Management 431– Applied Strategic Analysis – Fall 2016 Content and Format Guidelines for the Business Ethics Group Paper The SAP project consists of a paper and a presentation. The specific content requirements of the paper will be discussed below and presentation guidelines will be disseminated and reviewed later in the semester. Both sets of guidelines will be posted on Blackboard. You will work in teams to develop those papers and will be graded as a group (for specific point allocations, see paper evaluation form). Individual grades will be determined through the use of group and individual peer evaluations. In order to assess performance of all team members, each student will complete a peer evaluation after turning major sections of the paper and after both the class and client presentations as instructed by the professor. This class uses CATME online peer evaluation. Content Guidelines External Analysis The ultimate goal of this section is to identify relevant opportunities and threats. Please note that this section is about the industry and industry-related environments, not about your company which is internal. You may refer to your company to illustrate a point, but you should focus on discussing the actions of other firms in the industry and trends and occurrences that may affect your company’s future performance. Start with a brief introduction to this section that briefly explains the analysis and identifies the subsections of the Industry Analysis. Each subsection should also start with its own introduction as well, outlining the content in the body. You want to guide the reader through your paper. Also, create as many tables and figures as you can to illustrate your findings and arguments. They tremendously help readers quickly and accurately understand your points. Each tables and figures, however, should be thoroughly explained in the body of text. tables and figures have to be your own. Do not copy and paste tables and figures from existing sources. You may recreate tables and figures using the figures provided in those sources. The external section of your strategic plan needs to include the following six subsections (title each section clearly): 1. Before starting the analysis, clearly identify the client’s industry (start with a NAICS code- is it accurate? If not, how do you want to define the industry? Check the Hillsborough County Business Directory for classifications). After your group agrees on how to define the industry, describe the economic characteristics of the industry. For example, you may address the followings (focus on the industry): a. b. c. d. e. market size (sales) sales growth rate (of the industry) stage of the life cycle (of the industry) types of products sold (highly differentiated, weakly differentiated or very similar products) scope of rivalry (local, regional, national, international, global) Management 431– Applied Strategic Analysis – Fall 2016 f. Key Success Factors (KSF). You should identify the key success factors (KSF) for the industry. What are the critical factors that determine whether a firm will be successful in this industry? What must a firm deliver to be successful? You should identify 3-5 factors that are unique to being successful in this industry and give examples of companies that illustrate each key success factor. Be specific on how you know these factors are important to be successful. Don’t try to cover everything a company needs to do to be successful (i.e. make a good product, make money, have good employees….) but try to focus on what is unique to being successful in this industry. What differentiates the successful and not so successful companies? You may consider comparing the client company to the major competitors in the industry across the key success factors. In this part, you may also discuss your client firm on those characteristics. For example, if you are discussing industry (market) size, you may also discuss the market share of your client firm. As another example, you may discuss the client firm’s sales growth along with industry sales growth (try to show the comparison in charts as well). The rule of thumb is that, for external analysis, you should focus 80% of your writing on the industry and 20% on the client firm, and for internal analysis, it proportion should be reversed. 2. Discuss the key competitors in the industry. This part should discuss anything we need to know about the competitors. Be comprehensive and thorough in your analysis. a. b. c. d. e. f. Who are key competitors? where are they? What size are they? Is competition fragmented or consolidated? What are their strengths and weaknesses? Their past financial performance Competitors’ brief history including founding years 3. The third part is to discuss structural forces affecting industry profitability using Porter’s 5 Forces analysis. If any of Porter’s Five Forces is deemed not important in the industry, then you do not need to discuss that force. Nevertheless, you should mention in the introduction to the section what (or who) the five forces are for the client company and indicate which forces aren’t relevant (and why) and which forces will be addressed. Be sure to utilize your research to demonstrate with concrete examples how strong forces negatively affect profitability or how particularly weak forces create an opportunity for increased profitability. You need to show how buyers, suppliers, new entrants, competitive rivalry or substitutes have negatively affected profit margins. 4. The fourth step is to identify and discuss driving forces or macro environmental trends (economic, social, demographic, legal/regulatory, ecological, and technology) that are creating opportunities or threats to the industry. Again, focus on the trends that are impacting the industry. If ecological trends aren’t important, for example, don’t force them into your paper. **The use of research and concrete examples are critical to demonstrate how these trends are creating growth opportunities or threats to future growth. Do not rely on your common sense or what your gramma told you over a dinner table. You need to present hard data to convince your audiences. Management 431– Applied Strategic Analysis – Fall 2016 5. Conclude the section with a summary of the opportunities and threats for the industry. You should include all opportunities and threats you have identified and discussed throughout this section (i.e. in the KSF, Five Forces Analysis or in the Trend Analysis). The list should not contain any opportunities that you did not include in your analyses of KSF, Porter’s 5 forces or trend analysis (but it should include all that you did discuss!). Since you have already discussed the opportunities and threats, you do not need to repeat the same discussion here. Develop and list the opportunities and threats that you have identified (maybe in bullet forms). Please note that this section is about the industry and not your company. You may refer to your company to illustrate a point but you should discuss the actions of other firms in the industry as well. Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   1 WWW.IBISWORLD.COM Making claims: Renewed focus on risk management by insurers will boost industry demand This report was provided to University of Tampa (2133789824) by IBISWorld on 21 August 2019 in accordance with their license agreement with IBISWorld IBISWorld Industry Report 52429 Third-Party Administrators & Insurance Claims Adjusters in the US July 2019 Anna Miller 2 About this Industry 18 International Trade 29 Technology and Systems 2 Industry Definition 19 Business Locations 30 Revenue Volatility 2 Main Activities 2 Similar Industries 21 Competitive Landscape 3 Additional Resources 21 Market Share Concentration 4 Industry at a Glance 5 Industry Performance 5 Executive Summary 5 Key External Drivers 7 9 30 Regulation and Policy 31 Industry Assistance 21 Key Success Factors 32 Key Statistics 21 Cost Structure Benchmarks 32 Industry Data 23 Basis of Competition 32 Annual Change 24 Barriers to Entry 32 Key Ratios 25 Industry Globalization 33 Industry Financial Ratios Current Performance 26 Major Companies 34 Jargon & Glossary Industry Outlook 26 Sedgwick Claims Management Services Ltd 11 Industry Life Cycle 13 Products and Markets 13 Supply Chain 14 Products and Services 16 Demand Determinants 17 Major Markets 26 York Risk 26 Crawford & Company 27 IAS Claim Services 28 Operating Conditions 28 Capital Intensity www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   2 WWW.IBISWORLD.COM About this Industry Industry Definition Operators in this industry investigate, appraise and settle insurance claims; provide third-party administration services of insurance and pension funds; and offer insurance advisory and Main Activities The primary activities of this industry are ratemaking services. This industry does not include companies that primarily provide portfolio management services, sell insurance policies or offer actuarial consulting services. Investigating, appraising and settling claims Third-party claims processing Third-party insurance and pension fund administration Insurance actuarial services Insurance advisory services Insurance exchanges Insurance loss prevention services Insurance rate-making services Insurance reporting services Medical cost evaluation services The major products and services in this industry are Claims adjustment services Consulting services for insurance Third-party administration of health and welfare funds Third-party administration of pension funds Third-party administration of self-insurance funds Third-party administration of workers’ compensation funds Other services Similar Industries 52392 Portfolio Management in the US Operators in this industry manage others’ assets on a fee or commission basis. 52421 Insurance Brokers & Agencies in the US Operators in this industry sell annuities; insurance policies are included in this industry. 52511 Retirement & Pension Plans in the US Operators in this industry provide retirement income benefits exclusively for the plan sponsor’s employees or members. 52512 Health & Welfare Funds in the US Operators in this industry provide health- and welfare-related employee benefits exclusively for the plan sponsor’s employees or members. 52519 Workers’ Compensation & Other Insurance Funds in the US Operators in this industry provide workers’ compensation insurance and other self-insurance exclusively for the plan sponsor’s employees or members. Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   3 WWW.IBISWORLD.COM About this Industry Additional Resources For additional information on this industry www.iii.org Insurance Information Institute www.propertycasualty360.com PropertyCasualty360 www.rrr.com Risk Retention Reporter www.siia.org Self-Insurance Institute of America IBISWorld writes over 1000 US industry reports, which are updated up to four times a year. To see all reports, go towww.ibisworld.com Provided to: University of Tampa (2133789824) | 21 August 2019 WWW.IBISWORLD.COM Third-Party Administrators & Insurance Claims Adjusters in the US July 2019   4 Industry at a Glance Third-Party Administrators & Insurance Claims Adjusters in 2019 Key Statistics Snapshot Revenue Annual Growth 14–19 Annual Growth 19–24 Profit Wages Businesses 1.9% $256.3bn 4.7% $43.3bn $21.6bn 133,698 S&P 500 Revenue vs. employment growth There are no major players in this industry 40 5 % change 30 Index (thousands) Market Share 20 10 0 -10 Year 11 13 15 Revenue 17 19 21 23 25 4 3 2 1 Year 11 13 15 17 19 21 23 25 Employment SOURCE: WWW.IBISWORLD.COM p. 26 Products and services segmentation (2019) 2.9% Key External Drivers Third-party administration of workers' compensation funds S&P 500 1.1% Other services 1.8% Third-party administration of self-insurance funds 2.7% 3.9% Per capita disposable income Third-party administration of pension funds Claims adjustment services 3.1% Threat of Natural Disaster Industry consulting Number of employees Number of vehicle accidents Number of people with private health insurance 84.5% Third-party administration of health and welfare funds p. 5 SOURCE: WWW.IBISWORLD.COM Industry Structure Life Cycle Stage Revenue Volatility Capital Intensity Mature Low Medium Industry Assistance None Concentration Level Low Regulation Level Medium Technology Change Medium Barriers to Entry Medium Industry Globalization Low Competition Level High FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 32 Provided to: University of Tampa (2133789824) | 21 August 2019 WWW.IBISWORLD.COM Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   5 Industry Performance Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage Executive Summary The Third-Party Administrators and Insurance Claims Adjusters industry plays a critical role in the insurance and retirement markets by enabling businesses to outsource claims processing, administrative services and risk management. Insurance carriers and pension funds, health and welfare funds, workers’ compensation funds and self-insurance funds have increasingly relied on these services to cut operating costs and improve efficiency. Insurance and pension funds have increased their demand for third-party administration and risk assessment to avoid future calamity Over the five years to 2019, industry revenue is expected to grow an annualized 4.7% to $256.3 billion. Due to the prolonged effects of the financial crisis, insurance and pension funds have increased their demand for third-party administration and risk assessment to avoid future calamity, boosting industry revenue. At the same time, demand from primary insurers (e.g. property and casualty, health and medical and life Key External Drivers S&P 500 Industry participants receive a significant share of revenue as fees and commissions for services. Fund administration fees are largely based on a percentage of assets under management (AUM) of the funds they handle, which are affected by the performance of financial markets. Significant changes in the performance of stock markets will influence the value of AUM, and thus, industry revenue earned from fees. The S&P 500 index is expected to increase in 2019; however, it remains volatile. Per capita disposable income As disposable income levels increase, consumers are able to buy cars, homes insurers) for claims and associated actuarial and consulting services recovered because of rising underlying business activity, declining unemployment levels and stabilizing financial markets. Increased demand for administration, risk and actuarial services, in particular, have contributed to a higher average profit margin for the industry. In 2019 alone, industry revenue is forecast to increase 2.9%, due to a modest increase in per capita disposable income and the number of employees. Moreover, increases in the number of retirees in the economy will support demand for risk management services from retirement funds. In addition, continued regulation surrounding the terms of issuance and the investment risks of insurers will pressure insurers’ profitability. To save on operating costs, insurers will continue to outsource to industry operators. Particularly as the number of insured individuals is anticipated to rise over the next five years, likely boosting the number of claims being processed. Industry revenue is expected to grow at an annualized rate of 1.9% to $282.1 billion over the five years to 2024. and other assets that need insurance. Additionally, higher per capita disposable income enables individuals and households to expand coverage because they can afford higher premiums for health, life, property and casualty insurance. Per capita disposable income is expected to increase in 2019, creating a potential opportunity for the industry. Threat of Natural Disaster In the event of a natural disaster, households and businesses that incur property damage will submit a claim with their insurance company. The insurer will then use either an in-house or contracted claims adjuster to work Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   6 WWW.IBISWORLD.COM Industry Performance through the claim. An increase in insured catastrophic damages translates into higher demand for claims adjustment services. When the damage is particularly severe, demand for third-party administration will consequently spike, particularly if insurers lack the in-house resources to manage the work volume. With the recent increased severity of storms, revenue from claims adjustments and administering insurance after natural disasters is expected to increase in 2019. Number of employees Industry operators provide third-party administration of pension funds, health and welfare funds, workers’ compensation funds and other insurance funds. The number of plan members depends on the total number of employed individuals. Generally, a greater number of workers leads to more members and consequently more claims, which results in greater demand for third-party administration and claims processing services. The number of employees is expected to increase in 2019. Number of vehicle accidents The number of vehicle accidents represents the number of vehicle crashes on US highways as reported by the US Department of Transportation. An increase in the number of accidents, increases the number of claims, in turn driving growth in industry revenue. In 2019, the number of vehicle accidents is anticipated to decrease, representing a potential threat to the industry. Number of people with private health insurance An increase in the insured population would yield an increase in the number of insurance claims and adjustments, raising demand for industry services. An increase in demand for claims adjustments will result in an increase in industry revenue for industry operators. The number of individuals with private health insurance is expected to rise slightly in 2019. Per capita disposable income S&P 500 5 4 4 2 % change Index (thousands) Key External Drivers continued 3 2 1 Year 11 0 -2 13 15 17 19 21 23 25 -4 Year 13 15 17 19 21 23 25 SOURCE: WWW.IBISWORLD.COM Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   7 WWW.IBISWORLD.COM Industry Performance Robust demand The Third-Party Administrators and Insurance Claims Adjusters industry provides a range of services to downstream insurance industries and employee-benefit funds on a fee or contractual basis. There are three subgroups within this industry that are categorized based on the primary focus of services offered. The first group provides third-party administration of insurance and retirement plans for insurance carriers, pension funds, health and welfare funds, workers’ compensation funds and self-insurance funds; this division generates the majority of industry-specific revenue. The second group performs claims processing, which includes companies and individuals that primarily focus on investigating, appraising and settling insurance claims. Finally, the third group provides a variety of other insurance-related activities including actuarial services, coverage consulting and rate-making services. Over the five years to 2019, IBISWorld estimates that industry revenue will grow at an annualized rate of 4.7% to $256.3 billion. As a result of rising underlying business activity, declining unemployment and improving financial markets, individuals and companies increased their demand for insurance services. Due to greater volume of insurance plans, claim submissions from primary insurers increased, boosting demand for industry services. Likewise, increased disposable income and rising equity markets also affected insurance and employee benefit funds. Positive performance in financial markets increases funds’ investment income, and growth in disposable income increases demand for insurance plans, as well as the size of employee contributions to pension funds. Together, these factors have resulted in greater assets under management (AUM) for insurance and pension funds. Since industry operators earn fees based on the size of the asset pool they administer, increased insurance and pension fund assets resulted in a rise in industry fees, which positively affected industry revenue. Due to rising demand from primary insurers and employeebenefit funds, as well as increases in investment yields and private investment, IBISWorld projects industry revenue will grow 2.9% in 2019 alone. Primary insurers are expected to increasingly outsource claims to industry operators as medical costs continue to rise and weather-related losses trend upward due to global climate change. Declining unemployment also bolstered demand for third-party administrative services; as employment grows, the size of pension funds will subsequently grow, leading employers to increasingly outsource employee-benefit fund administration to reduce their own operating costs. Additionally, increased regulation concerning downstream insurance industries has provided a boost in demand for companies and individuals in the industry that provide actuarial, consulting and risk advisory services. Industry revenue 40 30 % change Current Performance 20 10 0 Year 11 13 15 17 19 21 23 25 SOURCE: WWW.IBISWORLD.COM Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   8 WWW.IBISWORLD.COM Industry Performance Robust demand continued Despite recent increases in the percentage of uninsured individuals, the percentage of insured individuals in the population is still historically high. Higher demand for insurance plans increases the number of claims that require processing, and subsequently, demand for administration, risk and actuarial services. Growing competition The financial crisis of the late 2000s generated an influx of industry operators to fulfill claim adjustments, risk advisory and administrative services for failing insurance and pension funds. The need for the industry has persisted into the present period, as wellestablished operators have increased their scale and service offerings. During the five-year period, the number of industry enterprises rose at an annualized rate of 0.9% to 133,698 companies. The vast majority of industry operators are individuals that do not employ other workers and are usually contracted by insurance carriers or employee-benefit funds for smallscale services. These nonemployers have consistently accounted for over 90.0% of industry participants. Consequently, the industry exhibits a highly competitive landscape. Changes in the regulatory landscape, namely the passage of the PPACA, increased the percentage of the population with health insurance during the period. Despite the repeal of the individual mandate as part of Tax Cuts and Jobs Act, the number of individuals with private health insurance has grown consistently throughout the period Since these services command higher margins, the implementation of the Patient Protection and Affordable Care Act (PPACA), which boosted the percentage of insured individuals during the first half of the current period, continues to positively affect profit margins for industry operators. Changes in the regulatory landscape increased the percentage of the population with health insurance since a majority of people obtain health insurance from employers and employment has been high. The scale of operators offering a combined range of claims processing, third-party administration and related insurance services, such as actuarial consulting, increased over the five years to 2019 due to growth in data-driven risk management and advisory services. Larger operators have been able to use improved analytics and intelligence to offer clients a more-diversified range of services. As a result, industry demand for skilled labor increased, and the number of industry employees grew at an annualized rate of 2.8% to 438,101 people over the five years to 2019. This trend has also helped boost revenue and improve profitability at a faster rate than their smaller industry counterparts, enabling larger players to further invest in technology and skilled labor. Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   9 WWW.IBISWORLD.COM Industry Performance Industry Outlook Greater demand Expansion in regulatory requirements concerning downstream insurance and employee-benefit fund markets is expected to increase the rate of outsourcing to the Third-Party Administrators and Insurance Claims Adjusters industry, driving growth over the five years to 2024. IBISWorld projects that industry revenue will grow an annualized 1.9% over the five years to 2014, to reach $282.1 billion. A projected slight increase in the insured populated, will continue to support industry revenue growth during the outlook period. Higher retirement levels, which raises the number of pension funds seeking consultation, as well as higher disposable income levels, will likely support the industry as well. During periods of higher disposable income, individuals are more likely to purchase discretionary insurance services and contribute to pension funds, which increases the potential for claims and drives demand for industry services. Increased regulatory pressures are anticipated to pressure profit margins for employee-benefit and insurance funds providers, which will also drive demand for operators’ services. In addition, the industry is expected to similarly benefit from a robust domestic economy. Insurance policy volumes are estimated to rise moving forward, particularly among corporations, which will support demand for claims adjustment services. Rising medical costs for downstream health and medical insurers (IBISWorld report 52411b); higher weather-related losses for general insurers (52412); and higher costs for life insurers (52411a) could result in greater outsourced claims volumes and higher demand for thirdparty administration services. Advisory and risk management services are also expected to benefit from the improving economy, since businesses, insurers and individuals will be able to allocate a greater portion of income to these services to mitigate risks and hedge against revenue volatility. Furthermore, demand from insurance and employeebenefit funds will grow as their plan participants and assets increase, along with rising yields in equity and fixedincome markets, leading to higher industry revenue from third-party administration services. The claims adjusting segment of the industry relates to various services provided to downstream insurance industries, particularly for direct life, auto insurance and other direct insurance carriers. Demand for claims adjusting is typically generated by an increase in the number of policyholders, which increases the volume of claims needing checks and assessments. Volatility in this sector will depend on factors affecting the Property, Casualty and Direct Insurance industry (52412), since it is a primary source of claims that need to be investigated. Although highly volatile and difficult to estimate, recent increases in weatherrelated losses for general insurers are expected to persist, which is expected to increase total claims volumes. An increase in outsourcing to industry operators is also expected to support some growth within this sector, as insurers seek to cut operational and overhead costs related to claimsadjustment services. Third-party administration has also exhibited strong growth due to expanding enrollment in health and welfare The industry is expected to benefit from a robust domestic economy Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   10 WWW.IBISWORLD.COM Industry Performance Greater demand continued programs and large gains in pension fund inflows, assets and accounts. This trend is expected to continue, as increased operational burdens force many companies to outsource the administration of their employee-benefit programs and pension plans to reduce expenses. Additionally, the industry will benefit from a rise in demand for health and medical insurance as the US population ages. Traditionally, demand for industry services spikes when premiums are higher during hard-market conditions within the primary insurance sector. Higher insurance premiums raise operational costs for businesses and diminish disposable incomes for Industry landscape Over the five years to 2024, industry employment is expected to increase at an annualized rate of 2.1% to 486,484 workers. In comparison, the number of industry enterprises is expected to increase at a slower annualized rate of 1.5% to 143,846 during the same period. Employer enterprises, particularly those that provide third-party administration, insurance advisory and risk management services, are expected to engage in strategic acquisitions to access proprietary data or to capitalize on operational efficiencies. Consequently, the number of individuals working in the industry will rise at a faster rate than the number of companies. Claims- individuals. However, demand for risk management and insurance advisory services also rises at these times as businesses, government organizations, charities and wealthy individuals seek savvy ways to cut costs and preserve assets. In addition, hard-market conditions, characterized by more stringent underwriting criteria and less issuance of insurance policies, are important for insurers themselves because underwriters need to evaluate their assessment of risk and the price of their insurance. Proper risk assessment and pricing is expected to be particularly important in health insurance moving forward as premiums rise, boosting demand for industry operators. The number of individuals working in the industry will rise at a faster rate than the number of companies adjustment services will be the main driver of growth among sole proprietor operators in the industry. This service segment, which has generally low barriers to entry, is expected to benefit from additional outsourcing of claims operations, particularly within services related to appraisal, examination and investigations of policy claims. Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   11 WWW.IBISWORLD.COM Industry Performance Life Cycle Stage The rate at which technology is changing and being adopted by insurance service companies has stabilized There is strong customer acceptance of products within the industry, which is approaching market saturation Industry growth depends on downstream demand from other mature industries Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   12 WWW.IBISWORLD.COM Industry Performance Industry Life Cycle This industry is M  ature The Third-Party Administrators and Insurance Claims Adjusters industry is in the mature stage of its economic life cycle, as reflected in the measure of industry value-added (IVA). IVA is a measure of an industry’s contribution to the economy, by incorporating total wage expenditure, industry revenue, profit and depreciation into the calculation. Over the 10 years to 2024, IVA is forecast to rise at an annualized rate of 4.8%. In comparison, GDP is projected to increase at an annualized rate of 2.0% during the same period. Typically, an IVA growth rate that outpaces the larger economy is indicative of an industry in the growth phase of its lifecycle. However, little change in the industry’s distribution methods and downstream markets, in addition to negligible growth in new enterprises over the five years to 2024, are all indicative of the industry’s maturity. Demand for industry services rose precipitously following the financial crisis of the late-2000s, as a wave of loan defaults, foreclosures, and financial markets volatility increased demand for industry services. Demand for industry services was particularly strong from insurance and pension funds that were particularly damaged due to a collapse in equity values. Since the late 1990s, there has been rapid technological advancement, including the automation of standard processes and improvements in various risk-based models. In addition, the use of communications and database networks has been a vital primer for connecting industry professionals with each other as well as with clients. These trends have enabled industry participants to become global service providers and expand their product offerings. Given global financial crises over the past decade, risk management has emerged as a critical function for mitigating potential financial losses. This new and intensified focus on risk management increased demand for industry offerings, contributing to steady revenue and profit growth. This growth in demand for risk management services has led to an immense increase in third-party administrative services as a share of industry revenue. Over the five years to 2019, industry profit margins are anticipated to rise from 13.0% in 2014 to 16.9% in 2019. Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   13 WWW.IBISWORLD.COM Products & Markets Supply Chain | Products and Services | Demand Determinants Major Markets | International Trade | Business Locations Supply Chain KEY BUYING INDUSTRIES 52411a Life Insurance & Annuities in the US Direct insurance carriers are increasingly using specialized service providers, both in the distribution and management of insurance policies. 52411b Health & Medical Insurance in the US Direct insurance carriers are increasingly using specialized service providers, both in the distribution and management of insurance policies. 52412 Property, Casualty and Direct Insurance in the US Direct insurance carriers are increasingly using specialized service providers, both in the distribution and management of insurance policies. 52413 Reinsurance Carriers in the US Products offered by reinsurance carriers are normally in the highest risk category, which necessitates high-quality risk management programs. Risk consultants provide specialized services and ongoing support to reinsurance carriers. 52511 Retirement & Pension Plans in the US The strong growth in pension funds in recent years has resulted in increased activity for third-party administrators and risk consultants. 52512 Health & Welfare Funds in the US Rapidly rising medical costs in the past decade have resulted in increased participation and contribution to health funds. This benefits industry participants as the management of these funds is increasingly outsourced to third-party administrators. 52519 Workers’ Compensation & Other Insurance Funds in the US Inability of small and medium-size businesses to obtain competitive coverage in commercial markets resulted in significant growth in self-insurance pools. Administration of these pools is mostly outsourced. KEY SELLING INDUSTRIES 52411a Life Insurance & Annuities in the US Revenue for insurance service operators depends on the ability of direct life, health and medical insurance carriers to underwrite risk. 52411b Health & Medical Insurance in the US Revenue for insurance service operators depends on the ability of direct life, health and medical insurance carriers to underwrite risk. 52412 Property, Casualty and Direct Insurance in the US Revenue for insurance service operators depends on the ability of direct life, health and medical insurance carriers to underwrite risk. 52511 Retirement & Pension Plans in the US Revenue for insurance service companies depends on the ability of pension funds to secure capital for investment. 