Los Angeles, CA (PRWEB) May 01, 2014
Cargo insurance has a buyer power score of 3.5 out of 5, indicating that buyers have more negotiating power than suppliers. Buyer power has been strengthened by high market saturation and low price volatility. Conversely, supply chain risks and product specialization have weakened buyer power over the three years to 2013. “Buyers can improve their negotiation position by leveraging their policy length and risk management,” says IBISWorld business research analyst Donna Khuu.
The cargo insurance market is highly competitive. Competition is driven by high market saturation. Low barriers to entry and few regulations have made it easy for new suppliers to enter the market. As such, suppliers are using price and service quality as competitive points of differentiation. Price competition has slowed price growth, which is favorable for buyers. Moreover, price volatility is low, strengthening buyer power. “Prices are not fluctuating drastically, which allows a buyer to choose a shorter policy length if they do not want to commit to long-term policy,” says Khuu.
Nonetheless, supply chain risks and product specialization have weakened buyer power. Suppliers have less leverage over their professional services partners and are susceptible to cost fluctuations from these partners. Buyers are at risk of absorbing these upstream costs because it costs more to perform the service. Thus, buyers are less able to negotiate price in the event that costs increase significantly. In addition, buyers that require more specialization in their policy will have decreased buyer power. There may be a limited pool of suppliers that provide the professional expertise desired.
Buyers can use several strategies to improve their negotiation position. Buyers that have a high volume of shipments can select a policy for a timeframe instead of per shipment. By guaranteeing a revenue stream for suppliers, suppliers will be more willing to charge a lower price. Moreover, buyers can engage in risk management to lower their loss risk. Suppliers will lower their rate if they are less vulnerable to a huge loss. Major vendors include FM Global, Progressive Casualty Insurance Company, Travelers Companies Inc. and United Parcel Service Inc. For more information, visit IBISWorld’s Cargo Insurance procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of cargo insurance. Buyers are freight forwarders, transportation carriers, industrial manufacturers and other companies that ship cargo. Cargo insurance provides financial protection for ocean, air and land cargo (e.g. motor truck and train) in the event of a peril. Several common perils are collisions, natural disasters, theft, fumigation, improper stowage by a third party and mud and grease damage. Suppliers of cargo insurance can be direct insurance carriers, agents and brokers and cargo transportation companies. This report does not include marine insurance, commercial property insurance and commercial auto and truck insurance.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Buying Lead Time
Key RFP Elements
Buyer Power Factors
About IBISWorld Inc.
IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.