Financial stability tops buyers' agenda, survey reveals

With the turbulent global economic climate continuing to buffet firms, financial stability is the biggest factor in buyers’ and brokers’ minds when deciding where to place their business, according to a survey conducted by a leading Lloyd’s insurer.

In the aftermath of the global financial markets breakdown, which brought several of the world’s biggest banks to their knees and rocked some insurers to their foundations, half of clients and over a third of brokers say that a carrier’s security and financial muscle was the key factor in their choice of insurer, reveals the survey conducted by QBE.

Next priority

With cashflow tight at nearly every company and all areas of expenditure under the spotlight, value for money is the next highest priority for buyers, according to the poll, which was conducted at the annual conference of AIRMIC, the UK risk managers association, in June.

But both clients and brokers continue to prize the flexibility and innovation that insurers can offer them, with 26% of buyers and 19% of brokers saying this is their third-biggest factor in choosing an insurer.

Brokers’ second-biggest priority in choosing which market to use differed from that of their clients, with brokers wanting specialist industry knowledge from insurers they use, says QBE, which owns the largest managing agency at Lloyd’s.

Three factors with least influence

The three factors that have the least influence on buyers’ and brokers’ choice of insurer were perhaps surprising.

Both groups said they are uninterested in an insurer’s global reach, despite the market being dominated by a number of global underwriting behemoths.

Clients also say they are not concerned by an insurer’s available capacity when choosing which one to use.

Brokers did not see the speed and accuracy of an insurer’s documentation as being a deciding factor in their choice of which carrier to place business with.

No brokers questioned for the survey saw this issue as being a priority, despite the recent drive by the London insurance market, supported by the regulator, the Financial Services Authority, to speed up the process in order to ensure all the contract details have been agreed before the client’s policy begins.

Holding sway

Having a long-term relationship with a carrier no longer seems to hold much sway in today’s more transactional market. Few clients or brokers saw it as an important factor in deciding which company to work with in future.

The current economic turmoil was the principal factor cited by both insurance buyers and brokers as the single biggest risk facing their businesses.

Buyers see threats to their business posed by risks to their reputation and also the increasingly tough legal and regulatory environment as their next biggest concerns, according to the survey.

Key suppliers

The failure of key suppliers or creditors and also environmental risks were also cited by some risk managers as being threats to their businesses.

Nearly a quarter of brokers said the pressure from increased competition in their industry was their second biggest concern, with problems created by exchange rate fluctuations coming third.

Several brokers said changing customer needs or demands could also threaten their businesses in the future.