Businesses providing services to other businesses account for more than $3.5 billion in commercial lines premiums in the United States and a loss ratio of 51.7%, according to data compiled by IMR (Insurance Market Research) Corp., one of the PLP Companies. The healthy loss ratio, combined with the fact that most of the companies are small or medium-sized businesses, makes this an attractive market for independent agents.
There are some 325,684 firms providing services to businesses in the United States. They employ more than 6.2 million people.
"This niche provides 2.7% of total commercial lines premiums written in the United States with nearly 60% of that residing in small and medium-sized accounts, prime targets for independent agents," according to Lindsay Smith, president of IMR. "More than $2.0 billion in commercial lines premiums are generated from the 312,911 small and medium-sized businesses." There are 276,706 small businesses (those employing fewer than 20 people) in this niche area, providing $963.3 million in premium for an average of nearly $3,500 per account. There are 36,205 medium-sized businesses (20-99 employees) accounting for $1.07 billion in premium for an average of $29,660 per account. The 11,508 large accounts (100-499 employees) provide $1.04 billion in premium for a $90,060 average premium per account, and the 1,265 jumbo accounts (those employing 500 or more employees) provide $461.5 million in premium for an average of $364,800 per account.
Business services provide $588.7 million in premium in the Rough Notes Midwest region. The loss ratio is 44.9%. The largest subgroup in this category is help supply services, which accounts for $131.4 million and a loss ratio of 48.0%. Building maintenance services is next, providing $71.2 million in premium and a loss ratio of 45.4% in the Midwest. It is followed by computer programming services ($40.6 million, 41.7%); data processing and preparation services ($38.9 million, 39.5%); detective and armored car services ($37.5 million, 47.8%); and equipment rental and leasing firms ($25.7 million, 51.5%).
There are 54,950 firms providing services to businesses in the region, employing 1.15 million people. There are 45,949 small (1-19 employees) business service firms in the Midwest, providing $149.8 million in premium for an average of $3,260 per account. The 6,524 medium-sized firms (20-99 employees) account for $176.4 million for an average of $27,035; the 2,231 large accounts (100-499 employees) provide $189.3 million in premium for an average of $84,870; and the 246 jumbo accounts (500 or more employees) provide $73.2 million in premium for an average of $297,510 per account.
"Business services have enjoyed strong real growth over the years, reflecting the growing importance of services in our economy," Smith points out. "With more than 30 subcategories in this segment, there are plenty of niche opportunities."
Information on this niche market is available from IMR at 39 E. Hanover Ave., Morris Plains, NJ 07950, or call (201) 898-4706. *