Insurance Brokers - Agencies in The US Industry Report PDF

WWW.IBISWORLD.
COM Insurance Brokers & Agencies in the USJune 2019 1
Free agent: Improving macroeconomic

conditions have benefited industry demand
This report was provided to
University of Michigan (2133584338)
by IBISWorld on 23 July 2019 in accordance with their license agreement with IBISWorld
IBISWorld Industry Report 52421

Insurance Brokers &
Agencies in the US
June 2019 Anthony Gambardella
2 About this Industry 19 International Trade 38 Revenue Volatility

2 Industry Definition 20 Business Locations 39 Regulation and Policy
2 Main Activities 40 Industry Assistance
2 Similar Industries 23 Competitive Landscape
3 Additional Resources 23 Market Share Concentration 41 Key Statistics
24 Key Success Factors 41 Industry Data
4 Industry at a Glance 24 Cost Structure Benchmarks 41 Annual Change
26 Basis of Competition 41 Key Ratios
5 Industry Performance 28 Barriers to Entry 42 Industry Financial Ratios
5 Executive Summary 29 Industry Globalization
5 Key External Drivers 43 Jargon & Glossary
7 Current Performance 30 Major Companies
10 Industry Outlook 30 Marsh & McLennan Companies Inc.
12 Industry Life Cycle 31 Aon Corporation
32 Willis Towers Watson
14 Products and Markets 34 Arthur J. Gallagher & Co.
14 Supply Chain
14 Products and Services 36 Operating Conditions
16 Demand Determinants 36 Capital Intensity
18 Major Markets 37 Technology and Systems
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

WWW.IBISWORLD.COM Insurance Brokers & Agencies in the USJune 2019 2
About this Industry
Industry Definition This industry includes individuals of insurance policies sold. They also earn
and businesses that primarily act as some fee income for providing risk
agents or brokers in selling insurance management consulting and other
policies and annuities. Industry value-added services. This industry is
participants earn commission income, only composed of independent brokers
mostly as a percentage of the premium and agencies.
Main Activities The primary activities of this industry are

Property and casualty insurance policy brokerage
Health and medical insurance brokerage
Life and accident insurance brokerage
Reinsurance brokerage and administration
Annuity brokerage
Risk management consulting
The major products and services in this industry are

Annuities
Commercial P&C insurance
Health and medical insurance
Insurance administration and risk consulting
Life and accident insurance
Personal P&C insurance
Other
Similar Industries 52411a Life Insurance & Annuities in the US

This industry includes direct insurers that primarily underwrite life insurance policies and annuities. This
industry uses agents and brokers to distribute policies.
52411b Health & Medical Insurance in the US

This industry includes direct insurers that primarily underwrite health and medical insurance policies. This
industry uses agents and brokers to distribute policies.
52412 Property, Casualty and Direct Insurance in the US

This industry includes direct insurers that underwrite property, casualty, liability, title and other general
insurance policies. This industry uses agents and brokers to distribute policies.
52413 Reinsurance Carriers in the US

This industry includes reinsurers that assume all or part of the risk associated with existing insurance
policies.
Provided to: University of Michigan (2133584338) | 23 July 2019

About this Industry
Additional Resources For additional information on this industry

www.acli.com
American Council of Life Insurers
www.iii.org
Insurance Information Institute
www.pciaa.net
Property Casualty Insurers Association of America
www.reinsurance.org
Reinsurance Association of America
www.ciab.com
The Council of Insurance Agents and Brokers
IBISWorld writes over 1000 US

industry reports, which are updated
up to four times a year. To see all
reports, go towww.ibisworld.com

WWW.IBISWORLD.COM Insurance Brokers & Agencies in the US June 2019 4
Industry at a Glance
Insurance Brokers & Agencies in 2019
Key Statistics Revenue Annual Growth 14–19 Annual Growth 19–24

Snapshot
$166.5bn 2.4% 0.7%
Profit Wages Businesses
$25.5bn $59.0bn 412,819

Revenue vs. employment growth Number of motor vehicle registrations
Market Share
Marsh & 8 2.0
McLennan
6
Companies Inc. 1.5
4.4% 4
% change
% change
1.0
Aon Corporation 2
2.9% 0.5
0
Willis Towers
Watson -2
Year 11 13 15 17 19 21 23 25
0.0
Year 13 15 17 19 21 23 25
2.4% Revenue Employment
Arthur J. SOURCE: WWW.IBISWORLD.COM
Gallagher & Co. Products and services segmentation (2019)

2.3% 1.5%
Insurance
administration
p. 30
9.1% and risk consulting 2.8%
Annuities
Life and accident insurance
Key External Drivers 30.4%
Number of motor
vehicle registrations
13.5%
Homeownership rate Health and medical insurance
Per capita disposable

income
Number of people with
private health insurance
Threat of natural disaster
15.1%
Other 27.6%
p. 5 Personal P&C insurance
SOURCE: WWW.IBISWORLD.COM
Industry Structure Life Cycle Stage Mature Regulation Level Heavy

Revenue Volatility Low Technology Change Low
Capital Intensity Low Barriers to Entry Medium
Industry Assistance None Industry Globalization Low
Concentration Level Low Competition Level High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 41

Industry Performance
Executive Summary | Key External Drivers | Current Performance
Industry Outlook | Life Cycle Stage
Executive Summary The Insurance Brokers and Agencies period. Furthermore, some legislation
industry has grown steadily over the five such as the Patient Protection and
years to 2019 due to macroeconomic Affordable Care Act (PPACA), mandated
growth, beneficial legislation and positive that consumers have health insurance,
trends in the insurance sector. The which industry operators help consumers
industry includes insurance brokers, who purchase. This provided constant demand
represent the buyer, rather than the for insurance products and services
insurance company, and agencies, who, provided by industry operators during the
in contrast, represent various insurance period. Despite these beneficial trends,
companies during the purchasing industry revenue growth was slightly
process. The industry is a vital stifled by insurance providers attempting
component of the larger insurance sector to bypass industry operators by building
as industry operators act as their own in-house sale teams and
intermediaries between insurance websites to help consumers to buy
providers and downstream consumers. insurance directly from them. Overall,
industry revenue increased an annualized
2.4% over the five years to 2019 to $166.5
Rising
premium policy prices and increasing billion. This includes industry revenue
growth of 1.4% in 2019 alone.
disposable income have benefited the industry Over the five years to 2024, the
industry is anticipated to grow
Operators generate income via moderately as the macroeconomic
commissions earned on policies sold. As landscape continues to improve.
a result, industry revenue increases as Continued macroeconomic growth will
policy prices and volumes increase. lead to sustained per capita disposable
Over the five years to 2019, the industry income growth during the period.
has grown for numerous reasons. One Consequently, consumers will be more
such reason has been rising premium able to afford items like automobiles and
prices on policies sold to consumers. As private health insurance. However, the
insurance providers sell policies at higher repeal of the individual mandate within
prices, operators generate higher the PPACA is expected to lead to slightly
commissions. Despite rising premium slower demand for industry operators’
prices, consumers have not decreased services during the period. Overall,
their consumption of insurance products industry revenue is expected to increase
provided by industry operators, as an annualized 0.7% over the five years to
disposable income levels rose during the 2024 to $172.7 billion.
Key External Drivers Number of motor vehicle registrations representing a potential opportunity for
The number of cars registered influences the industry.
industry demand for individual
automotive insurance. While automotive Homeownership rate
sales have little effect on the number of The US homeownership rate influences
cars on the road, they are an important demand for insurance. While this rate
indicator of policy prices because newer fluctuates on an annual basis, the stock of
cars are normally costlier to insure. The houses remains relatively constant and
number of motor vehicle registrations is the majority of homeowners’ insurance
expected to increase in 2019, revenue comes from renewals. Still, an

Key External Drivers increase in the homeownership rate For example, a significant portion of
continued typically translates into higher demand small companies (those with two to 50
for insurance and commissions for workers) purchase health benefits
industry operators. The homeownership through agents or brokers. Therefore, an
rate is expected to increase in 2019. increase in health insurance membership
will be a boon for agents and brokers.
Per capita disposable income The number of people with private health
A portion of an increase in personal insurance is expected to increase in 2019.
disposable income generally flows into
the insurance market. As peoples’ Threat of natural disaster
earnings grow, the need for insurance An increase in damage caused by natural
also expands as they buy cars, homes and disasters generally boosts demand for
other assets that need to be protected. insurance and reinsurance. Since
Additionally, higher per capita disposable insurance brokers and agents are a
income enables individuals to expand central part of the distribution of both of
coverage because they can afford high these products, they will benefit from this
premiums. This factor is particularly the increase in demand, despite damaged
case for life, property and casualty lines. profit margins among these upstream
Per capita disposable income is expected underwriters. Natural disasters are
to increase in 2019. inherently difficult to forecast, but any
increase in the frequency of these events
Number of people with holds the potential to boost insurance
private health insurance policy volumes, particularly for property
Brokers play an important part in and casualty products. This would pose a
distributing health insurance policies. threat to the industry.
Number of motor vehicle registrations Homeownership rate
2.0 68
67
1.5
66
% change
1.0
%
65
0.5
64
0.0 63
Year 13 15 17 19 21 23 25 Year 11 13 15 17 19 21 23 25

Current The Insurance Brokers and Agencies

industry is an important component of Industry revenue
Performance the insurance sector, as insurance
8
brokerages and agencies represent clients
and insurance carriers during the
6
insurance purchasing process. Brokers
are generally independent agents who
% change
represent the buyer, rather than the 4
insurance company, during the insurance
purchasing process. In contrast, agents 2
represent various insurance companies
during the transaction process. 0
The industry generates the majority of Year 11 13 15 17 19 21 23 25
its revenue through commission from
insurance sales and risk management SOURCE: WWW.IBISWORLD.COM
services. In turn, commission depends on

the level of transaction activity and increasing (hardening). Over the five years
premium pricing, which differ among to 2019, price increases in insurance
insurance products. During the five-year premiums have not caused consumers to
period, industry revenue has benefited shy away from purchasing durable goods,
from hardening prices cycles, which are as the number of motor vehicle
characterized by increasing premium registrations has increased an annualized
prices, in property and casualty (P&C) 1.6% over the five years to 2019.
and health insurance. These trends Furthermore, increased competition,
helped industry revenue increase an particularly from online brokerage
annualized 2.4% over the five years to businesses and direct insurance sales,
2019 to $166.5 billion. This includes continue to threaten the industry. As a
growth of 1.4% in 2019, partially due to result, industry operators have adjusted
continued growth in the number of their product offerings to remain
employees, who need to be supplied with competitive. The Insurance Brokers and
various lines of insurance, over the year. Agencies industry was also marked by
Within the P&C market, demand is extensive acquisitions early in the period,
relatively stable because homes, cars, caused by the desire to access niche
businesses and employees all need to be markets and the fallout from an
insured, regardless of general market arrangement concerning contingency
conditions. As a result, the majority of payments. Despite consolidation in the
P&C premiums are related to policy early part of the period, new operators
renewals. P&C premiums fluctuate in have continued to enter the market to
relation to changes in pricing, with the cater to the insurance needs of individuals
P&C market moving between periods of and businesses in their geographic
price cutting (softening) and price proximity over the five years to 2019.
Hardening cycle leads While demand from the P&C sector insurance fluctuates alongside the
to growth remains relatively constant, demand for unemployment rate. Workers’
specific lines of insurance can vary based compensation insurance must be
upon economic conditions. For example, provided to every employed worker,
demand for workers’ compensation regards of the nature of their work,

