Businesses providing various engineering and management services account for $2.1 billion in commercial lines premiums in the United States and a loss ratio of 64.2%, according to data compiled by IMR (Insurance Market Research) Corp., one of the PLP Companies. Niche markets covered in this report include engineering services, architectural services, accounting, auditing and bookkeeping, commercial and noncommercial research organizations and various management and public relations services. This is an important market for independent agents because more than two-thirds of the premiums written come from small and medium-sized businesses, key targets for agents.
There are some 256,017 firms providing these services to businesses in the United States. They employ about 2.68 million people.
"This niche provides 1.6% of total commercial lines premiums written in the United States with nearly 68.8% of that residing in small and medium-sized accounts, prime targets for independent agents," according to Lindsay Smith, president of IMR. "More than $1.45 billion in commercial lines premiums are generated from the 252,427 small and medium-sized businesses." There are 233,414 small businesses (those employing fewer than 20 people) in this niche area, providing $834.6 million in premium for an average of $3,575 per account. There are 19,013 medium-sized businesses (20-99 employees) accounting for $615.9 million in premium for an average of $32,390 per account. The 3,206 large accounts (100-499 employees) provide $386.5 million in premium for a $120,560 average premium per account, and the 384 jumbo accounts (those employing 500 or more employees) provide $271.6 million in premium for an average of $707,355 per account.
Engineering and management services provide $304.0 million in premium in the Rough Notes Midwest region. The loss ratio is 57.6%. The largest subgroup in this category is engineering services, which accounts for $95.4 million and a loss ratio of 60.6%. Accounting, auditing and bookkeeping services is next, providing $88.5 million in premium and a loss ratio of 65.7% in the Midwest. It is followed by management services ($25.0 million, 44.6%); management consulting services ($21.9 million, 46.1%); architectural services ($21.6 million, 60.9%); and testing laboratories ($12.6 million, 48.5%).
There are 40,691 firms providing these services in the Midwest, employing 424,743 people. There are 36,884 small (1-19 employees) engineering and management service firms in the region, providing $122.1 million in premium for an average of $3,310 per account. The 3,236 medium-sized firms (20-99 employees) account for $94.8 million for an average of $29,290; the 516 large accounts (100-499 employees) provide $56.1 million in premium for an average of $108,680; and the 55 jumbo accounts (500 or more employees) provide $31.1 million in premium for an average of $565,350 per account.
"This market is highly susceptible to the state of the liability market. Liability coverages, including professional liability, account for nearly 71% of total commercial lines premiums written," Smith points out. "Workers comp is the next most important line, representing about 17.6% of total commercial premiums. Commercial auto represents 6% and commercial property 5.4%. The vast differences in loss ratios, ranging from 48.4% in the Southeast to 75.7% in the Northeast, reflect the legal climate in the regions."
Information on this niche market is available from IMR at 39 E. Hanover Ave., Morris Plains, NJ 07950, or call (201) 898-4706. *
©COPYRIGHT: The Rough Notes Magazine, 1997