Insurance Carriers Industry Profile

The US insurance carriers industry includes about 7,500 companies with combined annual revenue of more than $1 trillion. Major companies include Aetna's Group Insurance division, AIG, AllState, GEICO, MetLife, and State Farm. The industry is concentrated: the 50 largest companies generate about 60 percent of revenue. Concentration is higher in some industry segments.

Providers of title insurance and health insurance, which are included in the industry, are covered in separate industry profiles. Insurance agents and brokers also are covered in a separate profile.

COMPETITIVE LANDSCAPE

Demand is driven by demographics and commercial transactions, as well as by legal or financial requirements affecting customers. Consumers are usually required by states to buy auto insurance and by lenders to buy homeowners insurance, for example. The profitability of individual companies depends on effective marketing and on the ability to accurately estimate future payments. Large companies have big economies of scale in administration and in access to capital, as well as advertising and marketing. Small companies can compete successfully by specializing in particular products or industries. The industry is capital-intensive: average annual revenue per worker is about $1 million.

In the late 2000s recession, insurers saw revenues decline sharply when their investment portfolios lost value after the market fell. Insurance carriers rely heavily on their investment portfolios, which is where they invest premiums collected until they are needed to pay claims or benefits. In addition, deregulation of the ...