Hardening cycle leads before they can start working. Similarly, insurance providers in certain insurance
to growth continued before a business can operate as a legal industries have been in a hardening price
entity, they must first possess numerous cycle. During a hardening price cycle,
lines of insurance that industry operators insurance providers raise premium prices
can help them purchase. Due to both of to boost profitability and excess reserves.
these relationships, as the number of This is normally done in the aftermath of
businesses and employees grows, so does a catastrophic event or a sustained period
demand for industry services. of unprofitable premium underwriting.
Accordingly, macroeconomic growth over In response to this, insurance providers
the five years to 2019 has led both the look to only underwrite policies to the
number of business and employees to highest quality consumers. Health and
increase an annualized 1.3% and 1.7%, P&C providers specifically have been in a
respectively. Growth in these key hardening price cycle during the entirety
macroeconomic variables has led to of the period. Health insurers have
increased demand for industry operators’ increased premium prices in response to
services, as they help assure that new the rising cost of care, while P&C
workers and businesses have the proper underwriters have increased premiums in
coverage in place. response to catastrophic events that led
While these macroeconomic trends insurers to payout a higher number of
have led the quantity of policies industry policyholders. Industry operators have
operators sold during the period to benefited from these trend as they
increase, the price of certain policies generate more in commissions as the
increased as well. During the period, prices of the policies they sell increase.
Competition Over the five years to 2019, online

heightens brokerage businesses and direct insurance Onlinebrokerage
sales have posed a threat to industry
revenue. Companies such as Geico have
businesses and direct
taken advantage of the low costs of selling insurance sales pose a
insurance policies online. Other insurers, threat to industry revenue
such as Liberty Mutual, have increased
their sales forces in an attempt to sell
products to businesses and individuals increase in industry revenue has led
directly. To counteract this trend, brokers wages to increase an annualized 2.9% to
and agents now emphasize their expertise $59.0 billion over the five years to 2019.
in risk management and insurance Brokers increasing their skill sets make
consulting services to avoid being them more valuable to their company or
perceived as mere liaisons during the to potential clients if they are an
insurance transaction process. independent insurance broker. This in
Increased specialization of brokers in turn enables them to command higher
the industry, as well as the overall wages for their services.
Industry participation Market service agreements, particularly quantity of business with an insurance
trends contingency payments, provide underwriter. These agreements,
incentives for brokers to place a certain particularly among the major industry

Industry participation players, came under fire prior to the Affordable Care Act (PPACA). The
trends continued current five-year period because they confusion and uncertainty surrounding
created a conflict of interest for brokers the implementation of the PPACA led
in the industry. Acquisition activity has consumers to contact industry operators
subsequently been supported by an to help them navigate the complex health
agreement with the New York Attorney insurance landscape and purchase the
General, which allows major players to insurance policy that best fit their needs.
acquire small industry operators that To cater to this increased demand, new
have these market service agreements, operators joined the industry.
as long as they phase out these contracts Accordingly, industry enterprises
within three years. One large merger increased an annualized 0.7% over the
that occurred during the period was five years to 2019 to 412,819 operators.
between Willis Group Holding and Despite increased internal competition
Towers Watson, which formed Willis among industry operators from new
Towers Watson. entrants and external competition from
While legislation has enabled insurance providers, industry profit
consolidation, industry participation has margins expanded during the period.
increased during the period. New This was achieved as a result increasing
entrants to the market help consumers in policy volumes and prices coupled with
a specific geographic region with their other operational cost savings.
unique insurance needs. This has been Accordingly, the average industry profit
partially supported in recent years by the margin increased from 14.2% in 2014 to
passage of the Patient Protection and 15.3% in 2019.

Industry Sustained macroeconomic growth is

expected to continue to lead the
individual mandate clause in the Patient
Protection and Affordable Care Act
Outlook Insurance Brokers and Agencies industry (PPACA), which required individuals to
to grow over the five years to 2024. As purchase insurance coverage or pay a
the economy continues to grow at a stable fine, may lead some people to drop their
pace, per capita disposable income is private health insurance coverage.
expected to increase an annualized 1.5% Overall, industry revenue is expected to
over the five years to 2024. Disposable increase an annualized 0.7% over the five
income growth will make paying years to 2024 to $172.7 billion.
insurance premiums more manageable Low-cost online carriers, such as
for consumers, especially as premiums Geico, continue to increase market share
continue to rise during the period. As within the property and casualty (P&C)
more consumers purchase insurance market. Similarly, other large insurers,
during the period, demand for industry such as Liberty Mutual, are anticipated to
operators’ services will also increase, as continue to expand their direct-selling
operators work with consumers to select capabilities by developing websites and
the insurance that best suits their needs. increasing in-house sales staff. As a result
While disposable income growth may of this increased competition, the average
lead consumers who previously did not industry profit margin is anticipated to
have private health insurance to purchase stagnate at 15.3% over the five years to
coverage, the recent repeal of the 2024, despite rising sales.
Expansion of car, life Consumption of durable goods like

and health insurance homes and cars is normally predicated on Industryoperators will
the long-term financial stability of
coverage
consumers. Per capita disposable income
benefit from an increase in
is expected to increase an annualized the total number of motor
1.5% over the five years to 2024, giving vehicles registered
consumers more certainty in their
financial stability. Despite overall new
cars sales slightly declining during the automobile insurance varies from state to
period, consumers in need of an state. This provides operators an
automobile will have increased certainty opportunity to add value for a consumer
in their ability to purchase a car. This by understanding and explaining these
trend, coupled with the increased minimum requirements.
longevity of automobiles due to improved Another area where disposable income
vehicle technology, is expected to cause growth will positively affect industry
the total number of motor vehicles operators is in health insurance policies
registered to increase an annualized 1.1% they help consumers purchase. As their
over the five years to 2024. Industry disposable income levels rise, consumers
operators will benefit from this trend as who previously relied on public healthcare,
automobile insurance is needed to legally such as Medicare and other government-
register a motor vehicle. As more run programs, are more likely to purchase
automobiles are registered, industry private insurance from health insurance
operators will help consumers purchase providers. However, after a repeal of a part
the right automobile insurance for their of the Patient Protection and Affordable
needs. This is especially true as minimum Care Act, individuals are not mandated by

Expansion of car, life law to have health insurance coverage. This only slightly increase, several factors are
and health insurance may lead some individuals to choose to go fueling the increase in the price of health
uninsured, especially young people who are insurance policies. The main driver of
coverage continued
no longer eligible for their parents’ health this increase is the growing cost of
insurance policies. Accordingly, the healthcare itself. Prescription drug costs,
number of individuals with private health in particular, have been one of the fastest
insurance is expected to only slightly growing major categories of health
increase over the five years to 2024 an spending over the past few years, and this
annualized 0.1% to 223.5 million trend is expected to continue. The
Americans. Despite this trend, consumers Centers for Medicare and Medicaid
that do look to purchase health insurance Services estimates that drug expenditures
will continue to seek out industry operators will continue to increase an annualized
to help them purchase the right health 6.7% until 2025. As the price of health
insurance policy. insurance policies increase, industry
While the number of individuals with operators are expected to generate higher
private health insurance is expected to commissions on policies sold.
Demand conditions Insurance pricing cycles and transaction

volume largely drive industry revenue. Demand is expected to
Pricing cycles depend on investment improve as consumers
returns and catastrophic events, while
transaction volumes are subject to return to work
business and consumer demand. Over
the five years to 2024, demand is employment is forecast to increase an
expected to improve as consumers return annualized 0.9% to 1.1 million
to work and businesses expand employees over the five years to 2024.
operations. Additionally, operators will Despite growth in establishment figures
likely benefit from an increase in demand keeping up with revenue growth,
for risk management and other value- operators will increasingly look to
added services. technology and internet sales to deliver
As a result of increased demand, the services. This trend will help buoy profit
number of establishments is forecast to margins against the ever-increasing level
increase over the five years to 2024, of competition from primary insurance
growing an annualized 0.7% to 440,981 carriers and self-insurance options in
locations. Similarly, industry the future.

Life Cycle Stage Industry value added is expected to trend in line
with real GDP growth over the 10 years to 2024
Product development has slowed
over the past five years
The industry is in a major merger
and acquisition phase

Industry Life Cycle The Insurance Brokers and Agencies risk management and consulting
industry is in the mature stage of its services, to add value to their clients and
economic life cycle; this stage is differentiate themselves from their
Thisindustry characterized by slowing product competition. This trend is expected to
is M
ature development and extensive merger and continue over the five years to 2024, but
acquisition (M&A) activity. Industry revenue generated from these services
value added (IVA), which measures an will still represent a small fraction of total
industry’s contribution to the overall industry revenue.
economy, is expected to increase at an In an effort to boost profit margins and
annualized rate of 2.0% over the 10 years improve performance in this competitive
to 2024. In contrast, US GDP is projected industry, many operators, particularly
to grow at an annualized rate of 2.2% the major players, have acquired a
during the same period. Industry growth significant number of operators prior to
is generally influenced by economic the period. For example, major player
conditions and pricing cycles within the Arthur J. Gallagher completed 48
primary insurance market. Traditionally, acquisitions in 2018 alone. The great
softening price cycles are associated with majority of these companies are small,
slow industry growth because lower rates specialized operators that focus on niche
mean smaller commissions. In contrast, markets or particular geographic
hardening price cycles correlate with segments. The trend of consolidation was
greater industry growth because also apparent in 2016 as Willis Group
participants benefit from higher rates. Holdings PLC, a major player,
The industry obtains the majority of its announced a merger-of-equals with
revenue from the sale of insurance Tower Watson to form Willis Towers
products. The products that industry Watson. By merging with the Irish-
operators generate commission from headquartered Willis Group, Towers
have not changed substantially over the Watson could lower their effective tax
past five years. However, competition for rate and create substantial cost savings
these sales continues to increase, from in only five years. This extensive amount
both specialized operators within the of M&A activity is anticipated to
industry and direct insurers outside the continue over the five years to 2024, as
industry. As a result, industry operators operators to try to increase market share
have expanded their ability to provide and build economies of scale.

Products & Markets

Supply Chain | Products and Services | Demand Determinants
Major Markets | International Trade | Business Locations
Supply Chain KEY BUYING INDUSTRIES

21 Mining in the US
Companies in the Mining sector use general insurance to protect assets, operations and employees.
42 Wholesale Trade in the US
Businesses in the Wholesale sector use general insurance to protect assets, operations and
employees.
51 Information in the US
Businesses in the Information sector use general insurance to protect assets, operations and
employees.
61 Educational Services in the US
Participants in the Educational Services sector use general insurance to protect assets,
operations and employees.
99 Consumers in the US
US businesses and households represent the other side of the equation for brokers and agents.
Insurers provide agents and brokers with products to sell and businesses and households
purchase them.
KEY SELLING INDUSTRIES

52411a Life Insurance & Annuities in the US
The Life Insurance and Annuities industry uses brokers and agents to distribute insurance.
Therefore, industry revenue is largely determined by the ability of life insurance carriers to
underwrite risk.
52411b Health & Medical Insurance in the US
The Health and Medical Insurance industry uses brokers and agents to distribute insurance.
Therefore, industry revenue is largely determined by the ability of health and medical
insurance carriers to underwrite risk.
52412 Property, Casualty and Direct Insurance in the US
The Property, Casualty and Direct Insurance industry uses brokers and agents to distribute
insurance. Therefore, industry revenue is largely determined by the ability of direct insurance
(except life, health, and medical) carriers to underwrite risk.
52413 Reinsurance Carriers in the US
Reinsurers use brokers and agents to distribute reinsurance. Therefore, industry revenue
depends on reinsurers’ abilities to underwrite the risk of existing insurance policies.
Products and Services The majority of industry income is for insurance carriers has been declining.
associated with commissions from both Self-employed brokers make up the
commercial and personal lines of property largest share of operators in the industry,
and casualty (P&C) insurance, as nonemployers account for an estimated
contributing an estimated 57.9% of 69.5% of industry enterprises in 2019.
industry revenue in 2019. The industry’s This allows them to decide the number of
organization is largely determined by the primary carriers to represent, as well as
type of insurance that each broker sells. the lines of insurance they want to sell.
Generally, most brokerages specialize in
either P&C insurance, life insurance or Commercial property and
health coverage, but a growing number of casualty insurance
agents sell multiple lines of insurance. P&C insurance covers the property and
This move has largely occurred because liability losses of businesses and
the number of brokers who work directly individuals, with losses ranging from

