Aon Risk Solutions Australia CEO Lambros Lambrou says concern about the economy has heightened the risk of companies cutting back on their insurance cover.

Commenting on Aon’s annual Australasian Risk Survey for 2013/14, Mr Lambrou told insuranceNEWS.com.au some companies now view insurance as a procurement item rather than a risk management tool.

“We’re seeing concerns about the economy play out in the level of pressure that companies are under to reduce costs, and that includes their insurance spend,” he said.

The survey, the 12th produced by Aon, says regulatory and legislative change has emerged as the No.1 risk concern for Australian and New Zealand businesses.

The next biggest business concerns are deteriorating local economic conditions and risks associated with employees. Concern about the global economy was ranked separately at No.6.

People risk was the fastest mover in this year’s top 10: it didn’t feature in the previous year’s rankings. Mr Lambrou says the cost of workers’ compensation insurance is increasing and has led to a greater focus on injury prevention and early intervention.

The Aon survey finds 64% of respondents believe economic conditions have made driving the cost of insurance down a priority. 

This has resulted in companies being prepared to tolerate a greater level of risk or narrowing their coverage.

Another key finding is that 37% of respondents do not believe the insurance sector is doing all it can to help their organisations manage its risk exposures.

Mr Lambrou says many companies are considering alternative non-traditional risk transfer solutions, such as captives, weather derivatives, catastrophe bonds and insurance-linked securities.

It is the first time at the No.1 spot for regulatory and legislative change as a risk concern – it was the third-biggest business concern in the previous year’s survey – and Mr Lambrou says this reflects concerns about the pace of change, the resources and effort needed to comply, and the added cost pressures of compliance.

He says that as companies do more business internationally, the compliance burden becomes even more exacting, and expensive, particularly in markets like the US, “where the pace [of change] is so much faster”.