52512 Health & Welfare Funds in the US Revenue for insurance service operators depends on the ability of health and welfare funds to secure capital for investment. 52519 Workers’ Compensation & Other Insurance Funds in the US Revenue for insurance service operators depends on the ability of workers’ compensation and other funds to secure capital for investment. Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   14 WWW.IBISWORLD.COM Products & Markets Products and Services Products and services segmentation (2019) 2.9% 3rd party administration of workers' compensation funds 1.1% Other services 3.9% 1.8% Third-party administration of self-insurance funds 2.7% Third-party administration of pension funds Claims adjustment services 3.1% Insurance consulting 84.5% Total $256.3bn Insurance advisers, consultants, claims adjusters, appraisers, examiners and investigators operate in a highly competitive industry. This competition emanates from a large number of retail insurance brokerage and agency companies, as well as individual brokers and agents, direct underwriters and other insurance intermediaries, such as banks. Industry players address the highly specialized product development, administrative risk management and consulting needs of professional groups, service businesses, governments, healthcare providers and commercial organizations. In addition, industry players provide underwriting management skills, claims and risk management expertise and third-party administration services to direct underwriters. Third-party administration of health and welfare funds Administration of health and welfare funds make up the majority of industry services, accounting for 84.5% of total revenue, representing an increasing share of industry revenue over the past five years. Services relating to health and welfare funds include claims processing; coordination of contributions; administration of benefits for medical, Third-party administration of health and welfare funds SOURCE: WWW.IBISWORLD.COM dental or pharmacy benefits; case management services; claim recovery services; medical billing; prescription benefit management; wellness or other screen services; COBRA or other related service eligibility; and brokerage services. Third-party administration of workers’ compensation funds Third-party administration of workers’ compensation funds accounts for 2.9% of industry revenue, representing a decreasing share of industry revenue over the past five years. Industry operators provide administration services for employee-benefit programs as well as claims management services. Their services and products include: claims investigations; subrogation; loss control and safety programs; workers’ compensation training; risk management information systems (RMIS); management analytical summary reports; and expert witness testimony. Since the passage of the Affordable Care Act, more individuals have become insured, thereby increasing demand for this segment. Third-party administration of self-insurance funds Most of industry income is associated with third-party administrative services Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   15 WWW.IBISWORLD.COM Products & Markets Products and Services continued for both insurance operations and pension funds. Traditionally, these services consist of general back-office and administrative support, but they can also include plan processing and claimsrelated operations. In 2019, third-party administrative services related to selfinsurance are expected to account for 1.8% of total revenue. This reflects a decreasing share of industry revenue and is indicative of decreased self-insurance activity and an increase in the adoption of external insurance plans. Third-party administration of pension funds In addition to various forms of insurance funds, industry operators offer thirdparty administration and other services to pension funds. Such services include risk assessment for pension fund assets as well as administrative consulting on managing and setting up pension fund operations. Such services are on the rise as employment increases and more employees join corporate pension plans. This segment is expected to comprise 2.7% of industry revenue, an increasing share over the past five years. Greater demand for industry services by pension funds is derived from tighter guidelines for risk assessment and the aging population. Claims adjustment services Claims adjusters, appraisers, examiners and investigators act as the eyes and ears of the insurance company, determining policy claim damages and liabilities. They also offer various litigation and forensic accounting services. This segment accounts for 3.9% of total revenue, a decreasing share over the past five years. Revenue from this segment of the industry has not grown with the same pace as fees from third-party administration services. Additionally, the majority of services in this segment are performed by the industry’s nonemployer or sole-proprietor operators, as many examiners and investigators are independent agents. Consulting services for insurance Consulting services account for 3.1% of total industry revenue. The consulting segment includes any operations that are not categorized under risk management or advisory services. Specifically, this segment includes operations related to actuarial services, insurance exchanges, insurance rate-making services and insurance reporting services. In addition, industry participants help evaluate underwriting activities and policy risk exposures. This segment has declined as a share of revenue over the past five years due to the disproportionate rise of third-party administration services, but is still a stable revenue-generating segment of the industry. Other services Other industry services account for 1.1% of industry revenue. Companies offering risk management and insurance advisory services work with insurers, businesses and governments to ensure that they are not overexposed to potential liabilities or insurance coverage gaps. Industry operators also work to identify proper insurance coverage and pricing policies. Businesses, governments and other organizations use advisory and risk management services to determine insurance policy terms and coverage. Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   16 WWW.IBISWORLD.COM Products & Markets Demand Determinants Macroeconomic variables, such as growth in GDP, stability of interest rates and financial market cycles, influence demand for risk-related services. In general, higher GDP growth will result in greater demand for insurance products and insurance-related services. Alternatively, a slowing economy will lead to increased demand for services related to self-insurance. Interest rates affect overall demand for goods and services as a “cost of doing business” in downstream markets, which indirectly influences demand for risk-related services. Increased volatility of interest rates is also associated with increased demand for risk products and services, as businesses attempt to limit the effect of frequently changing interest rates. In general, substantial changes in the economic and business environment, such as rapid market changes, global competition, deregulation, complexity of product offerings and the increasing size of many organizations, all drive demand for objective, third-party specialized knowledge and services. Increased global competition and deregulation have a positive effect on the industry, requiring companies in downstream markets to constantly reduce their costs by outsourcing to industry operators. The insurance cycle The insurance cycle influences demand for insurance and insurance services. The insurance markets move through an eight- to 10-year cycle in which insurance premiums harden (rise) and soften (fall). The pricing of insurance products depends on several factors, such as the level of competition and risk uncertainty within the insurance market. In a soft market, competition intensifies and the profit margins of primary insurance carriers decline. At the bottom of the softening cycle, profitability hits a low point and the market begins to harden as primary insurance carriers try to improve their balance sheets and credit ratings. It is during this time that insurance carriers will be more likely to engage insurance service operators for advisory and outsourcing services. These services will focus on improving profit margins through non-premium pricing means, increasing the company’s financial health and future competitiveness during the next cycle of rate cutting. Companies operating with limited resources often find it difficult to compete in business environments characterized by intense competition and rising globalization. These companies will often employ advisory companies and thirdparty service providers to offer specialized knowledge that increase competitiveness through cost reduction and process optimization. Outsourcing is also a means through which companies can realize the benefits of economies of scale in the analysis of markets. During a hard market when premiums are high, companies are more likely to self-insure, which is achieved by setting aside funds in case of an emergency or establishing a captive insurer. Self-insurance can have significant cost advantages and enables a company to escape the insurance cycle. The success of a self-insurance program depends on its management. It is common for companies that set up self-insurance programs to engage industry operators for assistance in managing such programs. Captive management Captive management services are often in high demand during an economic downturn. When the economy is performing poorly, businesses can reduce risk management costs by establishing self-insurance programs, as previously mentioned. To ensure the program’s success, operators are likely to use an insurance service provider to advise on and assist in captive management. Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   17 WWW.IBISWORLD.COM Products & Markets Demand Determinants continued Major Markets Simply put, a captive insurer represents a self-insurance vehicle established to insure the risks of a parent company or clients of the parent company; a captive insurer can also be established for members of an industry association. Captive insurance can have significant cost advantages because it eliminates the profit and commissions earned by insurers and insurance brokerages, respectively, and enables the insured company to escape hard markets. The ability of a captive insurer to deliver cost advantages, however, depends on its ability to provide insurance without incurring extra expenses beyond the savings. Many companies that establish captive insurers contract insurance support companies to advise or undertake management of the captive. processing technology increases. Generally, the larger the account base, the more likely a company is to outsource administrative duties to third parties. The number of insurance policies and insurance fund accounts can be affected by the state of the economy, regulations and feasibility of insurance coverage given budget constraints. The likelihood of insurance carriers and funds outsourcing administrative duties will also affect demand for third-party administrative services. Third-party administration Third-party administration services are most sought when the underlying insurance carriers and funds industries are experiencing strong growth. As the volume of insurance plans increases, the need for administrative personnel and Claims adjusting Claims adjusting services are in high demand when the volume and size of insurance claims in primary insurance industries increase. Factors that can affect claims include the number and severity of natural disasters and other catastrophes; the crime rate; the proportion of the population in poverty, which can instigate increased robberies and, hence, demand in property and casualty areas; motor vehicle accident rates; and the number of fires that cause damage to property. Insurance funds Industry participants mainly provide third-party administrative services to insurance funds, including health and welfare funds, workers’ compensation funds and self-insurance funds. Thirdparty administrative services include claims processing, consulting services for insurance funds and other administrative services. According to estimates based on the most recent data available from the US Census Bureau, demand from insurance funds is estimated to account for 92.5% of industry revenue in 2019. Within the insurance funds segments include property and casualty insurers, life and health insurers, as well as reinsurers. Industry participants that provide third-party administration services to direct insurance carriers, such as property and casualty (P&C) insurers have benefited from increased specialization in insurance markets. Increased specialization by insurers has resulted in some outsourcing of claims adjustment, investigation and settlement services to third-party service providers, albeit to a smaller degree than for separately organized insurance and benefits funds. Industry participants that provide advisory services, loss prevention services and additional research and investigation activities for P&C insurance carriers have decreased as a share of industry revenue. Health and life insurers, another notable market, have exhibited relatively Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   18 WWW.IBISWORLD.COM Products & Markets Major Markets continued Major market segmentation (2019) 2.7% Pension funds 4.8% Other Total $256.3bn International Trade 92.5% Insurance funds SOURCE: WWW.IBISWORLD.COM strong growth in recent years, in line with changing demographics and higher healthcare costs, which are being passed on to consumers. Account volumes in these areas, along with life insurance, have all exhibited growth over the past five years. Over the next five years, this segment is expected to grow further because health insurers will experience new cost pressures as the Patient Protection and Affordable Care Act is implemented. Reinsurance carriers primarily use risk consulting, advisory and other insurance-related services. Despite the penetration of insurance service operators into this market, the relatively small size of the reinsurance industry means this segment accounts for a negligible percentage of total market demand. Pension funds Pension funds exhibited strong growth in terms of fund inflows and total assets for much of the past five years, driving demand for administration services. The administrative burden of pension funds is expected to remain robust as will demand from this market. IBISWorld estimates pension funds account for 2.7% of total market demand. Exports and imports are not applicable to the Third-Party Administrators and Insurance Claims Adjusters industry. Several US risk consultancy and insurance advisory operators provide industry services to foreign clientele, including governments, businesses and insurance companies. For more information on foreign operations, refer to the Industry Globalization section of this report. Other Other services offered by this industry include financial management and consulting services, commissions from insurance and brokerage and agency services and various miscellaneous fees associated with third-party administration. These additional services are anticipated to comprise 4.8% of industry revenue in 2019. Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   19 WWW.IBISWORLD.COM Products & Markets Business Locations 2019 West New England AK 0.2 Great Lakes WA ND MT 2.0 Rocky Mountains ID OR 1.0 West NV 1.0 2.2 SD 0.4 WY 0.5 MN 0.3 0.5 Plains 1.0 UT CO 1.3 KY 1.1 9 OK 1.2 NC 2.5 TN AZ NM 2.3 0.5 Southwest TX 7.4 AR 0.8 SC Southeast MS AL 1.3 8 0.3 1.8 9.4 7 WV VA 1.8 1.2 1.9 CA West 2.8 MO KS 1.9 OH 1.8 6 4.8 IN 4.2 0.8 PA 3.1 IL 0.5 1 2 3 NY 6.3 5 4 MI 1.6 IA NE 0.2 WI ME MidAtlantic 1.3 GA 2.8 0.7 LA 1.7 FL 11.4 Establishments (%) HI 0.4 Less than 3% 3% to less than 10% 10% to less than 20% 20% or more Additional States (as marked on map) 1 VT 2 NH 3 MA 4 RI 5 CT 6 NJ 7 DE 8 MD 0.2 1.4 0.6 3.2 2.4 0.2 0.5 1.5 9 DC 0.2 SOURCE: WWW.IBISWORLD.COM Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   20 WWW.IBISWORLD.COM Products & Markets Southeast The Southeast is expected to account for 27.5% of total industry establishments. This region is the largest insurance market in the United States because it incurs a proportionately high share of insured losses due to its exposure to hurricanes and other inclement weather. Given the high proportion of establishments related to the claims adjusting sector, there is a high concentration of claims adjusters, appraisers, examiners and investigators, as well as the highest level of nonemployers and sole proprietors in the industry. The presence of Florida (11.3%) in the region, the state with the industry’s highest concentration of establishments, also contributes to the prominence of the region. Mid-Atlantic The Mid-Atlantic region is expected to account for 16.2% of total industry establishments. The region’s prominence is due to its substantial share of the US population. The states in the region with the Distribution of establishments vs. population 30 20 10 Southwest Southeast Plains New England Rocky Mountains Establishments Mid-Atlantic Great Lakes 0 West The geographical distribution of industry establishments is similar to the distribution of finance and insurance establishments overall. The spread varies slightly among the three main industry sectors: claims adjusting, third-party administration of insurance and pension funds and all other insurance-related activities. In general, it is more important for the claims adjusting sector to be dispersed according to population and client trends because claims adjusters, appraisers, examiners and investigators act as the eyes and ears of the insurance company in determining policy claim damages and liability. Similarly, risk managers and consultants are concentrated near large financial or corporate centers because these operators also benefit from direct client contact. In contrast, third-party administration services do not need to interact with consumers or insurance operators to conduct daily operations. % Business Locations Population SOURCE: WWW.IBISWORLD.COM highest concentration of industry establishments are New York (6.3%) and Pennsylvania (4.8%). This region has a large portion of third-party administrators of insurance and pension funds due to the high concentration of finance and insurance specialists and administrators in New York. West The West accounts for 13.9% of total industry establishments, the majority of which are related to third-party administrative services. In fact, California is home to 9.4% of third-party administrators in the United States; these medium-sized to large operators service the significant number of California workers’ compensation funds, pension funds and health and welfare funds. Other Other important clusters of industry establishments are in the Southwest and Great Lakes regions, which are expected to account for 11.4% and 13.5% of industry establishments, respectively. The Southwest accounts for 11.4% of the US population while the Great Lakes are home to 13.5% of the US population. Provided to: University of Tampa (2133789824) | 21 August 2019 WWW.IBISWORLD.COM Third-Party Administrators & Insurance Claims Adjusters in the US July 2019   21 Competitive Landscape Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization Market Share Concentration Level Concentration in this industry is L ow Key Success Factors IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are: The Third-Party Administrators and Insurance Claims Adjusters industry has a low level of concentration. The top four companies are estimated to account for less than 5.0% of industry revenue in 2019; based on latest data, 93.3% of industry operators are non-employers, meaning there is a large proportion of sole proprietorships and small businesses relative to large companies. The industry can be separated into three main sectors: claims adjusting, third-party administration of insurance and pension funds and all other insurance-related activities. The third-party administrative services compose the largest industry players while the other segments are dominated by sole proprietorships. Risk managers and insurance consultants benefit from the economies of scale of global financial models and analytics. In contrast, claims adjusters, appraisers, examiners and investigators need strong knowledge of local markets since these companies make determinations of damage and liability related to insurance policy coverage and claims at a local level. Access to highly skilled workforce Attaining highly qualified and specialized personnel is particularly important in areas like risk assessment, consulting and actuarial services. therefore be able to analyze risk from multiple perspectives. Undertaking technical research and development Most of the products and services offered in the provision of risk-related advice require in-depth research and modeling. Ability to vary services to suit different needs Risk has become a part of the agenda of nearly all boards of directors. Consultants in this industry must Cost Structure Benchmarks The cost structure of individual companies in the Third-Party Administrators and Insurance Claims Adjusters industry varies significantly depending upon the company’s size, geographic location and product and service mix. To remain competitive, industry operators continuously invest in professional talent, new technologies and process improvements. Like other industries in the insurance sector, the industry’s cost structure is subject to a Degree of globalization in the company Some degree of global presence is particularly important for enterprises operating in consulting and risk assessment, where clients often have both a local and global presence. Automation – reduces costs, particularly those associated with labor Automated functions can significantly decrease labor costs. Such cost efficiencies are particularly important for third-party administration enterprises because these entities’ services are labor intensive. moderate degree of volatility because of the varying contract and fee structures from primary insurance and retirementplan industries. Wages Wages and other forms of compensation incur the largest expense for industry operators. Total wages are estimated to account for 8.4% of industry revenue in 2019, falling slightly from 8.6% in 2014. However, this small decline does not Provided to: University of Tampa (2133789824) | 21 August 2019 WWW.IBISWORLD.COM Third-Party Administrators & Insurance Claims Adjusters in the