Products & Markets
Products and Services Products and services segmentation (2019)

continued
1.5%
Insurance
administration
9.1% and risk consulting 2.8%
Life and accident insurance Annuities
13.5%
30.4%
Health and medical insurance
15.1%
Other 27.6%
Personal P&C insurance
Total $166.5bn SOURCE: WWW.IBISWORLD.COM
damage and injuries from car accidents the southern states, where a large
to the cost of lawsuits from faulty number of households are at risk of
products and professional misconduct. floods. Insurers in the United States do
The largest segments under commercial not directly provide flood insurance
P&C insurance are workers’ coverage because the likelihood of floods
compensation, general liability and is typically confined to a few areas. As a
commercial automobile insurance. result, flood insurance is only offered by
Commissions for commercial P&C insurance companies that participate in
insurance account for an estimated the National Flood Insurance Program,
30.4% of industry revenue in 2019. which is federally sponsored. With severe
Commercial P&C insurance is often flooding striking numerous parts of the
purchased through brokers and agents country in recent years, the popularity of
because of the complexity and costs flood insurance is expected to grow.
associated with commercial insurance Commissions for personal P&C
products. Brokers provide expertise on insurance account for an estimated 27.6%
proper coverage, but they also offer of total industry revenue in 2019. By
insurance products from a diverse panel giving customers a wide variety of
of insurance carriers. The ability of products from which to choose, insurance
industry participants to offer services for brokers and agents are a preferred method
a wide variety of products and companies of purchasing personal P&C insurance.
is important in finding suitable coverage Consumer spending increases resulted in
at lower prices. Increased awareness of this segment appreciating slightly over the
the high costs associated with weather- past five years. Additionally, increased
related disasters has caused this segment costs related to weather damage and
to increase over the past five years. awareness of weather-related disasters are
expected to boost this segment over the
Personal P&C insurance next five years.
The largest segments under personal
P&C insurance are private automobile, Health, medical, life and
homeowners’ and renters’ insurance. accident insurance
Flood insurance is also popular within Commissions for health and medical
the private market, particularly among insurance and life and accident insurance

Products & Markets
Products and Services are estimated to account for 22.6% of 2019. These services include third-party
continued industry revenue in 2019. Within this administration and management,
broad product group, health and medical insurance claims and consulting services
insurance accounts for an estimated and risk consulting. Larger players
13.5% of industry revenue, while life and within the industry offer these services
accident insurance accounts for an to improve client value added, thus
estimated 9.1% of industry revenue. increasing competitiveness in the
Unfortunately for industry operators, industry. A greater emphasis on risk
many policyholders are provided with management in industries exposed to
these types of insurance through their the financial crisis helped grow demand
employers. Although many employers for industry risk consulting services over
purchase group medical and group life the past five years. With external
policies through insurance brokers and industry competition likely to increase
agents, a larger proportion of employers from direct insurers, IBISWorld
purchase group policies directly from anticipates the industry to continue its
insurance carriers or funds. This segment transition toward insurance and risk
increased as a share of industry revenue consulting, which will grow this segment
over the past five years. With the passage over the next five years.
of the Patient Protection and Affordable
Care Act and its subsequent affirmation Annuities
by the Supreme Court, has led demand There are generally two types of annuities
for private health insurance to pick up as associated with insurance companies.
individuals will be required to purchase Annuities with a certain period offer
health insurance or contend with payments to the holder of the annuity for
substantial penalties. However, the a designated number of years and are
individual mandate was repealed in late generally used to fund a need that will
2018, which may lead to decreased end when the period is up. The second
demand for health insurance over the five type of annuity is a life annuity, which
years to 2024, as individuals are no provides income for the life of the
longer required by law to have coverage. annuitant and is similar to defined
This may lead the segments share of benefit or pension plans. These annuities
industry revenue to decrease over the five are better suited for retirement plans
years to 2024. than annuities with a certain period
because individuals may outlive the
Insurance administration number of years those annuities will pay.
and risk consulting Premiums for annuity contracts and
Fees from a variety of administrative other deposit-type contracts are
and consulting services represent an estimated to account for 2.8% of total
estimated 1.5% of industry revenue in industry revenue in 2019.
Demand Demand for the Insurance Brokers and sold and the size of insurance premiums
Determinants Agencies industry is largely determined by dictate revenue for this industry. A wide
two underlying factors: the general demand variety of factors affect these two variables.
for insurance products and the state of the
insurance market, which determines the Consumer and business spending
size of insurance premiums. In other The general level of economic activity
words, the number of insurance products plays a large role in demand for

Products & Markets
Demand insurance products. In periods when turn affects demand for insurance
Determinants GDP growth is below average, both products. Commercial lines of insurance
businesses and individuals typically are offered to businesses, governments
continued
reevaluate their insurance needs and and other organizations. In the
reduce their spending on insurance commercial market, policyholders insure
products. In general, the level of risk against several risks, ranging from
retained by individuals and businesses natural and man-made disasters to
will usually be higher when the economy professional indemnity. The largest
is performing poorly. commercial line of insurance is workers’
Within the household market, compensation, which is influenced by the
insurance is closely linked to household level of unemployment; as more jobs are
disposable income and those factors that created, demand for workers’
affect income, such as GDP growth, compensation will increase. Most other
interest rates and gasoline prices. forms of commercial insurance will be
According to the US Census Bureau, prior influenced by the level of consumption.
to 2014, an estimated 25.4% of Private auto insurance is the single
individuals living in a household with largest line of business, and demand for
income less than $25,000 were without such insurance depends on demand for
health insurance, compared with only automobiles. Demand for automobiles is
7.8% of people living in a household with directly affected by economy-wide factors
income of about $75,000. such as growth in GDP, real disposable
Within the commercial segment, income and interest rates.
businesses may seek to self-insure during
periods of low GDP growth. They can do Investment performance of life insurance
this by either setting aside a set sum of For the past two decades, life insurers
funds or establishing a captive insurer. A have shifted their focus from traditional
captive insurer represents a company death benefit products into the pension
that is established for the purpose of market, through annuities and other
insuring a parent company or the deposit-type products. Life insurers’
members of an industry association. investment performance, relative to that
Premiums are paid to the captive insurer, of substitute savings products such as
which are then invested and used to pay pension funds or managed funds, is
for claims made by the parent company’s critical to ensure they can compete with
subsidiaries or the members of an these other investment options. Demand
industry association. for life insurers’ products is also
Captive insurance can have significant determined by the level of household
cost advantages as it eliminates the profit savings, which is influenced by interest
and commissions earned by insurers and rates and growth in real wages,
insurance brokerages, respectively. employment, after-tax investment
However, the ability of a captive insurer to returns and the taxation of investment
deliver cost advantages depends on the returns relative to other savings products
captive’s ability to provide insurance with such as pension funds.
limited extra expense. Importantly, any
form of self-insurance will reduce demand Healthcare costs
for risk products from the insurance A major demand determinant for health
market, and thus limit potential demand and medical insurance products is the
for insurance brokerage services. cost of healthcare. As healthcare costs
The level of economic growth affects increase, so does demand for and the
the levels of business activity, which in price of health insurance. Healthcare

Products & Markets
Demand costs rise as the population ages. The US flexible than others. Product innovation
Determinants population is aging rapidly as the baby- is a means through which insurance
boomer generation enters retirement, carriers and insurance intermediaries can
continued
which is driving up demand and compete with self-insurance.
premiums for health insurance.
Healthcare also increases as the price of The insurance cycle
medicine increases as well. This is During a soft pricing cycle, when
because health insurance providers look insurance prices are falling, insurance
to receive more for health insurance agents and brokers derive smaller
coverage as the medicine and drugs, commissions from each policy sold.
effectively the cost of care, increases. During this time, industry revenue
exhibits slower growth. While soft pricing
Product innovation conditions can lead to higher premium
Product innovation serves to increase volumes, this growth generally does not
industry demand. Flexibility in make up for lower commissions per
combining or tailoring insurance policy. During a hard market, when
products is important in both commercial insurance prices are rising, insurance
and household segments, as those agents and brokers derive a higher
purchasing products wish to ensure they commission from each policy sold.
are paying the least amount possible for Therefore, during this time, revenue
insuring the risks inherent in their exhibits stronger growth, typically
business or lives. Some insurance outweighing the lower volume of
products are more specialized and premiums caused by higher prices.
Major Markets Major market segmentation (2019)
4.3%
Government
32.0%
Individuals and households
63.7%
Businesses
Total $166.5bn SOURCE: WWW.IBISWORLD.COM
Insurance brokers and agents sell markedly different. Household policies

products to businesses, consumers and tend to be smaller and less complex than
government agencies. The market share business or group coverage. Additionally,
between the business and consumer businesses are primary users of insurance
segments is relatively even, but the types administration and risk management
of policies within each segment are services, as this segment uses larger,

Products & Markets
Major Markets more complex and sophisticated healthcare. The insured share of the
continued insurance products. The government population is anticipated to grow through
sector relies on the same policy plans and 2019, according to the Centers for
risk management services as the business Medicare and Medicaid Services, largely
sector but is anticipated to account for due to the healthcare reform. Households
only 4.3% of industry revenue in 2019. account for a relatively small fraction of
health insurance purchases because
Households and individuals 55.7% of individuals are insured by some
The household market accounts for type of employer-based plan.
32.0% of industry revenue in 2019. The
insurance policies purchased by Businesses
households most frequently through Commissions and fees earned from policies
insurance brokers and agencies are sold to businesses account for an estimated
automobile insurance and homeowners’ 63.7% of industry revenue in 2019.
multiple peril. In fact, it is estimated that Businesses are the primary purchasers of
87.9% of auto insurance provided by the insurance administration and risk
property and casualty insurers is consulting services provided by insurance
purchased by the personal segment. brokers and agents. Demand for such
Additionally, annuity contracts are one services from this market is increasing as
of the most popular insurance products businesses seek greater customization of
within the household segment. However, insurance coverage and more advanced
most customers within this market risk management practices.
segment establish annuity contracts A large portion of employers in the
directly through an insurance carrier, as United States purchase life and health
opposed to going through a broker or insurance coverage from primary
agent. Therefore, the selling of these insurance carriers or insurance funds.
contracts represents an area of potential Much of this business is written through
growth. To achieve this growth, operators insurance agents and brokers. Moreover,
will need to establish themselves as the companies also seek the employee
favorable mode of acquiring annuities by benefits administrative services that are
expanding the financial and retirement offered by the larger players in this
planning services they provide. industry, primarily through the Third-
According to the latest available data Party Administrators and Insurance
from the US Census Bureau, 91.2% of the Claims Adjusters industry (IBISWorld
total US population has healthcare report 52429). By offering such services,
insurance, including 37.3% covered by a these participants remain an attractive
variety of US government programs, such mode of purchasing group health and life
as Medicaid, Medicare and military insurance products.
International Trade The largest insurance brokerage and imports are not applicable. Insurance
agency operators offer brokerage and companies may use a foreign broker for
other insurance-related services on an the purchase of reinsurance, but this
international basis. Given the service- occurs very rarely and such instances only
based nature of the industry, exports and represent a fraction of insurance sales.

