Suppliers will continue to raise prices for buyers with more revenue due to their higher risk
Los Angeles, CA (PRWEB) February 11, 2015
Building and contents insurance has a buyer power score of 3.5 out of 5. This moderately high score indicates that buyers have more leverage over suppliers during the negotiation process. Buyers should, however, be aware of market structure risks that may negatively impact their ability to find more favorable prices. “The total cost of ownership for insurance is low, so buyers will not encounter any significant additional costs during the policy period, which aids buyer power,” says IBISWorld procurement analyst Kayley Freshman-Caffrey. “That being said, buyers should ensure that any potential fees for consultations, e-mails, phone calls and other interactions with the supplier are either covered in the premium price or explicitly detailed prior to signing the contract.”
Low market share concentration, meanwhile, encourages competition among building and contents insurance suppliers and provides buyers with more power because no one supplier controls the market. Low market share concentration also helps reduce buyers' switching costs, in that there are many suppliers for buyers to switch to in the event that a change is necessary. In addition, because many brokers sell insurance policies from several different insurance carriers, brokers can assist buyers in comparing insurance policies and premiums. “If buyers do decide to switch suppliers after purchasing a policy, they should consider the costs that will accompany the selection of a new supplier,” adds Freshman-Caffrey. “For example, buyers should not switch policies in the middle of the contract period unless there is an early termination clause in the contract. Otherwise, buyers risk incurring financial penalties for ending a contract early.”
The low level of substitutes in the market somewhat lessens buyer power. Because there are few alternatives to property insurance that provide similar coverage, suppliers are able to raise prices more easily.
Overall, changes in the economy will not drastically impact insurance prices; buyers require insurance to protect buildings and their contents regardless of economic conditions. This factor provides suppliers with a steady stream of demand and allows them to continue slowly raising prices. Buyers should, consequently, purchase insurance now to lock in prices with a long-term contract. For more information, visit IBISWorld’s Building & Contents Insurance procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of building and contents insurance, sometimes referred to as property insurance. Policies insure a business's physical assets, including the building itself, furniture, equipment, inventory, landscaping and outdoor signage. These assets are typically insured in the event of damage, a natural disaster, loss or theft. Building and contents insurance excludes homeowner’s insurance and any insurance coverage for personal property.
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.