastructure of financial markets includes systems that provide information, payment, clearing, and settlement services that support and facilitate transactions.
Balancing Risk and Reward
Risk is an integral part of financial markets, and investments can lose some to even all of their value under certain types of conditions.
Government Regulation
Industries in the finance and insurance sector are subject to extensive government regulation at varying levels.
Industry size & Structure
The finance and insurance sector is comprised of 567,567 establishments that employ 6.6 million workers and generate $5.3 trillion in annual revenue, according to government sources.
- The finance and insurance sector represents 8.9% of the nation's Gross Domestic Product (GDP) and employs 5% of the country's workers.
- The sector is somewhat concentrated at the top with the 20 largest firms representing 29% of revenue, but it is fragmented at the bottom.
- In addition to employer establishments, the finance and insurance sector has 755,000 owner-operated establishments with no employees. The subsector with the highest numbers of nonemployer establishments is agencies, brokerages, and other insurance-related activities (54%). The owners of nonemployer establishments typically perform the work and may outsource support functions like marketing and accounting.
- The finance and insurance sector shed about 90,000 establishments in 2021, which equals about 16% of existing establishments, according to the Bureau of Labor Statistics. However, the sector added about 119,000 new establishments, which is equivalent to 21% of existing establishments. As a result, the sector had a growth rate of 5.1%.
- The finance and insurance sector is forecast to grow its employment base by 4.4% overall in 2021-2031, which is lower than the national average of 5.3% for all jobs, according to the Bureau of Labor Statistics.
Industry Forecast
US Finance and Insurance Sector Industry Growth
Recent Developments
May 18, 2024 - Increasing Personal Income may Boost Demand
- Personal income, an indicator of demand in the finance and insurance sector, increased slightly during the first quarter of 2024, according to the US Bureau of Economic Analysis. US finance and insurance sector employment decreased slightly during the first quarter of 2024, according to the US Bureau of Labor Statistics.
- More banks will have to sign on to instant payment services like The Clearing House’s RTP Network and the Federal Reserve’s FedNow Service to enable faster payments, and services must be interoperable to accelerate growth of instant payment systems, according to Cory Barnes, senior product manager at payment technology platform provider Form3. Payments initiated on one system today must travel and settle within that system. A payment or remittance can’t travel from a bank on one system and land with a bank on another system. Barnes likened the situation to the mobile phone landscape a few decades ago, where Verizon subscribers could not call someone on the AT&T network. That changed over time, Barnes says, and we’re headed to the same flexibility with instant payments. Increased participation and interoperable systems will in turn will spur a “network effect” and growth in the number of endpoints. “The expectation with instant payments is that they are frictionless,” Barnes said. “It’s all about the end user.”
- The US property and casualty insurance industry entered 2024 with strong momentum, according to Swiss Re Institute. Profitability was below insurers' cost of capital in 2023 but strong premium increases, easing claims cost inflation, and higher investment returns began boosting industry results by the second half of the year. These trends are expected to continue in 2024, supporting profitability improvement. The loss ratio on personal lines was 21 percentage points higher than on commercial lines during the first 9 months of 2023 but the gap is expected to narrow in 2024. Personal lines premiums are growing faster and easing economic inflation primarily benefits personal lines claims costs, while social inflation mostly impacts commercial lines. Swiss Re Institute forecasts industry return on equity at 9.5% in 2024 and 10.0% in 2025, supported by premium growth of 7.0% and 4.5% respectively in these years.
- Car insurance had the highest annual cost increase in 2023 of all items tracked by the US Bureau of Labor Services (BLS). Americans spent an estimated 20% more on car insurance than they did in 2022, the largest such increase since 1976. Car insurance cost Americans 43% more in 2023 than it did in December 2020. Insurance companies accumulated so much cash from a lack of claims during the first half of 2020, when COVID-19 shutdowns stopped people from driving, that some sent rebate checks or discounts to their customers. Car insurance expenditures were down 5% in that year, according to the BLS. Insurance rates rebounded when pandemic restrictions were eventually lifted.
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