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Buyer’s market may be the new norm: Aon

An “extremely competitive” insurance market is driving down premiums and putting consumer loyalty to the test, according to Aon.

Its third-quarter Insurance Market Update says insurers are looking to attract and retain clients by refreshing their products and wordings, expanding cover and matching competitors’ pricing.

Aon MD of Broking James Baum says current market conditions may be here to stay.

“Are we really just seeing the traditional hard and soft market cycles, or are we witnessing a fundamental change in the insurance market caused by the continued creation of alternative capital?” he said.

“It would appear we are now moving away from the traditional cyclical market, with current market conditions likely to become the new norm.”

In the property insurance market, Aon says there has been a noticeable increase in “budget-driven behaviour” from insurers and reinsurers.

“With pressure building significantly, most insurers are now concentrating harder than ever on retaining their existing client base and attracting new prospects to bridge the widening gap in premium volume,” the report says.

Large corporate and global clients have enjoyed double-digit rate reductions, and “far more substantial reductions are available”.

Aon warns of an “incredibly price-sensitive market that shows no sign of abating” and says the industry finds itself in a “perfect storm”.

“Insurers are keen to use the quality of their products to differentiate, but the increasingly price-driven clients are refusing to bite. In fact, clients are fuelling the oversupply of capacity by further reducing the need for coverage, as well as the demand for insurer capital.”

Insurers that have historically focused on property lines are entering the liability market in a bid to “plug the holes in their leaking bottom line”.

Aon says the liability market has maintained its stable position, but new competitors are placing pressure on rates across most areas.