Industry Profit Trends The overall growth of the insurance industry can be

Industry profit trends the overall growth of the

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Industry Profit Trends The overall growth of the insurance industry can be classified as stable based on the revenue trends of the industry. We can see that total revenue of the industry has increased from $773.3 billion in 2010 to $877.9 in 2014 (Insurance Information Institute, 2015). It is interesting to analyze the dynamics of total revenue change in different sectors of the insurance industry. Revenue generated by life insurance demonstrates a stable growth during the researched period. Evidenced by generating $100.3 billion revenue in 2010 turned into $133.8 in 2014 (Insurance Information Institute, 2015). Annuity premiums and deposits have significantly increased in the period from 2010 to 2014. The 26.3% growth, $286.3 billion in 2010 and $352.8 billion in 2014 is the most substantial growth rate in the entire market (Insurance Information Institute, 2015). At the same time, health and accident premiums have changed slightly. Nevertheless, a 2.2% increase in total revenue in 2014 was an extension of the stable growth trend (Insurance Information Institute, 2015). The only sectors of the insurance industry that demonstrated a decrease of revenue is credit accident health and life insurance premiums with a 3.9% decrease in total revenue (Insurance Information Institute, 2015). While total revenues have been steadily growing since 2010, except for 2013 when revenue generated decreased, total expenses demonstrated the same tendency. In the down year of 2013 where revenue decreased from $832.5 billion in 2012 to $783.7 billion total expense also decreased to $704.3 billion in total expenses (Insurance Information Institute, 2015). Due to the fact that decrease in total expenses was more significant than decrease in total revenue, 2013 was a year of the highest net income, although the total revenue was not the highest in comparison
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ALLSTATE INSURANCE CORPORATION CASE ANALYSIS 7 with the previous and the next years. In the following years an increase was observed as the net income dropped from $43.2 billion in 2013 to $37.6 billion in 2014 (Insurance Information Institute, 2015). Competitive Nature of the Industry Applying the Porter’s Five Forces method of analysis to the insurance industry in the United States, the threat of new entrants and the intensity of competitive rivalry would clearly be identified as the two main factors influencing the industry. Shankar (2015) notes that the dynamic factor of competition is significant for the insurance market. The barriers for entrance are low while the barriers for exit are relatively high. As a result, the occurrence of over-capacity may be considered a systemic problem for the industry. There are two main domains of competition in this market: competition for distribution outlets and competition on broader financial services. Successful companies are forced to maintain constructive relationships with a variety of independent agents and commercial brokers which represent and distribute the company’s services. This competition is further complicated by the fact that different distribution strategies are required for different types of insurance due to the inherent characteristics of the type of insurance. For example, life insurance implies low
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