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Posted on 08 Mar 06
According to a recent report from Research and Markets http://www.researchandmarkets.com, about 130,000 insurance agency offices in the US generate annual revenues of $85 billion. Large agencies include Marsh & McLennan, Arthur Gallagher, and Aon.
Despite the prominence of large agencies in the commercial segment, the industry remains highly fragmented: the largest 50 firms only hold 20 percent of the total market. The average agency has five employees and generates less than a million dollars in annual revenue. An insurance agent works on the insurance company's behalf; an insurance broker on the customer's behalf. Many agencies, especially on the commercial side, function as brokers.
Demand is related to demographics and the volume of commercial activity. The profitability of individual agencies depends on volume because most costs are fixed. Large agencies have advantages of name recognition, connections with more insurers, and the ability to craft more-complex insurance packages. Small agencies can compete successfully by specializing in a product, industry, or market. Average annual revenue per employee is close to $200,000.
The three broad categories of insurance are property and casualty (P/C), which generates about 60 percent of annual industry revenue; health, about 12 percent; and life, which generates 10 percent. Within the P/C segment, commercial insurance accounts for 60 percent of revenue. Because of the very different insurance issues involved in each, many agencies handle only one type of insurance. Agencies may also specialize in selling to individuals, businesses, or groups.
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