Competition fuels consumer options
AonAustralia’s second quarter insurance market report for 2007 revealed that competitive tension and strong negotiating conditions have led to better insurance terms.
Announcing the report, Aon Australia market services head Lambros Lambrou said there was strong competition between insurers that fought to maximise returns from the available opportunities in the mid year renewal season.
“The traditionally large volumes of business renewing 30th June wetted the appetite of many insurers. Insurers with large amounts of capacity and broader risk appetites competed aggressively, and continuing strong financial year profitability provided ideal negotiating conditions for so many commercial renewals,” he said.
Lambrou said insurer appetite for professional indemnity business continued to go strong, resulting in further downward pressure on rates. It found that rate reductions in the corporate segment were typically in the low double digits. “Competition was even fiercer in the SME [small to medium enterprise] segment, which was almost ‘spoilt for choice’,” he said.
The report found that the SME market in particular attracted a lot of interest from Australian-based international insurers keen to explore growth opportunities.
“The bundling of products continued to be an attractive strategy for insurers, normally for small limits, in a bid to win new customers,” Lambrou said.
According to Lambrou, the effects of recent market consolidation had no material impact on insurer choice for commercial insurance buyers. “However, the Australian insurance market is likely to consolidate further over the next few years, reducing available choice to buyers.”
Lambrou concluded that over the next 12 months it was unlikely that the Australian insurance market would experience any capacity crunches in the major insurance classes.
The report also found that there was continued focus on retention as a critical imperative to meeting revenue budgets.
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