Buyers advised to prioritise long-term partnerships over price in ongoing soft market

At the seminar held yesterday in association with the Belgium and Dutch risk management associations Belrim and Narim, speakers stressed that the cheapest cover is not always the best option. They urged risk managers to make the most of the growing array of services offered by insurers fighting for their custom in tough market conditions. Speaking at the AIG and Aon-sponsored event, Gäetan Lefèvre, President of Belrim, said long-term partnerships between insurer and insured are desirable. "Capacity is there so use the capacity to protect your assets, not to make profits [via cheaper premium] but to protect yourself and ensure you have a partner in case of a problem. So it is important to develop a partnership and long-term agreements," he said at the seminar in Brussels. He stressed, however, that this message is not always easy to sell within companies looking for short-term gain and the cheapest cover. A balance needs to be struck between price and partnership, he advised.hide"I want to have the privilege of a long-term agreement and partnership but it's not always an easy message to give to an executive committee because the executive committee is looking more at the short term. So we need to find the right balance," he said. Adri van der Waart, Insurance Manager at Arcadis and secretary-treasurer of Narim, gave a similar message. "I told my CEO ten years ago I want to have a long-term relationship with my insurers and he said I don't like that I want to have profit. But the most profit is to have long-term relationships," he said. He also noted that securing cheaper cover and staying with the same insurer can go hand in hand. At the event partly focused on European renewals, Herman Kerremans, Chief Broking Officer & Managing Director Specialty Business at Aon Risk Solutions, said there are no signs of the soft commercial insurance market ending anytime soon. To make the most of these conditions insurance buyers should consider many factors when choosing their insurer. He suggested that long-term partnership and the services on offer should be prioritised over simple price comparisons. "I know that there is always someone willing today to take over from your incumbent insurer at a lower price. I have even seen it for loss making deals. But how important are long-term relationships for you? Do you want to hop from a to b to c every year? Probably after sometime the insurer may look at you as not a very reliable client," he told the audience. "It is not only the products, wording and the coverage but everything that goes around that to consider. Are you getting the same claims service, risk analysis and loss engineering services [if you change insurer]? Sometimes you have this and you like it and with a new carrier it is gone because of lack of people or ability to provide these services," he continued. "My message is not to tell you to stay with your incumbent. My message is try to get the best out of this market-I always advise that, to the extent possible, with your incumbent insurers. Of course, if you don't want your old insurer you need to look for somebody else and sometimes there is no other solution to change from a to b," he added. Fellow speaker Romany O'Malley, General Manager, Belgium & Luxembourg at AIG, said that given the relentless soft market insurance companies are having to look beyond simply providing indemnity and delivering added services for buyers in order to help both clients and insurers reduce losses. "There is long-term pricing pressure for pure risk transfer-for pure indemnity. This is why AIG is really focused on additional services and advice that we can give our clients. If we are going to be rewarded with a more modest premium for the risks we are taking then we would like to be giving every bit of advice we can to reduce the severity and frequency of losses. In most of our policies we share the losses with our clients so it's a win-win to help them to reduce losses over all because typically we have both got skin in the game," she said. Keynote speaker Stuart Shipperlee, Managing Director at Litmus Analysis Ltd, agreed that given current market conditions insurers today have to provide better risk mitigation services to clients in order to reduce losses and ultimately improve their own loss ratio. "What moves the dial for any insurance or reinsurance company writing bigger risk business is the loss ratio. To improve the loss ratio you reduce the cost of claims. If you provide added value and both you and your client have skin in the game then there is a plausible business outcome. It needs to be driven by that service approach," he said. "There are many ways in most industries to be successful as something other than simply the cheapest-and there is after all only one cheapest. For most businesses a strategy to simply try and be the cheapest is a race to the bottom. So you have got to supply something else and that's got to be service-driven," he added.

Buyers advised to prioritise long-term partnerships over price in ongoing soft market

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