Price growth has been steady because of a hardening insurance market and growing demand, but has been tempered by supplier competition.
Los Angeles, CA (PRWEB) December 01, 2014
Business interruption insurance has a buyer power score of 3.3 out of 5, indicating that buyers and suppliers have equal negotiation power. According to IBISWorld analyst Kayley Freshman-Caffrey, buyer power is strengthened by low market share concentration, but weakened by a hardening insurance market and growing demand for business interruption insurance. To strengthen their negotiating power, buyers can leverage long-term contracts and bundle coverage.
Supplier competition in the business interruption insurance market has been fueled by low market share concentration. Major market suppliers include Allianz SE, American International Group Inc. and Allstate Corporation. Suppliers have been seeking to increase prices to make up for past losses (e.g. Hurricane Sandy) and low returns on investment, but have been unable to because of supplier competition, continues Freshman-Caffrey. Few regulations govern business interruption insurance and insurance agent requirements, which has allowed many suppliers to enter the market. Consequently, suppliers are competing on price to gain an advantage. Buyers can pit suppliers against each other to receive a lower price or better discounts.
Nonetheless, buyer power is weakening because of a hardening insurance market. Suppliers have been raising insurance rates to recoup past losses. Hurricane Sandy continues to have a resounding effect on suppliers. Moreover, interest rates have been historically low, which has prevented suppliers from recovering revenue. Buyer power is weakened because suppliers are less willing to negotiate when their profit margins are at risk and demand is growing for their product. US economic recovery from the Great Recession has stimulated consumers' appetites for products and services, which has caused more businesses to enter the market.
Buyers can strengthen their leveraging position through long-term contracts or bundling coverage. Suppliers are willing to provide a more favorable price if buyers reduce supplier risk. Buyers can reduce supplier risk by committing to a policy over a set number of years. Stabilizing a supplier's revenue can encourage them to provide a lower price. Buyers can also source all of their commercial insurance needs with one supplier; thus, suppliers may provide a discount if the overall insurance account is large. For more information, visit IBISWorld’s Business Interruption Insurance procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of business interruption insurance, also known as business income insurance. This insurance provides financial protection against lost income resulting from property damage. Business interruption insurance can also include coverage for income lost when the buyer is mandated by the government to close or is unable to enter and exit their property. This insurance supplements property insurance, which only covers physical damage. Thus, this report does not include property insurance or general liability insurance. Buyers are any business entity from small companies to large companies. Business interruption insurance providers are either direct insurance carriers or agents and brokers, which are third party suppliers.
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.