US July 2019   22 Competitive Landscape highlight the precipitous decline in wages’ share of revenue over the past two decades. In prior periods, the dominance of nonemployers led most earned revenue to go toward paying the owner of the enterprise. As global industry operators have emerged and generated more revenue, wages’ average share of revenue has declined. Over the next five years, total wages as a share of revenue are projected to stabilize, as demand for industry services normalizes and companies hire at a decelerated rate. Purchases In 2019, purchases are estimated to account for 2.5% of industry revenue and have increased slightly during the period, from 2.2% in 2014. This segment primarily consists of payments paid to contract employees. Profit Profit is measured as earnings before interest and taxes. The average profit margin for the Third-Party Administrators and Claims Adjusters industry is estimated to be 16.9% of industry revenue in 2019, up from 13.0% in 2014. Profit margins differ significantly among operators depending upon the number of client engagements during a year, the possibility that clients will cancel an engagement and other operator-specific factors. Clearly, demand for services also affects revenue and profit in a given year. For example, large operators such as Sedgwick Claims Management and IAS Claim Services that provide a wide range of claims processing, employee-benefit plan administration and related insurance services grew their profit Sector vs. Industry Costs Average Costs of all Industries in sector (2019) Industry Costs (2019) 100 80 Percentage of revenue Cost Structure Benchmarks continued 60 1.5 1.4 17.4 16.9 13.1 8.4 2.5 13.8 1.4 1.6 1.6 40 20 1.6 n Profit n Wages n Purchases n Depreciation n Marketing n Rent & Utilities n Other 67.6 51.2 0 SOURCE: WWW.IBISWORLD.COM Provided to: University of Tampa (2133789824) | 21 August 2019 WWW.IBISWORLD.COM Third-Party Administrators & Insurance Claims Adjusters in the US July 2019   23 Competitive Landscape Cost Structure Benchmarks continued margins over the past five years due to growing demand in these sectors. Growth in underlying demand from downstream industries is expected to contribute to greater profitability during the current period and will enable profit margins to rise during the outlook period as well. Depreciation Depreciation is anticipated to account for 1.4% of industry revenue. Industry operators incur depreciation costs through ownership of office space and furniture. Depreciation costs are limited since industry operators do not require specialized equipment and do not need to make significant ongoing capital investments to provide services. Level & Trend  ompetition C in this industry is Highand the trend is I ncreasing Utilities Utility costs, which are not a significant cost component for industry operators, are estimated to account for 0.1% of industry revenue in 2019. Rent Rent costs are estimated to account for 1.5% of industry revenue in 2019. On Other Other service costs, such as administrative expenses, represent 67.9% of industry revenue. These costs are associated with business operations and other activities that are not directly related to providing industry services. These costs include general support, employee benefit plans, payments to third-party contractors for specialized services and expert opinions, legal costs, pension costs and travel and entertainment expenses. These costs vary from operator to operator. This segment also includes expenses incurred to hire third-party professionals and consultants possessing specialized skills for specific projects. Other service costs as a portion of total revenue has remained steady during the five-year period. Like any consulting or administrative service, to be competitive in the ThirdParty Administrators and Insurance Claims Adjusters industry, industry operators must deliver significant value to clients. Downstream clients, such as insurance companies, pension funds and corporate self-insurance programs will only employ industry operators if operators will increase the competitiveness and profitability of their clients beyond what these clients can implement themselves. With cost reduction remaining a major concern for industry operators, the price of industry services is key in determining a company’s choice of service company, so industry participants are forced to be compete based on price. Industry operators are further differentiated based on technical expertise, customization and relationship management. Since companies engage insurance service providers to gain access to specialized knowledge and skills, technical expertise is a critical competitive factor. Further, the needs of companies that employ insurance support companies vary considerably, so customization in services Marketing Marketing, which includes advertising and promotional campaigns, is anticipated to account for 1.6% of industry revenue in 2019. Services in this industry are relatively commoditized. As a result, to alleviate competitive pricing pressures, industry operators invest in promotional and advertising services to differentiate themselves. Basis of Competition average, each industry company in this industry operates a single location, which limits overall rent expenses for the industry. Provided to: University of Tampa (2133789824) | 21 August 2019 WWW.IBISWORLD.COM Third-Party Administrators & Insurance Claims Adjusters in the US July 2019   24 Competitive Landscape Basis of Competition continued is a powerful competitive weapon. Companies that offer customized solutions are thought to be more effective because customization implies greater expertise. In addition, a company must be able to maintain ongoing relationships with its clients. As operators establish strong customer relationships, clients are less likely to switch to other providers. Effective relationship management also ensures that responsibilities and expectations are clearly outlined, limiting the potential for client dissatisfaction. A large proportion of industry operators also compete within the insurance brokerage segment of the industry. Competition within this segment stems from direct insurance and reinsurance carriers that market and service their insurance products without any assistance from brokerages and agencies. Larger insurance brokerage companies offer clients extensive lines of insurance-related services, including a broad range of advisory and outsourcing services. These companies have a competitive advantage over traditional insurance service providers that do not offer insurance brokerage and agency Barriers to Entry Barriers to entry vary by segment within the Third-Party Administrators and Insurance Claims industry, but are generally moderate. The specialist areas dominated by risk management consulting and insurance brokerage have higher barriers to entry given their global prominence. Alternatively, barriers for claims adjusting enterprises are often much lower, limited to building a client base and acquiring business. Competition in the Third-Party Administrators and Insurance Claims Adjusters industry is isolated within each segment. That is, claims adjusters compete with other claims adjusters, risk management consultants compete with each other, and so on. Level & Trend  arriers to Entry B in this industry are Mediumand S  teady services; brokerage companies have a large established customer base to which they can up-sell additional insurance services. In addition, brokerage companies are better positioned to customize advisory and outsourcing services for clients. To be highly competitive in this industry, smaller operators may need to provide insurance brokerage services that complement the provision of other insurance-related services. External competition is dependent on the value-add of outsourcing to thirdparty providers, as companies within insurance and financial sectors can internalize the operations of third-party administrators. The threat of clients internalizing their own operations leads to some level of price competition. Low concentration of operators further intensifies price competition. Low concentration in the industry is reflected in that the top four industry participants account for less than 5.0% of total industry revenue, meaning that no one company has significant power to set prices. Nonetheless, the value of industry services is the primary differentiator between operators. Barriers to Entry checklist Competition Concentration Life Cycle Stage Capital Intensity Technology Change Regulation and Policy Industry Assistance High Low Mature Medium Medium Medium None SOURCE: WWW.IBISWORLD.COM Furthermore, most enterprises compete on a local level, with only a very small proportion of businesses having more than one establishment. Due to this low level of concentration, an enterprise’s market Provided to: University of Tampa (2133789824) | 21 August 2019 WWW.IBISWORLD.COM Third-Party Administrators & Insurance Claims Adjusters in the US July 2019   25 Competitive Landscape Barriers to Entry continued influence is often limited to its primary segments, creating opportunities for new players to enter the industry by targeting an underserved locality or service line. Industry participants must comply with regulatory requirements, which are set on an individual state basis. These requirements are set for the insurance industry and restrict access to new entrants. Certain activities may also be regulated under investment, securities and futures licensing authorities. Activity levels in this industry rise and fall with demand in downstream markets. The underlying industries where demand is generated are often characterized by overcapacity, with a large number of players competing fiercely for market share; therefore, new entrants must quickly build a solid customer base to recoup start-up costs, cover various fixed costs and buffer against changes in the health of the underlying industries. Building a solid client base can be time and capital intensive – even with the necessary resources. Incumbents in this industry place considerable emphasis on client relationship management, enabling insurance service providers to deliver higher-quality services and guard against clients leaving. The significant switching costs for clients, means industry incumbents benefit from a reasonably high level of customer loyalty. Switching costs vary according to product line but are usually moderate for the simpler advisory services and high for third-party administration services, further making entry difficult for new operators. To provide high-quality insurance services and retain clients, a new entrant must attract highly skilled and qualified personnel, particularly in the areas of risk assessment, actuarial duties and consulting. Some providers may also require specialists in a niche field, such as marine or aviation risk. Insurance service providers compete with many other companies in the insurance and finance sector for qualified and experienced personnel, which can make it difficult to find, secure and retain suitable employees. Therefore, the difficulty of hiring qualified personnel or acquiring the necessary qualifications further increases industry barriers to entry. Industry Globalization The Third-Party Administrators and Insurance Claims Adjusters industry is subject to a low level of globalization. This level is expected to increase over the next five years, though, due to globalization within the risk management, insurance advisory and third-party administration segment of the industry. This differs drastically