As part of an ongoing effort by the Bureau of Labor Statistics (BLS) program to expand Producer Price Index (PPI) coverage of the service sector of the U.S. economy, a new price index for the Insurance agencies and brokerages industry was introduced into the PPI in January 2003. This industry, NAICS 524210Insurance agencies and brokerages in the North American Industry Classification System (NAICS), appears in the monthly PPI Detailed Report and is available online through the BLS website.
The primary output of this industry is the provision of intermediary services between buyers and sellers of insurance. Both agents and brokers serve as intermediaries in the insuring process. Agents represent one or more companies to the consumer seeking coverage, while brokers represent consumers seeking coverage. The index for this industry measures price change in the commissions received by insurance agents and brokers for the sale of insurance policies.
The services for which price indexes are available include:
To track price movement for the sale of insurance, the company is asked to estimate a premium and commission for a frozen policy. This is the actual policy selected, where price-determining characteristics are held constant while the policy is priced each year. The company estimates the premium and commission using current charges applied to the characteristics of the actual policy. These price components remain unchanged until the policy is priced again the following year.
In order to hold inflation-sensitive characteristics constant, periodic adjustments will be made to account for inflation. For example, with homeowner's insurance, the dollar limit of coverage will be adjusted annually on the policy renewal date to account for changing construction costs. The assumption is that the policyholder is insuring to secure a constant flow of services from the insured property. If there is price movement affecting the cost of repair or replacement of the damaged property, the coverage limit should be adjusted to reflect this change.
Last Modified Date: July 12, 2018