Products & Markets
Business Locations 2019
West
AK
0.2 New
England
ME
Great Mid- 0.3
Lakes Atlantic 1 2
NY 3
WA MT ND 5.0
5 4
2.0 0.5 MN
Rocky
0.5 2.4
WI
OR Mountains SD
0.6
Plains 2.1 MI
2.9
PA
3.8
6
7
1.4 ID IA OH 9 8
0.6 WY 3.6
0.3
NE
1.6
IL IN WV VA
4.7 2.2 2.2
West NV
1.2 0.5
KY
UT MO
1.3 NC
0.9
1.2 CO KS 2.5 2.9
2.3 1.5 TN
SC
Southeast
1.9
CA 1.4
10.8
OK AR GA
1.6 1.1 AL 3.2
AZ MS 1.2
2.0 NM
0.6 Southwest 0.9
TX LA
1.5 FL
8.3 6.7
West Establishments (%)
HI Less than 3%
0.3 Additional States (as marked on map) 3% to less than 10%
1 VT 2 NH 3 MA 4 RI 10% to less than 20%
0.2 0.3 1.8 0.3 20% or more
5 CT 6 NJ 7 DE 8 MD 9 DC
1.1 2.0 0.3 1.5 0.1

Products & Markets
Business Locations Brokerages and agencies are widely used

Distribution of establishments vs. population
as the primary distribution network of
insurance products for property and
30
casualty (P&C), health, life and other
insurance carriers. As a result, the
geographic distribution of brokerages 20
and agencies generally reflects population
trends and demographics because it is
%
important for participants to have direct 10
access to consumers and potential clients.
At the same time, it is vital to note that
the distribution of industry participants 0
is also reflective of state regulation and
West
Great Lakes
Mid-Atlantic
New England
Plains
Rocky Mountains
Southeast
Southwest
weather patterns. Areas with high risks of
natural disasters, such as Florida,
typically have higher rates and more
industry operators than low-risk Establishments
locations due to the greater demand for Population
insurance coverage. SOURCE: WWW.IBISWORLD.COM
Southeast reason for this large percentage is mostly

In 2019, the Southeast region is anticipated due to population trends; this region
to account for 24.9% of total industry accounts for 14.5% of the total US
establishments, while its population is population. The level of employment,
expected to account for 25.7% of the US enterprises and establishments continues
total. In addition to population trends, this to fall within this region, though, due to a
area is heavily exposed to natural disasters, decrease in population within the region
particularly hurricanes. As a result, Florida and weak economic conditions,
contains the third highest share of particularly within the manufacturing
establishments in the country, with 6.7% of and automobile sectors.
the total in 2019.
P&C premiums in the region are West
comparatively higher than other parts of The West region accounts for 15.4% of
the country due to the frequency of industry establishments and 17.3% of the
hurricanes and other natural disasters. total US population. Demand for
This is particularly true in states such as insurance services and coverage in this
Louisiana and Florida, which are region has been hurt dramatically since
estimated to have the second and third- 2009, particularly in California because
most expensive homeowner’s insurance the state has one of the highest
premiums in the country. At the same unemployment rates in the country. Still,
time, this sector also has a high level of California has higher disposable incomes
under-insured individuals because many than other parts of the country, so
households are unable to afford coverage. demand for life insurance and other
coverage is still relatively high. In fact,
Great Lakes California contains 10.8% of industry
The Great Lakes region is the second- establishments in 2019, the largest share
largest region in the industry on an of any state. Auto premiums also tend to
establishment basis, accounting for 15.5% be high in California because the state
of total industry establishments. The consistently ranks number one for auto

Products & Markets
Business Locations theft and accidents. Additionally, spread across a wide area of land.
continued California is exposed to earthquakes, so it Therefore, the region is marked by a
is important for property owners to gain larger average establishment size.
coverage on this risk. In addition to auto coverage, demand
for brokerage and agency services is also
Mid-Atlantic supported by commercial, life and health
The Mid-Atlantic region accounts for the insurance needs. There is a high level of
fourth-highest level of insurance brokers commercial activity in the region,
and agents in the country, with an increasing demand for risk consulting
estimated 12.6% of industry services and group insurance coverage.
establishments in 2019. Unlike the Similarly, this region has above-average
Southeast region, though, the main disposable income levels, boosting
driver of industry participants’ revenue demand for life insurance coverage.
in the Mid-Atlantic is auto coverage; this Other regions and their share of
region has some of the highest auto establishments include the Southwest
insurance rates in the country. The with 12.5% of total establishments, the
region is densely populated and so does Plains with 10.2%, the Rocky Mountains
not require smaller offices that are with 4.9% and New England with 3.9%.

Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks
Basis of Competition | Barriers to Entry | Industry Globalization
Market Share Market share concentration within the

Concentration Insurance Brokers and Agencies industry Companies by employment size*
is low, with the top four operators No. of employees Share (%)
accounting for an estimated 12.0% of 0 to 4 75.8
Level
total industry revenue in 2019. The 5 to 9 16.3
Concentration in majority of industry operators are 10 to 19 4.7
this industry is L ow smaller operators that specialize in 20 to 99 2.5
specific regions or industries, largely 100 to 499 0.4
explaining this low level of concentration. 500+ 0.3
An estimated 30.5% of industry *Includes only firms with at least one employee
enterprises are employer operators, with SOURCE: US CENSUS BUREAU
nonemployers accounting for the

remaining 69.5% in 2019. Of the largely eliminated. Additionally, these
employer operators, 75.8% of enterprises operators experienced a backlash from
contain four or fewer employees in 2019, customers, as their ability to act as a
while only 0.7% of employer enterprises trusted independent insurance adviser
employ more than 100 people. The level was diminished.
of market share concentration has Increased M&A activity has been
steadily increased during the five-year sparked by the ability of larger operators
period, due to increased merger and to access capital in a tight lending market,
acquisition activity within the industry, as these companies have stronger balance
despite the rise of smaller more sheets than many of their smaller
specialized operators in niche markets counterparts. Additionally, acquisition
such as risk management or reinsurance. activity has been supported by an
However, the industry’s major players agreement with the New York Attorney
ended market service agreements due to General, which allowed major players to
investigations into such arrangements by acquire smaller operators that have
several state attorney general’s offices, market service agreements. Under the
subduing the effect of consolidation. deal, larger operators such as Marsh &
These investigations focused on issues McLennan are allowed to acquire
related to contingency payments, which operators with market service agreements
are incentives offered by insurance as long as they phase out these contracts
underwriters to brokers that place a within three years. In 2016, industry
certain amount of business with their consolidation continued as Willis Group
company. These commissions are Holdings (Willis) merged with Towers
disconcerting because of the conflict of Watson, a US-based professional services
interest that exists between brokers and company that specializes in risk
insurance companies; brokers are management and HR consulting. The two
intended to be independent agents that companies merged to take advantage of
represent insurance buyers. As a result of Willis’s lower international tax rate,
the investigations, many major players helping both companies save money. The
incurred substantial fines and the merger is expected to more than double
contingent commission practice was Willis’s annual revenue.

Key Success Factors Having links with suppliers Having a good technical
Agencies and brokerages must establish knowledge of the product
relationships with underwriters to Having a solid understanding of the
IBISWorld identifies increase the number of risk products they products that are distributed will
250 Key Success can offer in retail and wholesale markets. separate the most successful agencies and
Factors for a brokerages from the less successful.
business. The most Having an extensive
distribution network Must comply with
important for this
Agencies and brokerages must possess an government regulations
industry are: extensive distribution network to attract Insurance agencies and brokerages must
both primary underwriters and comply with state and federal legislation,
purchasers of risk products. which affects the entire insurance sector.
Cost Structure Insurance brokers and agencies operate 34.6% in 2014. As the industry moves to
Benchmarks in a highly competitive industry, with offering more niche products to
competition arising from the sheer customers, wages are expected to continue
number of retail insurance brokerage and to increase as the increased specialization
agency operators, as well as individual will allow industry employees to demand
brokers and agents, direct underwriters more for their services.
and other insurance intermediaries. Many of the major players exhibit
Industry players address highly above-average wage expenses, given that
specialized product development, they provide risk assessment and
consulting and administrative risk consulting services for specialist and niche
management needs of professional areas. While major players incur higher
groups, service businesses, governments, wage expenses, this superior talent
healthcare providers and commercial enables them to write higher-margin
organizations. In addition, industry business compared with smaller players
participants provide underwriting that usually do not possess such expertise.
management skills, claims and risk
management expertise and third-party Purchases
administration services to direct Similarly, administrative and clerical
underwriters. To remain competitive, materials are only required for workers to
brokers and agencies are continuously conduct operations daily. As a result,
investing in professional talent, purchase expenses only account for 2.8%
technology and process improvement. of industry revenue.
Wages Profit
Wages and compensation are the most Industry profit is expected to increase over
significant costs for insurance agencies the five years to 2019, with earnings
and brokerages. The industry invests before interest and taxes rising from
heavily in professional talent, which is 14.2% of revenue in 2014 to 15.3% in 2019.
required when offering highly specialized Profit margins widened during the period
services. Over the five years to 2019, wage due to a hardening cycle, which are
growth increased at a slightly outpaced characterized by rising premium prices,
industry revenue growth. Due to this, within numerous insurance industries.
wages share of revenue has increased to The harden cycle can be attributed
35.4% of industry revenue in 2019 from property and casualty insurers looking to

Cost Structure rebuild profit margins in the aftermath of while premiums and profitability
Benchmarks natural disasters just prior to the period fluctuate with changes in economic and
and rising cost of care for health insurance insurance cycles. Additionally, clients
continued
providers. Additionally, government often lower insurance premiums by
legislation, like the Patient Protection reducing coverage during difficult
Affordable Care Act, has mandated certain economic periods.
industry products. This has led demand
and price of these services to increase over Depreciation
the five years to 2019. Furthermore, Depreciation is driven by investment in
industry profit margins are expected to high-quality distribution networks, but
remain relatively unchanged over the five depreciation expenses vary depending on
years to 2024. Industry revenue growth is the size of the insurance brokerage or
expected to trend in-line with wage agency. The largest industry participants
growth during the period, stifling profit directly own and occupy office buildings
margin expansion. Accordingly, industry in several states. Depreciation is
profit margins to stagnate at 15.3% over estimated to account for 1.2% of industry
the five years to 2024. revenue in 2019, directly in-line with the
Insurance is often compared with a relatively low level of capital intensity
utility because businesses and individuals with which the industry operates.
are often required to carry insurance by
states and other regulators, particularly Marketing
auto insurance. Consequently, industry Since the average operator usually has
demand remains relatively constant, long-standing relationships with clients
Sector vs. Industry Costs
Average Costs of
all Industries in Industry Costs
sector (2019) (2019)
100 n Profit
17.2 15.3 n Wages
n Purchases
80 n Depreciation
12.9 n Marketing
n Rent & Utilities
35.4 n Other
13.7
Percentage of revenue
60
1.6 1.6
1.5 2.8
1.8 1.2
40 1.8
51.5
20 41.7
0

Cost Structure in their geographic proximity, only 1.8% Accordingly, only 0.1% of industry
Benchmarks of industry revenue is expected to be revenue in 2019 is accounted for by
spent on marketing expenses in 2019. utilities expenses.
continued
Rent Other
In 2019, rent expenses account for 1.7% of Other expenses include legal services,
industry revenue. Since the majority of litigation costs and restructuring
industry operators are sole proprietors or expenses. Additionally, other costs
employers with only a handful of employees, include selling, general and
rent expenses for the average operator in the administration expenses, which include
industry are fairly low. Retail space is the costs of support functions, and
beneficial for industry operators because it research and development initiatives.
allows agents and brokers to interact with These costs may vary substantially from
clients or potential clients directly. one year to the next, depending largely
on the level of acquisition activity in the
Utilities industry. Moreover, professional
Since industry operators only require indemnity claims, headquarters
small office spaces to operate out of, relocation costs, banking and related fees
expenses associated with running an and external professional fees are also
industry establishment are also low. included in the other segment.
Basis of Competition Insurance brokers and agencies operate underwriters. This prevents large
in a hyper-competitive environment, industry players from squeezing out
with high levels of both internal and smaller players by cutting prices. Instead,
Level & Trend external competition. this particular regulation serves to
ompetition
C in maintain a high level of competition in
this industry is Internal competition the industry.
Highand the trend Offering high value-added services is Insurance brokerages and agencies
critical to the competitiveness of offer services that are very complex;
is I ncreasing insurance brokerages and agencies within technical expertise is necessary if such
this industry. As a means to increase services are to add value. This is
competitiveness, larger brokerage particularly the case with risk products,
operators offer clients a broad range of as insurance brokers are often required
complementary advisory and outsourcing to tailor and combine insurance packages
services, including risk identification and to the risk management needs of their
assessment, alternative risk financing, clients. Ultimately, to be competitive in
safety engineering, loss management and this industry, operators must be able to
program administration. This makes effectively manage clients’ exposure to
larger companies more competitive than risk. The importance of this does vary
smaller rivals who do not possess the between market segments and tends to
capabilities and resources to offer these be more significant when dealing with the
additional value-adding services. more sophisticated risk management
However, regulation in this industry needs of commercial customers.
prevents larger brokerage operators from For industry participants, it is
providing clients with rebates or other important to possess a large distribution
discounts on the insurance policies network to gain access to the insurance
offered by insurance carriers and products offered by primary