from the claims adjustment segment, which is categorized by a high level of fragmentation and a low level of employer operators. Industry participants offering claims adjustment services benefit from strong local market knowledge and connections since these operators use them to determine costs and liabilities associated with auto accidents or homeownership claims. The four largest industry operators, Sedgwick Claims Management, IAS Claim Services, Crawford and Company and York Risk, conduct vast global operations; Sedgwick operates in 65 countries and Crawford has offices in 70. Specialized insurance service companies, such as risk management or insurance advisory companies, are increasingly globalized due to increasing interconnectedness of the financial markets and demand in foreign markets. Level & Trend  lobalization G in this industry is Lowand the trend is I ncreasing Provided to: University of Tampa (2133789824) | 21 August 2019 WWW.IBISWORLD.COM Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   26 Major Companies There are no Major Players in this industry | Other Companies Other Companies The Third-Party Administrators and Insurance Claims Adjusters industry is highly fragmented, with no company accounting for more than 5.0% of industry revenue in 2019. The industry is made up of a diverse set of companies that specialize in claims adjusting, third-party administration and advisory and consulting services. It does not include insurance agencies or brokers. The companies listed below are some of the largest and are representative of other players in the Third-Party Administrators & Insurance Claims Adjusters industry. Other Company Performance Sedgwick Claims Management Services Ltd (Sedgwick) was established in 1969 and is one of the largest third-party administrators (TPA) and claims adjustment service providers. The Memphis, TN-headquartered company employs an estimated 21,000 employees and is located across 65 countries worldwide. Sedgwick specializes in administering and managing claims for compensation, liability, property, disability and absence management benefits and insurance programs. The company also specializes in marine liability claims and operates several wholly owned subsidiaries, such as EFI Global that provides full-service engineering, fire investigation, environmental, health and safety, and specialty consulting services to the private and public sectors. In 2019, IBISWorld estimates that Sedgwick will generate $2.8 billion in industryrelevant revenue. Crawford & Company (Crawford) is a large independent provider of claims management solutions, providing services to risk management and insurance companies, as well as self-insured employers. Crawford is a global company, based in Atlanta, GA, with more than 700 locations in 63 countries. The company specializes in consulting services regarding property and casualty claims management, workers compensation claims, medical management and legal settlement administration. In 2019, IBISWorld estimates that Crawford & Company will generate $1.3 billion in industry-relevant revenue. York Risk (York) offers risk management, claims administration, managed care and absence management to corporations, the insurance industry and public entities. The company was established 55 years ago and is currently based in Jersey City, New Jersey. The company’s claims adjustment unit specializes in providing services for workers’ compensation and property and casualty insurance providers. In addition, York, provides case management, medical bill review, utilization review, and consulting for return to work programs. In 2019, IBISWorld estimates that York Risk will generate $837.8 million in industryrelevant revenue. Sedgwick Claims Management Services Ltd Market Share: 1.1% Other Company Performance Crawford & Company Market Share: 0.4% Other Company Performance York Risk Market Share: 0.3% Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   27 WWW.IBISWORLD.COM Major Companies Other Company Performance IAS Claim Services Market Share: 0.1% IAS Claim Services (IAS) is a San Antonio, Texas-based company that was established in 1984. IAS is one of the largest independent insurance adjusting firms, providing a range of property, casualty and liability claim services. In addition, the company provides third-party administrative and specialty large loss services. IAS operates locations 121 locations throughout the United States. Through its IAS Claim Services unit, known as CatCREW, within 24 hours the company is able to deploy hundreds of personal and commercial lines adjusters following catastrophic events. In 2019, IBISWorld estimates the company will generate $224.8 million in 2019. Provided to: University of Tampa (2133789824) | 21 August 2019 WWW.IBISWORLD.COM Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   28 Operating Conditions Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance Capital Intensity Level The level of capital intensity is M  edium The Third-Party Administrators and Insurance Claims Adjusters industry undertakes labor-intensive administrative and processing functions on behalf of insurers and insurance funds. It also provides clients with advisory services, for which the primary input is human capital. Most individuals employed in the industry have undergone significant training, in addition to possessing other qualifications. Insurance consultants provide a broad spectrum of services requiring expertise in multiple disciplines, such as risk identification, estimation and mitigation; knowledge of insurance lines and client specifics (e.g. operations, industries and fields of business); actuarial analysis; and understanding Capital Intensity Capital units per labor unit 0.5 0.4 0.3 0.2 0.1 0.0 Economy Finance and Insurance Dotted line shows a high level of capital intensity Third-Party Administrators & Insurance Claims Adjusters SOURCE: WWW.IBISWORLD.COM regulatory and legal environments. Effectively mastering these various disciplines requires extensive education Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   29 WWW.IBISWORLD.COM Operating Conditions Capital Intensity continued and training and, consequently, demands a high wage. Insurance service companies identify individual risks to provide advice on risk exposure by structuring programs for retaining, mitigating, financing and transferring identified risks in configurations that vary according to the risk profiles, requirements and preferences of a specific client. Due to the company-specific and analytical nature of these tasks, the provision of risk-related services is very labor intensive, although aided by technology. More advanced software platforms have reduced the time and complexity burden of several industry-specific work tasks, which has ultimately increased productivity and reduced the industry’s reliance on labor. As a result, there has a decline in wages as a proportion of revenue over the past five years. Nonemployer companies, which account for an estimated 93.3% of establishments, have a very low level of capital investment because many of these sole operators work from a very small or mobile office (i.e. car) and do not require extensive, complex information technology infrastructures. However, this industry does require some investment in capital, with an average company spending $0.17 on capital for every dollar spent on labor. Technology and Systems Advancements in information technologies have had a significant effect on the Third-Party Administrators and Insurance Claims Adjusters industry. Providers of risk-related services have rapidly embraced technological advancements over the past decade, which has enabled them to expand the horizon of their specialized knowledge from local or regional to global. Significant improvements in communications and database networks have been vital in connecting industry professionals with each other and clients and in improving service quality. Many large participants also have operations overseas and draw from knowledge gained in other markets to help domestic clients. The speed and ease with which this knowledge transfer occurs highlights the extent of progress made in communications technology. Risk consultants use internet-based tools that give clients real-time access to all elements of their very complex risk management programs. This technology has enabled clients to tap into databases that provide information on a range of business, financial and risk subjects, such as the insurance and regulatory environments worldwide. Industry participants have also upgraded the transactional side of their services by installing technology to improve the collection and analysis of pricing and coverage information in global markets. Substituting paper-based methods of conducting insurance transactions with electronic processing has resulted in enhanced accuracy and efficiency. Improvement in technology has enhanced the data handling and retrieval capabilities of risk consultants, along with the ability to conduct more specific research on behalf of clients. For third-party administrative operators, investment has focused on implementing technology that permits clients to have real-time access to their accounts and reduce labor intensity. Nonetheless, labor intensity remains high. Level The level of technology change is M  edium Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   30 WWW.IBISWORLD.COM Operating Conditions Revenue Volatility Level The level of volatility is L ow Regulation and Policy Level & Trend  he level of T Regulation is Mediumand the trend is S  teady The Third-Party Administrators and Insurance Claims Adjusters industry is characterized by low revenue volatility over the five years to 2019. Unlike the primary insurance market, industry revenue is relatively stable because participants do not rely on investment income. Instead, industry revenue is generated by fees associated with claims adjusting, third-party administration and other insurance related services. As a result, industry revenue often fluctuates with insurance cycles, catastrophes and general economic activity. Industry growth is also influenced by the outsourcing activity of insurers since participants provide administrative and operational support for primary insurance companies. As the industry becomes more saturated, revenue is expected to closely follow fluctuations within the primary insurance market. Laws and regulations for risk and insurance services vary from state to state. Every state in the country requires insurance consultants, managing general agents and third-party administrators to have an individual or company license from the relevant governmental agency or self-regulatory organization. Certain activities may also be regulated under investment, securities and futures licensing authorities. The level of regulation in this industry is lighter than for insurance carriers and funds since providers of claims, funds administration and other insurance services do not have access to, or rights over capital from premiums, investments or fund inflows, making regular financial reporting and capital adequacy measures unnecessary. The laws of most US states give regulatory authorities broad discretion in granting, renewing and revoking licenses to conduct business in the state. Under the licensing requirements of some states, industry participants are required to operate through a local corporation. Others only issue licenses to individual residents or locally owned business entities. Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   31 WWW.IBISWORLD.COM Operating Conditions Industry Assistance Level & Trend  he level of T The Third-Party Administrators and Insurance Claims Adjusters industry does not receive government assistance, such as tariff protection or subsidies. Industry Assistance is N  oneand the trend is S  teady Provided to: University of Tampa (2133789824) | 21 August 2019 WWW.IBISWORLD.COM Third-Party Administrators & Insurance Claims Adjusters in the US July 2019   32 Key Statistics Industry Data 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Sector Rank Economy Rank Industry Revenue Value Added Establish($m) ($m) ments 125,367.7 31,564.9 129,141 138,884.2 32,658.5 130,367 182,969.5 40,442.1 131,608 194,896.4 46,753.0 128,384 203,616.7 46,952.6 130,920 208,471.8 51,879.1 131,569 222,463.2 56,047.8 129,501 239,981.1 64,755.4 133,465 248,968.6 66,732.0 135,854 256,271.9 68,555.2 137,944 262,422.0 70,148.4 139,841 267,503.8 71,409.9 141,962 272,213.3 72,616.9 143,960 276,922.5 73,864.1 146,082 282,111.1 75,269.0 148,699 8/31 14/31 4/31 37/694 46/694 55/694 Annual Change 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Sector Rank Economy Rank Key Ratios 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Sector Rank Economy Rank Industry EstablishRevenue Value Added ments (%) (%) (%) 10.8 3.5 0.9 31.7 23.8 1.0 6.5 15.6 -2.4 4.5 0.4 2.0 2.4 10.5 0.5 6.7 8.0 -1.6 7.9 15.5 3.1 3.7 3.1 1.8 2.9 2.7 1.5 2.4 2.3 1.4 1.9 1.8 1.5 1.8 1.7 1.4 1.7 1.7 1.5 1.9 1.9 1.8 13/31 15/31 14/31 130/694 199/694 249/694 IVA/Revenue (%) 25.18 23.51 22.10 23.99 23.06 24.89 25.19 26.98 26.80 26.75 26.73 26.69 26.68 26.67 26.68 24/31 393/694 Imports/ Demand (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Enterprises Employment 125,730 322,509 127,083 325,528 128,577 328,751 125,350 336,150 127,687 382,180 128,010 397,433 126,193 397,525 129,655 410,151 131,803 425,890 133,698 438,101 135,430 449,349 137,430 459,805 139,317 468,425 141,335 476,899 143,846 486,484 4/31 7/31 55/694 83/694 Exports ---------------N/A N/A Imports ---------------N/A N/A Wages ($m) 14,891.1 15,298.0 15,375.4 15,569.6 17,428.2 18,315.2 18,896.5 19,638.9 20,952.8 21,556.1 22,102.3 22,599.4 23,017.9 23,430.6 23,895.2 12/31 79/694 Enterprises Employment (%) (%) 1.1 0.9 1.2 1.0 -2.5 2.3 1.9 13.7 0.3 4.0 -1.4 0.0 2.7 3.2 1.7 3.8 1.4 2.9 1.3 2.6 1.5 2.3 1.4 1.9 1.4 1.8 1.8 2.0 14/31 12/31 255/694 113/694 Exports (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Imports (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Wages (%) 2.7 0.5 1.3 11.9 5.1 3.2 3.9 6.7 2.9 2.5 2.2 1.9 1.8 2.0 12/31 122/694 Exports/ Revenue (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Revenue per Employee ($’000) 388.73 426.64 556.56 579.79 532.78 524.55 559.62 585.10 584.58 584.96 584.00 581.78 581.12 580.67 579.90 20/31 173/694 Wages/Revenue (%) 11.88 11.01 8.40 7.99 8.56 8.79 8.49 8.18 8.42 8.41 8.42 8.45 8.46 8.46 8.47 20/31 582/694 Employees per Est. 2.50 2.50 2.50 2.62 2.92 3.02 3.07 3.07 3.13 3.18 3.21 3.24 3.25 3.26 3.27 25/31 552/694 Figures are in inflation-adjusted 2019 dollars. Rank refers to 2019 data. Provided to: University of Tampa (2133789824) | 21 August 2019 Number of people with Domestic private health insurance Demand (mil) N/A 196.2 N/A 197.3 N/A 198.8 N/A 201.0 N/A 208.6 N/A 214.2 N/A 216.2 N/A 217.0 N/A 220.2 N/A 222.1 N/A 222.7 N/A 222.5 N/A 222.6 N/A 222.9 N/A 223.5 N/A N/A N/A N/A Domestic Number of people with Demand private health insurance (%) (%) N/A 0.6 N/A 0.8 N/A 1.1 N/A 3.8 N/A 2.7 N/A 0.9 N/A 0.4 N/A 1.5 N/A 0.9 N/A 0.3 N/A -0.1 N/A 0.0 N/A 0.1 N/A 0.3 N/A N/A N/A N/A Average Wage ($) 46,172.66 46,994.42 46,769.14 46,317.42 45,602.07 46,083.74 47,535.38 47,882.12 49,197.68 49,203.49 49,187.38 49,149.97 49,138.92 49,131.16 49,118.16 31/31 393/694 Share of the Economy (%) 0.20 0.21 0.25 0.28 0.28 0.30 0.32 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 14/31 46/694 SOURCE: WWW.IBISWORLD.COM WWW.IBISWORLD.COM Third-Party Administrators & Insurance Claims Adjusters in the US July 2019   Industry Financial Ratios Apr 2014 Mar 2015 Apr 2015 Mar 2016 Apr 2016 Mar 2017 Apr 2017 Mar 2018 Apr 2017 - Mar 2018 by company revenue Small Medium Large ($50m) Liquidity Ratios Current Ratio Quick Ratio Sales / Receivables (Trade Receivables Turnover) Days’ Receivables Cost of Sales / Inventory (Inventory Turnover) Days’ Inventory Cost of Sales / Payables (Payables Turnover) Days’ Payables Sales / Working Capital 1.3 1.1 1.1 1.1 1.4 1.1 1.4 1.1 1.4 1.3 1.3 1.1 1.3 1.0 20.0 19.7 20.0 18.9 90.3 15.0 16.7 18.3 n/a n/a n/a n/a 20.9 18.5 n/a n/a n/a n/a 29.6 18.3 n/a n/a n/a n/a 23.5 19.3 n/a n/a n/a n/a 19.6 4.0 n/a n/a n/a n/a 16.5 24.3 n/a n/a n/a n/a 16.5 21.9 n/a n/a n/a n/a 32.4 10.0 24.5 8.5 13.0 10.7 30.4 8.4 2.3 6.6 n/a 10.2 n/a n/a n/a 0.4 2.7 14.6 0.4 3.6 12.5 0.2 3.5 16.5 0.3 2.4 13.3 0.3 2.9 2.2 0.2 1.5 23.9 0.5 2.3 19.6 40.9 12.2 37.0 1.8 54.9 15.1 30.3 1.4 36.8 8.8 47.5 1.7 35.3 12.5 47.7 1.5 31.7 13.0 65.9 1.0 34.2 13.0 45.7 0.9 65.1 8.3 25.0 2.5 n/a 8.9 8.6 4.2 3.7 14.3 n/a 9.5 9.8 3.7 6.7 20.2 n/a 10.6 10.9 3.7 2.6 9.1 n/a 10.4 12.1 4.1 6.0 12.2 n/a 15.2 14.8 3.8 2.1 4.7 n/a 15.0 13.8 5.6 14.0 40.3 n/a 7.6 6.9 3.0 3.0 5.4 27.0 18.3 0.1 7.2 52.6 16.5 18.0 12.9 100.0 2,791.1 29.3 16.8 0.1 5.5 51.6 15.5 14.8 18.1 100.0 4,414.0 30.1 16.3 0.2 8.2 54.9 13.3 14.6 17.2 100.0 5,278.0 29.4 16.6 0.1 6.9 53.0 15.6 15.9 15.5 100.0 3,975.2 32.1 18.3 n/a 7.3 57.8 21.2 12.5 8.6 100.0 246.5 27.3 14.5 0.2 4.5 46.6 9.0 19.4 25.1 100.0 1,679.2 26.7 16.6 n/a 10.8 54.1 14.9 17.6 13.3 100.0 2,049.5 6.4 2.5 10.2 0.5 23.3 42.9 15.0 0.6 8.8 32.6 2,791.1 5.8 2.4 8.2 0.8 27.4 44.6 16.6 0.9 10.6 27.3 4,414.0 9.2 1.7 10.9 0.7 22.7 45.2 12.9 0.7 10.0 31.1 5,278.0 6.2 2.2 7.0 0.5 29.0 44.9 17.2 0.6 8.1 29.2 3,975.2 9.8 3.0 4.3 0.3 32.4 49.8 27.0 0.2 8.3 14.7 246.5 3.8 1.6 8.2 0.9 27.6 42.0 6.0 0.9 7.8 43.3 1,679.2 1.6 1.4 11.4 0.4 23.0 38.0 15.3 0.9 8.6 37.2 2,049.5 123 155 135 138 63 51 24 Coverage Ratios Earnings Before Interest & Taxes (EBIT) / Interest Net Profit + Dep., Depletion, Amort. / Current Maturities LT Debt Leverage Ratios Fixed Assets / Net Worth Debt / Net Worth Tangible Net Worth Operating Ratios Profit before Taxes / Net Worth, % Profit before Taxes / Total Assets, % Sales / Net Fixed Assets Sales / Total Assets (Asset Turnover) Cash Flow & Debt Service Ratios (% of sales) Cash from Trading Cash after Operations Net Cash after Operations Cash after Debt Amortization Debt Service P&I Coverage Interest Coverage (Operating Cash) Assets, % Cash & Equivalents Trade Receivables (net) Inventory All Other Current Assets Total Current Assets Fixed Assets (net) Intangibles (net) All Other Non-Current Assets Total Assets Total Assets ($m) Liabilities, % Notes Payable-Short Term Current Maturities L/T/D Trade Payables Income Taxes Payable All Other Current Liabilities Total Current Liabilities Long Term Debt Deferred Taxes All Other Non-Current Liabilities Net Worth Total Liabilities & Net Worth ($m) Maximum Number of Statements Used 33 Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more than 260,000 statements of member financial institutions’ borrowers and prospects. Note: For a full description of the ratios refer to the Key Statistics chapter online. Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   34 WWW.IBISWORLD.COM Jargon & Glossary Industry Jargon CLAIMS ADJUSTINGThe process of investigating, appraising and settling insurance claims to determine the extent of a company’s liability. SOFT MARKETA period of falling insurance prices as the supply of insurance is greater than demand, which often leads to increased price competition. HARD MARKETA period of increasing insurance prices as demand for insurance overshoots supply. The supply of insurance depends on insurers’ capital position. UNINSURED RATEThe number of people above the age of 18 that do not have health insurance divided by the total number of people above 18 years of age. INSURANCE SERVICE PROVIDERA company that offers insurance services including claim adjustment, third-party insurance fund administration, claims processing administration and actuarial, consultancy and advisory services. IBISWorld Glossary BARRIERS TO ENTRYHigh barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry. CAPITAL INTENSITYCompares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor. CONSTANT PRICESThe dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator. DOMESTIC DEMANDSpending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports. EMPLOYMENTThe number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry. ENTERPRISEA division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control. ESTABLISHMENTThe smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise. IMPORTSTotal value of industry goods and services brought in from foreign countries to be sold in the United States. INDUSTRY CONCENTRATIONAn indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%. INDUSTRY REVENUEThe total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded. INDUSTRY VALUE ADDED (IVA)The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP, or profit plus wages and depreciation. INTERNATIONAL TRADEThe level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%. LIFE CYCLEAll industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services. EXPORTSTotal value of industry goods and services sold by US companies to customers abroad. Provided to: University of Tampa (2133789824) | 21 August 2019 Third-Party Administrators & Insurance Claims Adjusters in the USJuly 2019   35 WWW.IBISWORLD.COM Jargon & Glossary IBISWorld Glossary continued NONEMPLOYING ESTABLISHMENTBusinesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals. WAGESThe gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure. PROFITIBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax. VOLATILITYThe level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%. Provided to: University of Tampa (2133789824) | 21 August 2019 www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com At IBISWorld we know that industry intelligence is more than assembling facts It is combining data with analysis to answer the questions that successful businesses ask Identify high growth, emerging & shrinking markets Arm yourself with the latest industry intelligence Assess competitive threats from existing & new entrants Benchmark your performance against the competition Make speedy market-ready, profit-maximizing decisions Who is IBISWorld? We are strategists, analysts, researchers, and marketers. We provide answers to information-hungry, time-poor businesses. Our goal is to provide real world answers that matter to your business in our 700 US industry reports. When tough strategic, budget, sales and marketing decisions need to be made, our suite of Industry and Risk intelligence products give you deeply-researched answers quickly. IBISWorld Membership IBISWorld offers tailored membership packages to meet your needs. Disclaimer This product has been supplied by IBISWorld Inc. (‘IBISWorld’) solely for use by its authorized licenses strictly in accordance with their license agreements with IBISWorld. IBISWorld makes no representation to any other person with regard to the completeness or accuracy of the data or information contained herein, and it accepts no responsibility and disclaims all liability (save for liability which cannot be lawfully disclaimed) for loss or damage whatsoever suffered or incurred by any other person resulting from the use of, or reliance upon, the data or information contained herein. Copyright in this publication is owned by IBISWorld Inc. The publication is sold on the basis that the ...
Purchase answer to see full attachment