Suppliers have been raising price to recoup past losses and protect profit margins from growing overhead costs
Los Angeles, CA (PRWEB) September 17, 2014
Marine insurance has a buyer power score of 3.2 out of 5, indicating that buyers have a slight edge in negotiations with suppliers. Low market share concentration and low price volatility have strengthened buyer power. Nonetheless, price growth has weakened buyer power as well. “Buyers can improve their negotiation position by locking in premium rates through long-term contracts and bundling their insurance coverage,” according to IBISWorld business research analyst Andrew Yang.
Marine insurance providers have been raising prices in response to large losses from 2011 to 2014. The effects of MV Rena, Costa Concordia and Super Storm Sandy have caused billions of dollars in losses for insurance suppliers. However, price growth has been hampered by an overabundance of suppliers, which has diluted market share concentration. Low barriers to entry have also contributed to low market share concentration. As such, buyer power has strengthened despite price growth because of intense supplier competition, which has kept price volatility low. Low price volatility allows buyers to enter into short-term contracts without substantially increasing their insurance costs in the future. Buyers are also able to leverage supplier competition to receive better premiums.
Although buyers have greater negotiation power than suppliers, buyer power has been weakened by supplier's financial risks. Suppliers have low profit levels that they are struggling to maintain because of the surplus of suppliers. Buyers will have difficulty obtaining discounts because suppliers are striving to replenish their claims reserves.
Buyers can use several strategies to improve their negotiation position. “Suppliers are often willing to maintain a fixed premium rate if a buyer is willing to commit to a long-term contract” says Yang. Buyers can protect against future price growth by keeping the rate constant. Furthermore, buyers that transport cargo or have specialty risks can bundle their cargo insurance and marine excess liability insurance with their marine insurance provider. Buyers may be able to negotiate a discount if they are a bigger account for the supplier. For more information, visit IBISWorld’s Marine Insurance procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of marine insurance, which includes hull and machinery insurance and protection and indemnity (P&I) insurance. Marine insurance provides financial protection against collision and loss or damage to a marine vessel and bodily injury and property damage from the ownership or operation of the vessel. It can also include pollution and piracy protection and other specialty liabilities. Buyers include marine transportation and services companies. Suppliers are insurance carriers and agents and brokers, which are intermediaries between insurance carriers and buyers. This report does not include inland marine insurance, cargo insurance, onshore or offshore property insurance (e.g. vessel terminals) and recreational marine 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
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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.