Basis of Competition underwriters. Essentially, a significant their attractiveness as a means for

continued geographical representation implies purchasing insurance, which depends on
increased net premiums underwritten for their ability to provide service and
primary carriers and, in turn, increased technical expertise and diversity in
commissions for agents and brokers. products and insurance providers.
Purchasers of insurance policies desire If an enterprise decides to self-insure,
access to a diverse panel of primary the industry has lost the opportunity to
underwriters and insurance products. earn a commission and fee by selling an
This is because the ability of a broker or insurance product to the particular party.
agent to tailor risk products to the needs An enterprise may seek to self-insure to
of policyholders depends on its ability to reduce the costs of managing their risk
independently offer the most suitable exposure or to better tailor insurance to
product from a cross-section of their risk profile. If an enterprise decides
underwriters. Therefore, providing to establish or use a captive insurer for
product and provider/brand diversity providing insurance, insurance brokers
constitutes a critical point of competition and agencies have again lost the
for insurance brokers and agencies. opportunity to earn a commission and a
fee. Enterprises may choose to use a
External competition captive insurer to lower insurance costs,
Companies in this industry compete realize greater policy design flexibility
directly with several substitute options and to control claims.
for insurance sales and sourcing risk Unlike self-insurance, captive
management products, including primary insurance provides greater risk
insurance carriers, self-insurance options protection, and premiums are tax
and other distributors. deductible. Captives can also enable
When an individual or enterprise enterprises to escape the insurance cycle,
directly sources insurance from a primary which includes hard markets. Since
insurance carrier and underwriter, the participants in this industry are unable to
industry has lost a potential commission control the cost of insurance, they are
and fee. Any increase in direct insurance unable to make insurers’ products more
sourcing by individuals and enterprises cost competitive. However, by offering
will negatively affect this industry. As a high levels of service and technical
result, external competition for insurance expertise and diversity in products and
brokers and agencies is largely from insurance providers, insurance brokers
linkage industries, such as Life Insurance and agencies can make the sourcing of
and Annuities (IBISWorld report 52411a), insurance from carriers and underwriters
Health and Medical Insurance (52411b), a more attractive risk management
Property, Casualty and Direct Insurance option. Please see the Demand
(52412) and Reinsurance Carriers (52413). Determinants section of this report for an
Therefore, the competitiveness of explanation of captive insurers and the
participants in this industry depends on insurance cycle.

Barriers to Entry The Insurance Brokers and Agencies

industry has medium barriers to entry; Barriers to Entry checklist
however, barriers can vary depending on Competition High
Level & Trend the area a new entrant may target. While Concentration Low
arriers to Entry
B it is relatively easy for a small player to Life Cycle Stage Mature
in this industry enter the market, to compete with the Capital Intensity Low
are M ediumand industry’s major players, an industry Technology Change Low
entrant must have access to a significant Regulation and Policy Heavy
Increasing
level of capital to develop brand Industry Assistance None
awareness and reputation, a distribution
network, a broad line of complementary SOURCE: WWW.IBISWORLD.COM
insurance-related services and very

talented labor. Fragmented market
The market is highly fragmented, with
Low concentration several varied product lines, including
This industry is characterized as having health, life, automobile, commercial and
low market share concentration, with the title insurance. There is also reinsurance
top four industry participants accounting and specialist risk consulting and
for 12.0% of total industry revenue. As a administrative services that many larger
result, the industry’s major players do players offer as a value-add. In addition,
not have significant market power. many smaller players compete based on
However, in the more profitable proximity to markets and other
segments and markets in which they competitors. Moreover, the popularity of
compete, competition is intense and a specific insurance products depends on
new player would find it difficult to win the geographical region. For example,
market share without making flood insurance is particularly popular in
acquisitions of existing players. This is the South, where the probability of a
particularly true in the case of the flood incident is much higher than
reinsurance market, where concentration elsewhere in the United States. As a
is much higher due its domination by result, there are several opportunities for
major players. Since major players are nonemployers and small players to enter
well capitalized, they are in a position to the market by targeting a particular niche
hold up well against potential new through specializing in the type of
entrants in this market segment. insurance products offered and add-on
services provided.
Distribution networks
Brokers and agencies are required to Regulation
invest heavily in a distribution Insurance brokers and agents have to
network, with significant retail comply with regulatory requirements
presence in a geographically well- that are set on an individual state basis.
distributed market. The lack of an These requirements are set for the
extensive distribution network will insurance sector as a whole and can be
result in the failure to attract primary quite rigorous; this has the effect of
underwriters to the agent or brokers’ limiting the entrance of new operators.
panel. The need for an extensive Please see the Regulation & Policy section
distribution network has resulted in of this report for more information on
increased capital intensity for most what types of regulations industry
agencies and brokerages. operators experience.

Industry The Insurance Brokers and Agencies result, it is estimated that domestic
Globalization industry is subject to a low level of operators dominate the US insurance
globalization, which is expected to brokerage and agency market.
Level & Trend remain steady over time. The level of It is important to note that insurance
foreign ownership predominantly brokers and agents constitute the main
lobalization
G in this influences globalization in this industry distribution network of primary
industry is L owand because there is no international trade. insurance carriers in the domestic
the trend is S teady Numerous large foreign brokerage market. Agencies and brokers do
operators operate within the US market, represent international insurance
including Aon PLC and Willis Towers carriers that operate in the US insurance
Watson. While these companies are market. The largest insurance brokerage
expected to account for 5.3% of industry and agency operators are also global in
revenue in 2019, it is difficult to nature, and offer brokerage and other
determine the market share of foreign insurance-related services in principal
companies due to a lack of financial regions of the world. Given the service-
information. However, considering the based nature of the industry,
low level of concentration in this industry international trade is not applicable. On
and the dominance of small players, rare occasions, insurance companies may
IBISWorld estimates that all foreign use a foreign broker for the purchase of
players collectively account for less than reinsurance, but such instances represent
25.0% of total industry revenue. As a a very small fraction of insurance sales.

Major Companies
Marsh & McLennan Companies Inc. | Aon Corporation
Willis Towers Watson | Arthur J. Gallagher & Co. | Other Companies
Major Players Arthur J. Gallagher & Co. 2.3%

(Market Share) Aon Corporation 2.9%
88.0%
Other
Willis Towers Watson 2.4%
Marsh & McLennan Companies Inc. 4.4%
Player Performance Marsh and McLennan Companies Inc. Marsh and Guy Carpenter provide
(MMC) is a leading global professional MMC’s risk and insurance services. For
services and insurance brokerage operator. Marsh, these specific services include risk
Marsh & McLennan The company is headquartered in New management, risk consulting, insurance
Companies Inc. York City and has 60,000 employees that brokerage, financial solutions and
Market Share: 4.4% provide services to clients in more than 130 insurance program management services.
countries. MMC offers services through Employing 32,700 people, Marsh
Industry Brand Names
two major operating segments: risk and provides services not only to business
Marsh Inc.
insurance services and consulting. These clients, but also to government agencies,
Guy Carpenter
services are provided through several high-net worth individuals and
Mercer Inc.
subsidiaries, most notably Marsh Inc., Guy consumers served through affinity groups
Carpenter and Company LLC and The and employer-based programs.
Mercer Group Inc. Most of MMC’s Alternatively, Guy Carpenter provides
operations in the Insurance Brokers and reinsurance brokerage, financial
Agencies industry occur through its risk modeling services and related advisory
and insurance business, which accounted functions worldwide for insurance and
for 55.0% of company revenue in 2018, reinsurance companies. Guy Carpenter
according to the latest available data. employed 2,400 people in 2018,
Additionally, the majority of Marsh & according to the latest available data.
McLennan’s revenue is derived outside of The Mercer Group Inc. provides
the United States. In 2018, the company services on several issues relevant to the
generated $15.0 billion in total sales. management of operators in major global
Marsh & McLennan Companies Inc. (US industry-specific segment) -

financial performance*
Revenue Operating Income
Year ($ million) (% change) ($ million) (% change)
2014 5,834.7 N/C 1,036.6 N/C
2015 6,326.9 8.4 1,187.1 14.5
2016 6,614.5 4.5 1,333.8 12.4
2017 6,877.2 4.0 1,400.5 5.0
2018 7,124.4 3.6 1,315.7 -6.1
2019 7,330.3 2.9 1,374.1 4.4
*Estimates
SOURCE: ANNUAL REPORT AND IBISWORLD

Major Companies
Player Performance markets. Specifically, Mercer operates in Services. Both acquisitions expanded
continued four areas: health, retirement, talent and MMC’s geographic presence and its
investments. Although Mercer falls under employee benefits coverage offerings.
MMC’s consulting business segment, the Furthermore, MMC completed 15
company derives a small portion of its acquisitions in this segment in 2014,
revenue from commission-based with a particular focus on expanding
brokerage services, which occur in its Marsh’s presence in the US middle-
health and benefits business. market business.
While occurring just prior to the
five-year period, one of MMC’s major Financial performance
acquisitions in recent years was that of Over the five years to 2019, MMC’s US
John B. Collins Associates Inc. (JBC). industry-specific revenue is expected to
JBC was previously the fifth-largest increase at an annualized rate of 4.7% to
reinsurance intermediary in the United $7.3 billion. Strong growth throughout
States and the seventh-largest in the the five-year period was largely a result of
world. Then, MMC made 12 acquisitions MMC’s acquisitions and a rise in
that cost the company $197.0 million, transaction activity. The elimination of
though only seven small, specialty contingent commissions has slightly
insurers were added to industry-specific hindered the profitability of MMC’s
revenue. Early in 2012, MMC acquired operations in the industry because, in
Alexander Forbes’ South African many cases, it has meant lower
brokerage operations, which increased commissions per policy sold. This
the company’s international presence. elimination differs from many of the
Later in the year, the company industry’s small and medium-sized
continued to be proactive in acquiring participants, which have continued to use
companies, most notably adding contingent arrangements. As a result,
Florida-based Edison Insurance and these smaller operators have greater
Wisconsin-based Security Insurance capacity to boost profitability.
Player Performance Aon Corporation (Aon) is a risk The majority of its revenue is associated
management and human-capital with its risk solutions group. According
consulting company that was formed in to Business Insurance magazine, Aon is
Aon Corporation 1982 when Ryan Insurance merged with the largest insurance and reinsurance
Market Share: 2.9% Combined Insurance Company of broker and manager of captive insurance
America. In 2012, Aon moved its companies in the world.
corporate headquarters from Chicago to Aon’s insurance professionals
London. While its Chicago offices remain specialize in retail and reinsurance
its North American headquarters, the brokerage. Their expertise covers a range
London move was made to provide of specialties, such as claims and loss cost
greater access to emerging markets and control, underwriting management,
reduce the company’s effective tax rate. premium finance, safety engineering and
Aon has 50,000 employees and conducts direct marketing to affinity groups. As a
business in more than 120 countries. The retail broker, Aon offers a broad
company serves its clients through one spectrum of advisory and outsourcing
operating segment through which it services, including risk identification and
provides clients with insurance, human assessment, alternative risk financing,
resources and other professional services. safety engineering, loss management and

