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Safe and secure

Protective service industries represent a growing market for commercial insurance

The security service industry represents more than $395 million in premium, according to data compiled by MarketStance, Middletown, Connecticut. Security guards and patrol services represent the largest niche in this market segment, accounting for $236.8 million in premium or 59.9% of the total for the segment. Security systems services (except locksmiths) is the next largest niche, with $81.3 million in premium or 20.5%, followed by investigation services ($33.6 million, 8.5%), locksmiths ($29.9 million, 7.6%) and armored car services ($13.8 million, 3.5%).

MarketStance forecasts payroll growth for the next two years to reach an annual rate of 5.4% for this industry, better than the 4.9% annual rate forecasted for all industries. This is especially important in the security industry since it is very labor intensive, with workers compensation insurance representing 48% of the total premium for this segment, followed by liability insurance at 23%. Commercial auto is the next largest line at 13%, followed by BOP premium at 9%, inland marine (4%) and property (3%).

This is an interesting marketplace, with a plethora of self-employed and small businesses that would seem to make it an ideal candidate for independent agents. However, the self-employed people involved in this area carry little or no insurance. In fact, of the nearly 116,000 businesses engaged in security services, nearly 99,000 are self-employed individuals that carry only some $24 million in insurance, or an average premium of only $245 per account. The nearly 16,000 small businesses (1 to 49 employees) are a much better target, accounting for $113.9 million in premium for an average premium in excess of $7,300.

The 1,587 middle-market businesses (50 to 999 employees) represent $155.7 million in premium for an average of more than $98,000 per account. The 117 national accounts account for $101.7 million in premium for an average of more than $869,000 per account.

California is the dominant state in this market segment. Premiums written on accounts in California total $102.8 million and 37 of the national accounts are located in the state. The next nearest states are Texas, with premiums of $32.7 million and New York, where premiums total $32.5 million.

The Rough Notes Southwest region boasts the highest annual sales growth rate forecast at 9.1%, compared with 6.4% in the West; 5.8% in the Southeast; 5.2% in the Midwest; and 4.6% in the Northeast. However, the majority of this growth in the Southwest is occurring in self-employed businesses where there is little or no premium potential. The strong sales growth in the Southwest and West reflects population shifts and market tailwinds that have made these areas attractive to carriers in recent years.

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