By CYRIL TUOHY, managing editor of Risk & Insurance®
For risk managers responsible for structuring insurance programs and looking to cut costs in a recession for their Fortune 500 employers, there's often more money to be saved in switching insurance carriers than they might think, according to a new survey.
Nearly 70 percent of the U.S. companies that have switched carriers over the past 24 months reduced their premium rates by at least 5 percent and more than 40 percent of those reporting a switch reduced their rates by 10 percent or more, the survey found. The survey was conducted with the participation of 669 companies.
The findings also showed that in Europe, more than 45 percent of companies that switched carriers in the past two years reduced premiums by at least 5 percent and almost 38 percent of companies that reported switching cut premiums by 10 percent or more. A total of 519 companies were included in the survey.
"Not many people are taking advantage of the opportunity and those that do are finding greater savings than they are expecting," said Bill Bruno, senior vice president and consultant with Greenwich Associates.
Similar savings were reported by risk managers representing midsize and small companies, the survey also found.
Some risk managers are changing carriers because the soft market is forcing carriers to compete more aggressively on price, according to Bruno. Other risk managers are changing because they want better service.
But just because it may make economic sense to change carriers, risk managers aren't necessarily jumping to the opportunity.
David Fox, managing director of Greenwich Associates, also said that while it's possible to save money, risk managers are also mindful of losing any "equity" they've built up with their carrier: a track record, for example, or a carrier's ability to pay claims.
"There's an interesting play on how clients view carrier relationships when it comes to long-term relationships," Fox said. "One of the key drivers of a good-quality carrier relationship is a willingness to pay claims. A number of clients feel that the longer you have with a carrier, the more you have equity with them."
Risk managers thinking of switching have to consider the trade-off between the money saved versus rebuilding equity with a new carrier.
April 1, 2009
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