Major Companies
Player Performance program administration for clients. its risk solutions segment and two to be
continued Additionally, Aon’s reinsurance included in its HR solutions segment.
professionals provide sophisticated Then in 2016, the company completed
advisory services that enhance the risk purchases of Stroz Friedberg, which is
and return characteristics of insurance provider of specialized insurance
policy portfolios and improve capital use solutions, especially cybersecurity
for insurance and reinsurance insurance. In 2017, the company agreed
companies. They also offer experience in to sell its HR outsourcing business to the
statistical claims analysis and evaluation Blackstone Group. This materially
of catastrophic loss exposures. effected industry revenue growth during
Aon also derives revenue specific to the the period.
Insurance Brokers and Agencies industry
through employee benefits services. In Financial performance
providing these services, Aon receives Over the five years to 2019, Aon’s US
commissions from insurance companies industry-specific revenue is expected to
for placing individual and group decrease at an annualized rate of 3.6% to
insurance contracts, primarily life, health $4.8 billion. The reason for the company’s
and accident coverage. decline in industry-specific revenue is a
During the period, the company has result of a divestiture in 2017 of a part of
taken part in several mergers and its commercial insurance brokerage
acquisitions, as well as spin-offs of its business. The company cited despite its
own non-core business units. In 2014, divestiture of this unit, it still expects to be
the company completed the acquisition a large client for its commercial insurance
of 13 businesses, with 11 to be included in needs moving forward.
Aon Corporation (US industry-specific segment) - financial performance*

2014 5,811.2 N/C 770.8 N/C
2015 6,052.1 4.1 799.9 3.8
2016 6,065.9 0.2 807.8 1.0
2017 4,411.0 -27.3 191.9 -76.2
2018 4,751.5 7.7 485.3 152.9
2019 4,833.0 1.7 529.6 9.1
*Estimates
Player Performance Willis Towers Watson PLC (Willis Towers for tax purposes. In January 2016, the
Watson), formerly known as Willis Group merger between Willis Group Holdings
Holdings, is a leading global insurance and Towers Watson was completed, thus
Willis Towers broker with principal executive offices in forming Willis Towers Watson, a joint
Watson London, though the company officially company headquartered in Ireland. The
Market Share: 2.4% moved its headquarters to Ireland in 2009 company provides a broad range of

Major Companies
Player Performance value-added risk management consulting Towers Watson shareholders paid a small
continued and insurance brokerage services to its premium to be acquired by Willis Towers
clients globally. Willis Towers Watson Watson. By merging with Willis Towers
employs over 43,000 employees in more Watson and incorporating under their
than 140 countries. The United States Irish headquarters, Towers Watson was
constitutes the largest share of the able to immediately achieve a lower
company’s North American operations. In effective tax rate, creating cost savings
2018, the company generated $8.5 billion that had to be compensated for in the
in total sales. deal. On top of the initial value-created
As an adviser and broker, Willis by lower tax rates, the combined
Towers Watson works with clients to company has resulted in Willis Towers
determine risk management Watson providing its clients with more
requirements. The company then competitive products.
determines the best means to manage
this risk by negotiating and placing Financial performance
policies with various insurance carriers. Over the five years to 2019, Willis Towers
The company also acts as an intermediary Watson’s US industry-specific revenue is
for determining prices and coverage expected to increase at an annualized rate
between clients. Additionally, the of 18.1% to $3.9 billion. Similar to the
company also provides specialist other major players, Willis’s growth has
consulting and brokerage services, which largely been a result of acquisition
include construction, employee benefits, activity in recent years, most notably the
healthcare and advanced risk 2016 merger with Towers Watson. By
management services. acquiring Towers Watson, a US-based
In January 2016, a merger-of-equals professional services and HR solutions
between Willis Group Holdings and company, the company has placed a
Towers Watson was completed, thus further emphasis on the continued
forming Willis Towers Watson. To merge, growth of the industry moving forward.
Willis Towers Watson (US industry-specific segment) - financial

performance*
2014 1,713.5 N/C 264.1 N/C
2015 1,689.5 -1.4 138.1 -47.7
2016 3,733.4 121.0 164.7 19.3
2017 3,814.5 2.2 240.0 45.7
2018 3,895.5 2.1 370.2 54.3
2019 3,944.3 1.3 515.1 39.1
*Estimates

Major Companies
Player Performance Arthur J. Gallagher and Co. (AJG) is a its investment portfolio, which includes
global professional services and insurance a variety of investments including
brokerage company headquartered in fiduciary funds.
Arthur J. Gallagher Itasca, IL. The company specializes in The majority of AJG’s acquisitions
& Co. providing insurance brokerage and have been smaller companies, which
Market Share: 2.3% third-party property and casualty claims provide AJG with larger access to specific
settlement and administrations to geographical areas and niche markets.
domestic and foreign clients. AJG prides Per the latest available data from the
itself on its ability to offer a variety of company’s 2018 annual report, the
insurance and risk management services company has completed 507 acquisitions
that are uniquely tailored to fit their since 2002. In 2018 alone, the company
clients’ needs. The company does not completed 48 acquisitions. The largest of
assume any underwriting risks, but it does these acquisitions was for Pronto
act as an intermediary between insurers Insurance, which the company paid a
and customers. The company operates in total of $313.5 million to acquire. While
three business segments: brokerage, risk the company does partake in larger
management and corporate. Through acquisitions such as this, the company
these segments, the company employs does normally make acquisitions that
30,400 workers that helped the company cost them between $1.0 million and
generate $6.9 billion in total sales in 2018. $50.0 million.
According to Business Insurance
magazine, AJG is the fourth-largest Financial performance
insurance brokerage business in the Over the five years to 2019, AJG’s US
world. In 2018, 66.9% of the company’s industry-specific revenue is expected
revenue was generated in the United to increase an annualized 9.6% to $3.8
States, with the remaining 33.1% derived billion. Since going public in 1984, the
primarily in the United Kingdom, company has reported consistent
Australia and Canada. AJG’s two major revenue growth from its operations,
sources of revenue are commissions and despite periods of economic downturn.
fees from brokerage and risk Consistent revenue growth over the
management operations. The company past five years has stemmed from the
also generates investment income from cross-selling of services and brokerage
Arthur J. Gallagher & Co. (US industry-specific segment) - financial

performance*
2014 2,400.4 N/C 151.2 N/C
2015 2,713.3 13.0 147.7 -2.3
2016 2,888.4 6.5 169.6 14.8
2017 3,132.2 8.4 180.3 6.3
2018 3,522.1 12.4 243.5 35.1
2019 3,794.7 7.7 294.2 20.8
*Estimates

Major Companies
Player Performance acquisitions. Brokerage acquisitions philosophy largely involves buying

continued have been the largest driver of growth, local brokers with similar cultures and
as the company’s expansion business strategies.
Other Companies The Insurance Brokers and Agencies agreements (i.e. contingent
industry is highly fragmented in the commissions) is expected to keep
United States. Concentration is low, market share concentration low in the
with the top four industry participants industry. This change has enabled other
anticipated to account for only 12.0% of operators to take some market share
revenue in 2019. Concentration for the away from the major players and has
top four players has increased during inhibited major players from acquiring
the five-year period (see Market Share smaller players using such
Concentration), due to an extensive arrangements. Among these smaller
amount of acquisition activity by the operators, Integro Insurance Brokers,
industry’s major players. However, the Lockton Companies Inc. and Diversified
elimination of market service Insurance Brokers, are the most notable.

Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility
Regulation & Policy | Industry Assistance
Capital Intensity The Insurance Brokers and Agencies

industry has a low level of capital Capital Intensity
Capital units per labor unit
intensity. IBISWorld estimates that for
Level
every $1.00 spent on wages, the 0.5
The levelof capital industry will allocate $0.03 to capital
intensity is L ow investment in 2019. This is the same 0.4
amount capital investments accounted 0.3

for in 2014. However, capital intensity
levels vary widely by company size. 0.2
Some of the largest industry 0.1

participants have established extensive
distribution networks, in which a large 0.0
Economy Finance and Insurance
amount of capital has been invested. Insurance Brokers &
Agencies
This enables these service providers to Dotted line shows a high level of capital intensity
source solutions in various markets SOURCE: WWW.IBISWORLD.COM
within the United States and

throughout the world. Alternatively, of these sole proprietors work from a
non-employing operators have a very very small office and use relatively
low level of capital investment, as many simple technology.

Capital Intensity Industry participants invest a significant the continued distribution of insurance
continued amount in professional talent. Most through various online platforms is
individuals who are employed in the expected to lead it to slightly decline.
industry have undergone substantial The threat of online sales continues to
training. Investments in labor are increasing weigh on the need for brokers and
as clients’ demand services that complement agents, as direct insurers now have the
insurance policy sales. Growing numbers of ability to sell policies to clients through
insurance agents and brokers now offer online portals in a less expensive way.
comprehensive financial planning services, Consequently, it is important for brokers
such as retirement planning, estate planning and agents to emphasize the benefits of
or assistance in setting up pension plans building relationships with customers,
for businesses. Accordingly, wages as a including the ability to act as a trusted
share of revenue has increased from 34.6% adviser for risk management practices
of industry revenue in 2014 to 35.4% in and insurance purchases. Overall,
2019, as a result of industry employees capital intensity will remain low in this
increase specialization. industry as wages represent a
While wage expenses are expected to significantly larger portion of industry
remain high over the five years to 2024, revenue than capital expenditures.
Technology and Technological change in the Insurance services that complement the sale of
Systems Brokers and Agencies industry has been insurance policies. Investment in IT has
low during the five-year period. However, facilitated the administration of
Level industry operators rely heavily on employee benefits programs on behalf of
technology for their business operations. businesses. Many insurance brokers and
The level
of Insurance brokers use information agents use IT to gain an internet presence
technology technology (IT) to maintain customer to build brand awareness, reach potential
change is L ow records, process financial transactions, customers and communicate with clients.
provide sophisticated advisory services IT has yet to be fully exploited in this
and assist in marketing products to industry, with plenty of potential
customers. Investment in IT provides applications waiting to be discovered. IT
several advantages; it enables brokers investment offers one means through
and agents to reduce the time taken to which insurance brokers and agents will be
process insurance policy sales, gain able to increase their value to clients and
greater access to insurance carrier protect market share. Any online
information and source insurance technology that enables customers to easily
policies from a wider variety of carriers and conveniently select and purchase
and underwriters. Additionally, IT insurance coverage from a variety of
investment allows operators to offer a underwriters and policy options will be
wide array of product lines, source and beneficial for brokers and agents. However,
build more customized insurance operators must still emphasize their ability
products, introduce new products, to act as advisers for insurance purchases
provide support to sales staff and provide and risk management practices,
strategic information to customers. particularly as insurers use websites and
Furthermore, IT has enabled some of other online distribution networks to
the larger brokerage operators to provide directly sell products to customers.

Revenue Volatility IBISWorld estimates that industry revenue Insurance is often compared with a
volatility, or the average absolute change in utility, as businesses and individuals
revenue, is 2.1%, corresponding to a low are often required to carry insurance
Level
level of revenue volatility over the five years by states and other regulators,
The level of to 2019. Volatility depends on price changes particularly within the automotive
volatility is L ow and the quantity of sales for the industry. market. Consequently, industry
The industry has benefited over the five demand remains relatively constant,
years to 2019 from a gradual hardening while premiums and profitability
premium pricing cycle which has led fluctuate with macroeconomic trends.
industry revenue to increase steadily. Economic cycles are important because
Unlike the primary insurance market, clients often reduce coverage during
industry revenue is relatively stable, as economic downturns.
participants do not rely on investment Industry premiums are also affected
income. Instead, revenue is generated by insurance cycles, with prices
from commissions related to insurance fluctuating between periods of hard and
policy sales and fees associated with risk soft pricing cycles. In hardening price
management services. As a result, cycles, premiums rise, as insurers look
industry revenue generally fluctuates with to increase reserves and margins. Higher
insurance cycles, catastrophes and general premiums are beneficial to industry
economic activity. Industry growth is also operators because they often generate
affected by outsourcing activity by revenue as a percentage of insurance
insurers, as participants provide policy premiums. As a result, brokers
administrative and operational support and agencies often have higher margins
for primary insurance companies. during hard pricing cycles.

