Although only half of risk managers are clearly satisfied with the level of disclosure offered by their brokers on compensation issues, very little turnover of intermediaries is expected as a result of such concerns, the National Underwriter Spring 2005 “State Of The Market Survey” revealed.

Indeed, only 7 percent of the 200 risk managers surveyed said they were likely to change brokers as a result of all the controversy over compensation.

In addition, as the market continues to moderate, with premium rates often flat or in decline for bigger buyers, risk managers in general feel less urgency to change carriers to get a better price at renewal, according to the survey, which was sponsored by Zurich in North America.

“While customers are experiencing price relief from their current carriers, the need to shop around for lower premium costs lessens,” noted The Response Center, the independent research firm based in Fort Washington, Pa., that conducted the survey on behalf of NU and Zurich. Only 19 percent of those surveyed said that as the market softens, they are likely to change carriers to obtain lower prices, compared with 31 percent last fall.

However, the 200 agents and brokers surveyed–representing a much wider range of clients, including small and medium-sized accounts–reported much higher average premium hikes than the risk managers queried (see story, page 12). As a result, 48 percent said their clients are likely to change carriers over cost concerns, up from 38 percent last spring.

In addition, the probes by New York Attorney General Eliot Spitzer and other regulatory authorities into bid-rigging and contingency fee abuse by intermediaries did seem to have some repercussions in terms of buyer attitudes.

For example, only one-third of risk managers surveyed say “we rely heavily on the advice and guidance of brokers,” compared with 46 percent last spring. In addition, 59 percent said “our broker's advice is important when we select a carrier,” compared with 69 percent a year ago.

While fewer buyers in general may feel the need to change carriers over price, that doesn't mean risk managers won't insist their brokers get a wide range of quotes to reassure them they are getting the best deal.

“In large property, it's a tale of two cities,” said Greg Maguire, director of the property group for Zurich's global corporate business in North America. “Some brokers report very few requests by customers to shop their business. Some buyers, however, are almost forced to shop to demonstrate they are doing their due diligence and getting the best possible price. We hear from some brokers that as a result of this, requests for proposals are coming across their desks at a much higher volume than before Mr. Spitzer's probe.”

On a positive note, two-thirds of buyers queried are now “comfortable” with the financial stability of their carriers, up from 56 percent a year earlier. Among brokers, 69 percent said their clients are happy on this point, up from 60 percent last spring.

“Clearly buyers are reading the same news we all are,” said Joe Murphy, senior vice president of marketing operations for Zurich in North America. “They are seeing that a lot of carriers stepped up and bolstered reserves while still announcing fairly good financial results. That gives them confidence about our financial stability and ability to pay claims going forward.”

“The industry has been able to absorb the largest set of catastrophe losses in history with last year's hurricanes, pay off all the claims and still produce an underwriting profit on an industrywide basis,” added Mr. Maguire. “That is an extraordinary performance, and it gives buyers a comfort zone that the industry is being well managed.”

However, buyers still have one major pet peeve, as only 18 percent surveyed said they are receiving their policies in a timely fashion, error-free, down from a still low 25 percent last spring. Interestingly, however, among intermediaries surveyed, 61 percent said their accounts were getting mistake-free policies without undue delay–up substantially from 42 percent last fall and 34 percent in spring 2004.

Why the difference? “Smaller accounts lend themselves to more automation in policy issuance,” said John Ormerod, director of marketing for Zurich's global corporate business in North America. “They get most of their policies off the shelf, meaning they can be delivered faster and there is less of a chance of error.”

Bigger buyers, on the other hand, “demand more manuscripting of their policies, which takes more time,” he added. “Every deal is different for a large buyer–the wording is far more customized and the policies much more complex, making them harder to deliver quickly and in perfect condition.”

With insurance premiums moderating in most commercial lines, the survey found that only 48 percent of buyers increased deductibles, compared with 74 percent in the last two surveys. Only one-third increased their self-insurance, down from 60 percent last fall. Among the intermediaries surveyed, only one-quarter said clients hiked deductibles and only 6 percent increased their self-insured retention.

Big buyers, however, maintained their commitment to proactive risk management, with 77 percent saying they had increased their loss control and safety efforts–virtually unchanged over the past year.

Among the intermediaries surveyed, however–with many representing much smaller commercial insureds without full-time risk managers–only 20 percent boosted loss control and safety efforts, down from 26 percent last spring.