Manufacturers of business machines, including computers, provide $82.24 million in commercial lines premiums in the United States or 0.06% of total commercial premiums written, according to data obtained from IMR (Insurance Market Research) Corp.'s database of insurance marketing information. The loss ratio is a very attractive 46.0%. This is a relatively small market since much of the manufacturing has been moved outside of the United States. Still, the good loss ratio coupled with the fact that much of the business is short tail in nature (more than 45% is property coverage) does make this an attractive niche.
There are six subgroups in this niche market, with manufacturers of computer peripheral equipment not elsewhere classified by the SIC (Standard Industrial Classification) Codes representing the largest, providing $24.63 million in premium and a loss ratio of 49.0%. It is followed by manufacturers of electronic computers ($23.72 million, 35.8%); of computer storage devices ($15.89 million, 46.8%); of office machines not elsewhere classified ($9.68 million, 59.2%); of computer terminals ($5.03 million, 51.2%); and of calculating and accounting equipment ($3.29 million, 48.2%).
"Although computers have become an integral part of the United States economy, their manufacture, in general, has been exported to foreign climes. Those manufacturers that have continued to operate in the United States, however, produce excellent loss results and can be an attractive niche for agents interested in this area," Lindsay Smith, president of IMR Corp., one of the PLP Companies, points out. "This market is dominated by commercial property coverages which have proven to be especially attractive to insurers which are facing a soft liability market." The property coverages account for 45.1% of the total premium. Workers comp is the second largest line at 24.7%, followed closely by general liability (24.5%). Commercial auto represents 5.2%. Boiler & machinery coverages account for 0.4%.
There are 2,026 businesses engaged in computer and other business equipment manufacturing in the United States, employing 204,832; 1,227 are small (employing less than 20 people) and account for $4.47 million in premium for an average premium of $3,640 per account. There are 477 medium-sized accounts (20-99 employees) providing $12.80 million in premium for an average of $26,830. The 97 large manufacturers (100-499 employees) account for $25.05 million in premium and an average of $103,925 per account. The 81 jumbo accounts provide $39.93 million for an average of $492,970.
Manufacturers of computers and other business equipment provide $10.49 million in premium in the Rough Notes Midwest region. The loss ratio is 44.65%. Manufacturers of computer peripheral equipment represent the largest subgroup, providing $3.33 million in premium and a loss ratio of 47.5%. Manufacturers of computer storage devices are next, with $2.22 million and a loss ratio of 40.6%. They are followed by makers of electronic computers ($2.22 million, 33.2%); office machines not otherwise classified ($1.99 million, 56.1%); calculating and accounting equipment ($619,000, 48.6%), and computer terminals ($117,540, 42.1%).
There are 284 of these manufacturers in the Midwest, employing 31,100 people. The 180 small businesses (those employing fewer than 20 people) account for $526,000 in premium for an average of $2,900 per account. The 63 medium-sized accounts (20-99 employees) provide $1.61 million in premium for an average of $25,610 per account. The 31 large businesses (100-499) account for $3.11 million for an average of $100,285, and the 10 jumbo accounts provide $5.24 million for an average of $524,450.
Information on this niche market is available from IMR at 39 E. Hanover Ave., Morris Plains, N.J. 07950, or call (888) 237-7066. *
©COPYRIGHT: The Rough Notes Magazine, 1998