Regulation and Policy The majority of insurance related However, some of the models have been
operations are regulated under state deemed essential for effective solvency
laws and local ordinances. Industry regulation, and are required of those
Level & Trend participants are often required to have states seeking formal NAIC accreditation.
he level of
T certain licenses to act as brokers, agents,
Regulation is third-party administrators, managing NAIC Accreditation Program
Heavyand the general agents, reinsurance The NAIC Accreditation Program,
intermediaries or adjusters. Under the adopted in 1990, aims at more effective
trend is S
teady
laws of most states in the United States, solvency regulation of the insurance
regulatory authorities have broad industry. The Program is designed to
discretion with respect to granting, improve the quality of regulation, and
renewing and revoking brokers’ and thus, consumers’ and fellow regulators’
agents’ licenses to operate in the state. confidence in an insurance department’s
The mode of operating will vary abilities. The standards require that
according to the licensing requirements insurance departments have adequate
of the specific state. This may require, statutory and administrative authority to
among other things, a company to regulate an insurer’s corporate and
operate through a local corporation. In a financial affairs, the necessary resources
few states, licenses are issued only to to carry out that authority and that the
individual residents or locally owned department have in place organizational
business entities. and personnel practices designed for
effective regulation. The program
The National Association of involves a review of the departments by
Insurance Commissioners an independent review team, and
Today, the National Association of mandates a full on-site re-examination
Insurance Commissioners (NAIC) is the and re-accreditation every five years.
organization of insurance regulators Furthermore, the program requires
from the 50 states, the District of interim annual reviews to ensure
Columbia and the four US territories, compliance with the standards.
and provides a forum for the
development of uniform policy. The Uniform Certificate of
According to the NAIC, its mission is to Authority Application
assist state insurance regulators in The Uniform Certificate of Authority
servicing the public interest and to help Application (UCAA) process is part of the
do the following: promote competitive NAIC, and is designed to allow insurers to
markets; facilitate the fair and equitable file copies of the same application for
treatment of insurance consumers; admission in numerous states. Each state
promote the reliability, solvency and that accepts the UCAA is designed as a
financial solidity of insurance uniform state. Each uniform state still
institutions; and support and improve performs its own independent review of
state regulation of insurance. each application, but the UCAA eliminates
The NAIC’s primary instruments of the need to file different applications in
public policy are model laws, regulations different formats for all states that accept
and guidelines. To address the need for the uniform application.
uniformity, model laws and regulations The UCAA includes three applications.
are developed at NAIC meetings for The Primary Application is for use by
members’ use. The states may either newly formed companies seeking a
adopt the models intact or modify them to Certificate of Authority in their domicile
meet their specific needs and conditions. state and by companies wishing to

Regulation and Policy redomesticate to a uniform state. The October 2004 as the New York attorney
continued Expansion Application is for use by general sued Marsh & McLennan
companies in good standing in their state Companies Inc. (MMC) for colluding
of domicile that wish to expand their with insurance companies to inflate
business into a uniform state. The prices. In doing so, MMC was neglecting
Corporate Amendments Application is its primary responsibility: to help clients
for use by an existing insurer for get the best coverage at the lowest
requesting amendments to its certificate premium. The specific act of collusion
of authority. was that brokers were deriving
A uniform state is defined as a state commissions contingent on a certain
committed to streamlining the amount of business going to an insurer
application approval process by rather than offering the client the best
accepting the UCAA for company available price. In most cases,
admission. However, some states have contingent commissions were never
state-specific filing requirements based disclosed to clients.
either on statutory requirements or Since then, reparations have been
internal procedures. made by large insurance brokerage
operators, but there was no admission
Contingent commissions of guilt. The large insurance brokers
Though not a regulation, the insurance have also discontinued contingent
industry came under heavy scrutiny in commission arrangements.
Industry Assistance The industry does not receive any direct important to note that TARP only covers
financial assistance, but primary insurers that own federally chartered
insurers do, particularly in light of the banks (bank-holding companies).
Level & Trend credit crisis that occurred in 2008 and The Insurance Brokers and Agencies
he level of
T 2009. In response to the credit crisis, industry also receives indirect assistance
Industry Assistance the Treasury Department extended from the federal government through the
is N
oneand the bailout funds to multiple primary Patient Protection and Affordable Care
insurers in April 2009, under its Act, which, among other things, aims to
trend is S
teady
Troubled Asset Relief Program (TARP). increase the rate of health insurance
The extension was an attempt to cover coverage for individuals in the United
big losses that were incurred within the States. Rising health insurance coverage
investment sector of some industry is anticipated to increase commissions
operators, namely American for insurance brokers and agencies over
International Group (AIG). However, it is the five years to 2024.

Key Statistics
Industry Data Industry Per capita dis-
Revenue Value Added Establish- Wages Domestic posable income
($m) ($m) ments Enterprises Employment Exports Imports ($m) Demand ($)
2010 131,917.5 65,093.9 401,855 391,019 916,646 -- -- 48,604.2 N/A 38,162.0
2011 134,429.4 65,133.3 402,575 391,452 907,654 -- -- 47,388.6 N/A 38,777.6
2012 137,252.6 68,040.2 408,587 397,538 922,425 -- -- 48,824.7 N/A 39,778.6
2013 144,062.6 71,148.6 404,567 393,651 928,425 -- -- 49,395.1 N/A 38,995.4
2014 148,003.1 73,870.5 409,787 398,681 944,876 -- -- 51,226.0 N/A 40,279.6
2015 157,725.7 78,543.5 413,099 401,342 964,018 -- -- 54,411.5 N/A 41,636.7
2016 160,341.9 82,389.1 414,785 402,973 991,195 -- -- 56,894.7 N/A 42,050.1
2017 161,712.5 84,369.1 417,325 405,368 999,279 -- -- 57,363.1 N/A 42,866.5
2018 164,291.3 85,429.5 421,348 409,095 1,013,256 -- -- 58,188.2 N/A 43,825.0
2019 166,537.2 86,552.5 425,312 412,819 1,026,695 -- -- 58,964.3 N/A 44,804.7
2020 167,751.3 87,206.8 428,025 415,413 1,035,667 -- -- 59,462.5 N/A 45,715.0
2021 168,913.4 87,844.7 431,289 418,584 1,044,815 -- -- 59,965.1 N/A 46,217.8
2022 170,039.4 88,503.5 434,337 421,539 1,053,498 -- -- 60,443.7 N/A 46,726.2
2023 171,334.6 89,237.4 437,533 424,628 1,062,557 -- -- 60,951.6 N/A 47,427.1
2024 172,742.1 89,991.6 440,981 427,958 1,071,590 -- -- 61,466.3 N/A 48,182.8
Sector Rank 13/31 10/31 2/31 2/31 2/31 N/A N/A 5/31 N/A N/A
Economy Rank 68/694 31/694 21/694 21/694 32/694 N/A N/A 23/694 N/A N/A
Annual Change Industry Establish- Domestic Per capita dis-

Revenue Value Added ments Enterprises Employment Exports Imports Wages Demand posable income
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
2011 1.9 0.1 0.2 0.1 -1.0 N/A N/A -2.5 N/A 1.6
2012 2.1 4.5 1.5 1.6 1.6 N/A N/A 3.0 N/A 2.6
2013 5.0 4.6 -1.0 -1.0 0.7 N/A N/A 1.2 N/A -2.0
2014 2.7 3.8 1.3 1.3 1.8 N/A N/A 3.7 N/A 3.3
2015 6.6 6.3 0.8 0.7 2.0 N/A N/A 6.2 N/A 3.4
2016 1.7 4.9 0.4 0.4 2.8 N/A N/A 4.6 N/A 1.0
2017 0.9 2.4 0.6 0.6 0.8 N/A N/A 0.8 N/A 1.9
2018 1.6 1.3 1.0 0.9 1.4 N/A N/A 1.4 N/A 2.2
2019 1.4 1.3 0.9 0.9 1.3 N/A N/A 1.3 N/A 2.2
2020 0.7 0.8 0.6 0.6 0.9 N/A N/A 0.8 N/A 2.0
2021 0.7 0.7 0.8 0.8 0.9 N/A N/A 0.8 N/A 1.1
2022 0.7 0.8 0.7 0.7 0.8 N/A N/A 0.8 N/A 1.1
2023 0.8 0.8 0.7 0.7 0.9 N/A N/A 0.8 N/A 1.5
2024 0.8 0.8 0.8 0.8 0.9 N/A N/A 0.8 N/A 1.6
Sector Rank 23/31 24/31 18/31 16/31 20/31 N/A N/A 21/31 N/A N/A
Economy Rank 390/694 431/694 359/694 348/694 368/694 N/A N/A 387/694 N/A N/A
Key Ratios Imports/ Exports/ Revenue per Share of the

IVA/Revenue Demand Revenue Employee Wages/Revenue Employees Average Wage Economy
(%) (%) (%) ($’000) (%) per Est. ($) (%)
2010 49.34 N/A N/A 143.91 36.84 2.28 53,023.96 0.42
2011 48.45 N/A N/A 148.11 35.25 2.25 52,209.98 0.41
2012 49.57 N/A N/A 148.80 35.57 2.26 52,930.81 0.42
2013 49.39 N/A N/A 155.17 34.29 2.29 53,203.11 0.43
2014 49.91 N/A N/A 156.64 34.61 2.31 54,214.52 0.44
2015 49.80 N/A N/A 163.61 34.50 2.33 56,442.41 0.45
2016 51.38 N/A N/A 161.77 35.48 2.39 57,400.11 0.47
2017 52.17 N/A N/A 161.83 35.47 2.39 57,404.49 0.47
2018 52.00 N/A N/A 162.14 35.42 2.40 57,426.95 0.46
2019 51.97 N/A N/A 162.21 35.41 2.41 57,431.17 0.45
2020 51.99 N/A N/A 161.97 35.45 2.42 57,414.69 0.45
2021 52.01 N/A N/A 161.67 35.50 2.42 57,393.03 0.44
2022 52.05 N/A N/A 161.40 35.55 2.43 57,374.29 0.44
2023 52.08 N/A N/A 161.25 35.57 2.43 57,363.13 0.43
2024 52.10 N/A N/A 161.20 35.58 2.43 57,359.90 0.43
Sector Rank 13/31 N/A N/A 31/31 2/31 28/31 28/31 10/31
Economy Rank 109/694 N/A N/A 480/694 104/694 594/694 292/694 31/694
Figures are in inflation-adjusted 2019 dollars. Rank refers to 2019 data. SOURCE: WWW.IBISWORLD.COM

