Los Angeles, CA (PRWEB) November 15, 2013
The market for workers' compensation insurance has a buyer power score of 3.8, representing moderately high buyer power. “The high buyer power is due mainly to the homogeneity of the product across providers,” says IBISWorld procurement analyst Dale Schmidt. “Buyers can compare service offers easily, leading to high price competition between providers.” However, this has led to low profit margins across the industry, so buyers typically cannot further negotiate lower prices. Another boost to buyer power is the lack of volatility in the industry. Workers' compensation insurance is a required purchase for virtually every business that employs workers (with some exceptions that differ by state). This has created a steady level of demand over time, which prevents sudden changes in prices.
“Base rates are set by each state's government, and providers adjust the base rate based upon a formula involving the buyer's workplace safety record over the past three years,” says Schmidt. “As a result, the easiest way for a buyer to reduce price in the future is to improve the safety of their workplace.”
Twelve states operate workers' compensation insurance funds and four (North Dakota, Ohio, Washington and Wyoming) do not allow competitors, resulting in state-run monopolies. State-run funds are not profit, so are therefore likely to undercut private suppliers on price. However, private suppliers are mostly large-scale insurance providers that provide an array of insurance products. As a result, buyers can bundle insurance products together for a lower per-product price. Major vendors in the market include American International Group Inc., the Hartford and the Travelers Companies Inc. For more information, visit IBISWorld’s Workers' Compensation procurement research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to help buyers of workers' compensation. Also known as workmens' insurance, it is a form of insurance in the event of a workplace injury, which provides the injured employee with wage replacement and medical benefits. In return, the employee relinquishes the right to sue his or her employer for negligence.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Vendor Financial Benchmarks
Buying Lead Time
Key RFP Elements
Buyer Power Factors
About IBISWorld Inc.
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