May 17, 2016 by Canadian Underwriter
The global insurance brokerage market will grow at a compound annual growth rate (CAGR) of more than 4% during the period from 2016 to 2020, according to global technology research and advisory company Technavio.
The report from Technavio covers the present scenario and growth prospects of the global brokerage market for this period, the company noted in a press release on Tuesday. According to the report, three factors are contributing to growth: different valuation strategies, a change in customer demographics and economic recovery, and a rise in the middle-income customer group and high net worth (HNW) clients in developing countries.
To calculate the market size, the report considers the revenue generated primarily through the fees paid by clients; commissions and fees collected from the insurers; and funds that are held on behalf of clients.
It outlines market shares for key regions such as North America, Europe and the rest of the world. For North America, it accounted for 53% of the market share during 2015 and is expected to grow at a CAGR of 5% during the forecast period. “The top insurance brokerage firms in the region are trying to build strong relationships with customers and insurance companies,” the report noted. “This has become possible due to social media platforms that have automated the insurance process, thereby bringing in seamless transactions with the help of technology.”
The report added that the shift in demography has pushed many insurance firms to make use of actuarial and sales model for better pricing. “The rise in population of Baby Boomers and the emerging Generation Y are sparking growth opportunities for different insurance products,” the release pointed out. “It is estimated that a slowdown in the population of insurance buyers may cast a dampening effect on the growth of the insured value for personal line insurance. Growing population, the expansion of industrialization, the surge in global commercial and entrepreneurial operations, rise in consumer awareness regarding insurance products and increasing disposable incomes worldwide are driving the pace of change in the insurance industry.”
Therefore, the release said, brokers and companies provide both insurance security support to the customers as well as various other personalized services to the customers. “This has led to an increase in demand for insurance services and demand for insurance products such as professional indemnity insurance, liability insurance and property insurance.”
The report also noted that many top market players in the insurance brokerage industry are using new ways to insure new, unusual, and complex risks with the help of underwriting services. Concurrently, there has been an increase in consolidation of different companies in the insurance industry catering to middle-class and HNW customers. “As a result, the big insurance brokerage firms may pursue M&A transactions to expand their market share in developing countries during the forecast period,” the report suggested.
As well, the adoption of Big Data analytics and incorporation of business intelligence in this market are expected to boost market growth in the next four years, the report noted. Big Data analytics and business intelligence software will allow insurance brokerage firms to leverage their customer data so that they can build, refine and modify the predictive models.