Industry Financial Ratios

Apr 2017 - Mar 2018 by company revenue
Apr 2014 - Apr 2015 - Apr 2016 - Apr 2017 - Small Medium Large
Mar 2015 Mar 2016 Mar 2017 Mar 2018 (<$10m) ($10-50m) (>$50m)
Liquidity Ratios
Current Ratio 1.1 1.1 1.1 1.1 1.1 1.2 1.2
Quick Ratio 1.0 1.0 1.0 1.0 0.9 1.1 1.0
Sales / Receivables (Trade Receivables
Turnover) 96.5 141.5 125.5 459.4 n/c 15.8 7.8
Days’ Receivables 3.8 2.6 2.9 0.8 0.4 23.1 46.8
Cost of Sales / Inventory (Inventory Turnover) n/a n/a n/a n/a n/a n/a n/a
Days’ Inventory n/a n/a n/a n/a n/a n/a n/a
Cost of Sales / Payables (Payables Turnover) n/a n/a n/a n/a n/a n/a n/a
Days’ Payables n/a n/a n/a n/a n/a n/a n/a
Sales / Working Capital 85.8 90.7 94.2 53.8 107.3 21.9 16.6
Coverage Ratios
Earnings Before Interest & Taxes (EBIT) /
Interest 10.7 10.4 9.4 9.1 8.2 12.1 11.3
Net Profit + Dep., Depletion, Amort. / Current
Maturities LT Debt 4.3 2.7 2.7 4.8 3.0 15.2 5.3
Leverage Ratios
Fixed Assets / Net Worth 0.5 0.5 0.5 0.7 1.0 0.4 0.5
Debt / Net Worth 6.9 6.8 5.3 7.3 11.4 3.5 6.0
Tangible Net Worth -1.0 -1.3 -6.2 -6.4 -10.3 3.6 11.4
Operating Ratios
Profit before Taxes / Net Worth, % 64.4 58.8 60.8 60.9 66.4 50.5 31.8
Profit before Taxes / Total Assets, % 13.6 15.1 14.8 15.2 17.3 11.9 9.8
Sales / Net Fixed Assets 45.5 42.8 42.6 40.0 41.4 39.4 28.3
Sales / Total Assets (Asset Turnover) 1.7 1.9 1.7 1.8 2.1 1.3 0.9
Cash Flow & Debt Service Ratios (% of sales)

Cash from Trading n/a n/a n/a n/a n/a n/a n/a
Cash after Operations 15.4 14.8 14.9 15.2 15.2 16.1 10.9
Net Cash after Operations 15.5 15.6 14.6 15.6 15.6 17.1 13.6
Cash after Debt Amortization 3.6 2.5 2.8 3.3 2.5 5.5 5.0
Debt Service P&I Coverage 5.3 4.9 4.5 3.9 3.5 5.8 4.3
Interest Coverage (Operating Cash) 12.6 10.7 9.6 10.2 9.0 31.1 15.6
Assets, %
Cash & Equivalents 31.4 32.6 31.2 32.2 32.2 33.1 30.4
Trade Receivables (net) 12.2 12.8 12.4 11.2 9.2 17.9 16.5
Inventory n/a n/a n/a n/a n/a n/a n/a
All Other Current Assets 4.6 3.8 5.1 4.7 3.9 5.5 11.4
Total Current Assets 48.2 49.2 48.7 48.2 45.4 56.6 58.3
Fixed Assets (net) 13.6 14.5 14.5 15.2 17.1 10.5 6.2
Intangibles (net) 23.2 21.9 21.9 22.8 24.0 17.6 21.7
All Other Non-Current Assets 15.0 14.3 14.9 13.8 13.5 15.4 13.9
Total Assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Total Assets ($m) 9,781.6 9,333.7 7,515.8 7,947.9 919.7 2,194.8 4,833.5
Liabilities, %
Notes Payable-Short Term 11.6 11.8 12.2 11.1 13.6 3.3 2.4
Current Maturities L/T/D 3.9 3.6 4.1 3.1 3.5 2.0 1.4
Trade Payables 15.6 17.9 16.7 14.7 13.5 20.1 15.2
Income Taxes Payable 0.2 0.3 0.2 0.4 0.4 0.4 0.1
All Other Current Liabilities 16.9 15.0 15.3 18.4 16.6 23.9 24.0
Total Current Liabilities 48.1 48.5 48.5 47.6 47.6 49.8 43.1
Long Term Debt 22.2 25.0 30.7 30.5 33.5 23.2 16.6
Deferred Taxes 0.2 0.2 0.1 0.1 0.1 0.3 0.4
All Other Non-Current Liabilities 7.3 5.8 5.1 5.4 5.2 5.6 6.7
Net Worth 22.2 20.6 15.7 16.4 13.7 21.2 33.1
Total Liabilities & Net Worth ($m) 9,781.6 9,333.7 7,515.8 7,947.9 919.7 2,194.8 4,833.5
Maximum Number of Statements Used 662 702 533 529 401 87 41
Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more
than 260,000 statements of member financial institutions’ borrowers and prospects.
Note: For a full description of the ratios refer to the Key Statistics chapter online.

Jargon & Glossary
Industry Jargon CONTINGENT COMMISSION ARRANGEMENTAn INSURANCE BROKERAn independent agent who
arrangement in which an insurance broker is paid by the represents the buyer during an insurance transaction by
insurer for the placement of business. These trying to find the best policy in regard to coverage and
arrangements have been deemed inappropriate pricing; insurance brokers do not represent the insurer.
because of the conflict of interest that they cause. SOFT MARKETA market in which insurance prices are
HARD MARKETA market in which insurance prices are falling. Insurance markets soften when strong balance
increasing. Insurance markets harden when demand for sheets cause the supply of insurance to exceed demand.
insurance overshoots supply. The supply of insurance
depends on insurers’ capital positions.
INSURANCE AGENTAn individual who is licensed by a
state to sell insurance products and services for one or
more specific insurance carriers or companies.
IBISWorld Glossary BARRIERS TO ENTRYHigh barriers to entry mean that INDUSTRY CONCENTRATIONAn indicator of the
new companies struggle to enter an industry, while low dominance of the top four players in an industry.
barriers mean it is easy for new companies to enter an Concentration is considered high if the top players
industry. account for more than 70% of industry revenue.
CAPITAL INTENSITYCompares the amount of money Medium is 40% to 70% of industry revenue. Low is less
spent on capital (plant, machinery and equipment) with than 40%.
that spent on labor. IBISWorld uses the ratio of INDUSTRY REVENUEThe total sales of industry goods
depreciation to wages as a proxy for capital intensity. High and services (exclusive of excise and sales tax); subsidies
capital intensity is more than $0.333 of capital to $1 of on production; all other operating income from outside
labor; medium is $0.125 to $0.333 of capital to $1 of labor; the firm (such as commission income, repair and service
low is less than $0.125 of capital for every $1 of labor. income, and rent, leasing and hiring income); and
CONSTANT PRICESThe dollar figures in the Key Statistics capital work done by rental or lease. Receipts from
table, including forecasts, are adjusted for inflation using interest royalties, dividends and the sale of fixed
the current year (i.e. year published) as the base year. This tangible assets are excluded.
removes the impact of changes in the purchasing power of INDUSTRY VALUE ADDED (IVA)The market value of
the dollar, leaving only the “real” growth or decline in goods and services produced by the industry minus the
industry metrics. The inflation adjustments in IBISWorld’s cost of goods and services used in production. IVA is
reports are made using the US Bureau of Economic also described as the industry’s contribution to GDP, or
Analysis’ implicit GDP price deflator. profit plus wages and depreciation.
DOMESTIC DEMANDSpending on industry goods and INTERNATIONAL TRADEThe level of international
services within the United States, regardless of their trade is determined by ratios of exports to revenue and
country of origin. It is derived by adding imports to imports to domestic demand. For exports/revenue: low is
industry revenue, and then subtracting exports. less than 5%, medium is 5% to 20%, and high is more
EMPLOYMENTThe number of permanent, part-time, than 20%. Imports/domestic demand: low is less than
temporary and seasonal employees, working proprietors, 5%, medium is 5% to 35%, and high is more than 35%.
partners, managers and executives within the industry. LIFE CYCLEAll industries go through periods of growth,
ENTERPRISEA division that is separately managed and maturity and decline. IBISWorld determines an
keeps management accounts. Each enterprise consists industry’s life cycle by considering its growth rate
of one or more establishments that are under common (measured by IVA) compared with GDP; the growth rate
ownership or control. of the number of establishments; the amount of change
the industry’s products are undergoing; the rate of
ESTABLISHMENTThe smallest type of accounting unit
technological change; and the level of customer
within an enterprise, an establishment is a single
acceptance of industry products and services.
physical location where business is conducted or where
services or industrial operations are performed. Multiple NONEMPLOYING ESTABLISHMENTBusinesses with
establishments under common control make up an no paid employment or payroll, also known as
enterprise. nonemployers. These are mostly set up by self-employed
individuals.
EXPORTSTotal value of industry goods and services sold
by US companies to customers abroad. PROFITIBISWorld uses earnings before interest and tax
(EBIT) as an indicator of a company’s profitability. It is
IMPORTSTotal value of industry goods and services
calculated as revenue minus expenses, excluding
brought in from foreign countries to be sold in the
interest and tax.
United States.

Jargon & Glossary
IBISWorld Glossary VOLATILITYThe level of volatility is determined by WAGESThe gross total wages and salaries of all
averaging the absolute change in revenue in each of the employees in the industry. The cost of benefits is also
continued past five years. Volatility levels: very high is more than included in this figure.
±20%; high volatility is ±10% to ±20%; moderate
volatility is ±3% to ±10%; and low volatility is less than
±3%.

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WWW.IBISWORLD.

COM Insurance Brokers & Agencies in the USJune 2019 1

Free agent: Improving macroeconomic

IBISWorld Industry Report 52421

2 About this Industry 19 International Trade 38 Revenue Volatility

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

About this Industry

Main Activities The primary activities of this industry are

The major products and services in this industry are

Similar Industries 52411a Life Insurance & Annuities in the US

52411b Health & Medical Insurance in the US

52412 Property, Casualty and Direct Insurance in the US

52413 Reinsurance Carriers in the US

Provided to: University of Michigan (2133584338) | 23 July 2019

About this Industry

Additional Resources For additional information on this industry

IBISWorld writes over 1000 US

Provided to: University of Michigan (2133584338) | 23 July 2019

Key Statistics Revenue Annual Growth 14–19 Annual Growth 19–24

$25.5bn $59.0bn 412,819

Gallagher & Co. Products and services segmentation (2019)

Per capita disposable

Industry Structure Life Cycle Stage Mature Regulation Level Heavy

Provided to: University of Michigan (2133584338) | 23 July 2019

Provided to: University of Michigan (2133584338) | 23 July 2019

Number of motor vehicle registrations Homeownership rate

Provided to: University of Michigan (2133584338) | 23 July 2019

Current The Insurance Brokers and Agencies

services. In turn, commission depends on

Provided to: University of Michigan (2133584338) | 23 July 2019

Competition Over the five years to 2019, online

Provided to: University of Michigan (2133584338) | 23 July 2019

Provided to: University of Michigan (2133584338) | 23 July 2019

Industry Sustained macroeconomic growth is

Expansion of car, life Consumption of durable goods like

Provided to: University of Michigan (2133584338) | 23 July 2019

Demand conditions Insurance pricing cycles and transaction

Provided to: University of Michigan (2133584338) | 23 July 2019

Provided to: University of Michigan (2133584338) | 23 July 2019

Provided to: University of Michigan (2133584338) | 23 July 2019

Products & Markets

Supply Chain KEY BUYING INDUSTRIES

KEY SELLING INDUSTRIES

Provided to: University of Michigan (2133584338) | 23 July 2019

Products & Markets

Products and Services Products and services segmentation (2019)

Total $166.5bn SOURCE: WWW.IBISWORLD.COM

Provided to: University of Michigan (2133584338) | 23 July 2019

Products & Markets

Provided to: University of Michigan (2133584338) | 23 July 2019

Products & Markets

Provided to: University of Michigan (2133584338) | 23 July 2019

Products & Markets

Major Markets Major market segmentation (2019)

Total $166.5bn SOURCE: WWW.IBISWORLD.COM

Insurance brokers and agents sell markedly different. Household policies

Provided to: University of Michigan (2133584338) | 23 July 2019

Products & Markets

Provided to: University of Michigan (2133584338) | 23 July 2019

Products & Markets

Business Locations 2019

West Establishments (%)

Provided to: University of Michigan (2133584338) | 23 July 2019

COM Insurance Brokers & Agencies in the USJune 2019 1