This month, we're taking a different look at the commercial insurance marketplace. Rather than focusing on a specific niche market, this column will look at the total commercial insurance market of more than $129.4 billion in the United States, coming from some 6,695,310 businesses, according to data compiled by Insurance Market Research (IMR) Corp., one of the PLP Companies.
The most important sector of the economy now is the services sector, which accounts for $28.71 billion in premium from 2,299,407 accounts. Transportation and public utilities represent the second largest sector, with $21.24 billion from 271,657 firms. Manufacturing is next, with $17.23 billion and 377,257 accounts, followed by agriculture, forestry and fishing ($15.80 billion; 387,261 accounts); retail trade ($13.75 billion; 1,521,854 accounts); construction ($12.39 billion; 608,816 accounts); wholesale trade ($9.47 billion; 500,215 accounts); finance, insurance and real estate ($5.07 billion; 610,428 accounts); government ($3.31 billion; 91,192 accounts); and mining ($2.47 billion; 27,223 accounts).
Western differences
The service sector is the largest sector in the Rough Notes Western Region, where it generates $6.06 billion in premium from 477,208 accounts. The service sector premiums represent 22.6% of the total commercial premiums of $26.77 billion written in the region. Transportation and public utilities is second, providing $3.98 billion from 52,784 accounts. Agriculture, forestry and fishing is next, with $3.82 billion and 80,328 accounts, followed by manufacturing ($2.99 billion; 79,412 accounts); construction ($2.90 billion; 126,297 accounts); retail trade ($2.87 billion; 291,853 accounts); wholesale trade ($1.98 billion; 100,573 accounts); finance, insurance and real estate ($1.01 billion; 129,635 accounts); government ($676.4 million; 16,220 accounts); and mining ($495.5 million; 3,645 accounts).
The most important niche market in this region is makers of tanks and tank components, which provides $4.5 million in premium. IMR determines those markets which are most important by comparing the percentage of premiums written in that niche in the region as compared with the percentage written throughout the United States. For example, tank manufacturers represent only .017% of commercial premiums written in the West. However, this niche provides only $12.3 million in premiums written throughout the United States, where it represents only .009% of total commercial premiums. Thus, this niche market is about two times more important in this region than in the United States overall.
Rice growing is the second most important, with $30.2 million in premium, followed by makers of guided missiles and space vehicles ($39.6 million); tree nut growers ($322.8 million); fruit and tree nut growers, not elsewhere classified ($266.3 million); berry crops ($37.9 million); grapes ($266.6 million); makers of structural clay products ($1.4 million); primary copper ($3.9 million); and cotton ($70.4 million).
Each region has distinctive traits
"This overview of the United States market, combined with the regional breakdown, gives you a real perspective on just how diverse this country is," Lindsay Smith, IMR president, points out. "The important markets include anthracite mining in the Northeast; deep sea transportation in the Southeast; iron ore mining in the Midwest; rice milling in the Southwest; and nuts and grapes in the West, to name just a few. It makes it clear that a cookie-cutter approach to entering these markets certainly is not the most efficacious approach. Companies and agents can save a great deal of time and money researching a region and its best niche markets before deciding what lines to offer or even whether to go into that area."
Smith notes that the information can be brought down to state and county levels to allow companies to zero in on areas where the niche markets match their strategic goals. "For example, our analyses of attractive markets show the wide range that exists, with the hog market being exceptional in Missouri, grapes in California, business credit institutions in New Hampshire, grocery stores in Michigan, and so on."
Information on niche markets discussed in this article, as well as information on any of more than 900 niche markets as defined by SIC (Standard Industrial Classification) Codes can be obtained by writing IMR at 39 E. Hanover Avenue, Morris Plains, N.J. 07950 or by calling Deb Kreger at (973) 898-4706. *
©COPYRIGHT: The Rough Notes Magazine, 1998