Insurance Carriers

In the US, about 7,500 companies provide insurance coverage of various types and have combined annual revenue of $1 trillion. Large companies include AIG, Aetna's Group Insurance division, MetLife, AllState, State Farm, and GEICO. The industry is highly concentrated: the 50 largest companies hold more than 60 percent of the market. Within product segments, concentration is even higher.

See the Insurance Agencies profile for coverage of insurance agents and brokers and the Managed Healthcare profile for coverage of group health insurance providers.

COMPETITIVE LANDSCAPE

Demand is driven by demographics and commercial transactions. Demand is also driven by legal or financial requirements. 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. Average annual revenue per worker is around $400,000, so the industry is not labor-intensive.

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 ...