Continued rising demand will boost prices in the next three years, but heavy competition among suppliers will mitigate price growth
Los Angeles, California (PRWEB) December 10, 2014
Cargo insurance has a buyer power score of 3.1 out of 5, indicating that buyers and suppliers have an equal amount of negotiating power. IBISWorld market research analyst, Kayley Freshman-Caffrey, says, "High market fragmentation and low price volatility strengthen buyer power, while moderate supply chain risks and product specialization reduce it." The cargo insurance market is highly competitive, driven by low market share concentration. Low barriers to entry and few regulations make it easy for new suppliers to enter the market. As such, suppliers use price and service quality as competitive points of differentiation. This competition has slowed price growth, aiding buyers. Major vendors in the market include FM Global, United Parcel Service Inc. and ACE Group Holdings. Moreover, price volatility is low, further strengthening buyer power. Because prices do not fluctuate drastically, buyers can choose a shorter policy length if they do not want to commit to long-term policy without worrying that average prices will change after their commitment.
At the same time, moderate supply chain risks and specialization weaken buyer power. "Suppliers have less leverage over their professional services partners and are susceptible to cost fluctuations from these partners," says Freshman-Caffrey. Buyers are at risk of having to absorb these upstream costs when they are reflected in service prices. Thus, buyers are less able to negotiate price when supply chain costs increase significantly. In addition, buyers that require more specialization in their policy will have less negotiating power because specialization reduces the pool of available suppliers, limiting the buyer's ability to choose their preferred cargo insurance provider.
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 significant loss. 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 collisions, natural disasters, theft, fumigation, improper stowage by a third party, mud and grease damage, among other perils. 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.