UK Employers Liability Insurance 2007

Transcription

1 A Datamonitor report UK Employers Liability Insurance 2007 A comprehensive guide to the market Published: Apr-07 Product Code: Providing you with: Analyzis of the competitive issues and prevailing trends within the employers' liability market Sizing of the employers' liability market providing competitors' GWP, market share and claims ratios data Use this report to... Forecasts of GWP growth up to and including 2011, based on Datamonitor's inhouse expertise and interviews with senior industry executives Gain insight into the trends and issues affecting players in the employers' liability market

2 UK Employers Liability Insurance 2007 Introduction Soft market conditions persisted in the UK employers liability market during This report discusses the current competitive environment of the market and its effect on GWP and profitability. It also provides forecasts for GWP and profitability up to 2011 under two different scenarios, making it essential reading for those with an interest in employers liability insurance The report also includes a discussion of the performance of the top employers liability insurance competitors in 2005, providing data on GWP, market share and gross claims costs and puts this data into context with a discussion of key market issues. This is supplemented with a discussion of commercial distribution trends, with focus on employers liability insurance Key findings and highlights The employers' liability market saw premium income drop an estimated further 7.4 per cent in This drop was the result of unabated pressure on premium rates, as some competitors continued to lower premium rates in order to increase market share and others followed suit to protect the size of their books. The competitive conditions in 2005 prevented most competitors from growing their employers' liability book and this was no less true for the top 10. While three of the top 10 increased market share, only two competitors did so as the result of increases in premium income. Due to the varied and shifting needs of commercial insurance clients, independent intermediaries have long been the dominant force in distribution, accounting for around 83 per cent of premium income. This is a slight loss of market share since Reasons to buy Gain insight into the trends and issues affecting players in the employers' liability market Benchmark your company against your competitors based on current and past performances in the market Develop your future business plans from an informed viewpoint with Datamonitor's GWP forecast Contact us... From Europe: tel: fax: fsinfo@datamonitor.com From the US: tel: fax: usinfo@datamonitor.com From Asia Pacific: tel: fax: apinfo@datamonitor.com

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4 UK Employers Liability Insurance 2007 Table of contents EXECUTIVE SUMMARY Introduction Soft market conditions in the employers' liability market led to declining GWP in 2005 and 2006, but the market returned a small profit in Soft market conditions governed employers' liability in 2005 and 2006, leading to a decrease in GWP, though the market returned a profit - The market recorded a profit in 2005, as a result of a rise in NWP combined with a fall in claims costs - The cost and number of employers' liability claims continues to fall, benefiting from ongoing improvements in workplace related accidents and diseases Brokers dominate the distribution of commercial general insurance - Independent intermediaries continue to be the overwhelming channel of choice in commercial general insurance but the direct channel has grown - imarket continues to grow in its offering but has faced slow uptake among brokers Soft market conditions governed the market in 2005, with many of the top insurers experiencing reductions in GWP - A number of insurers entered the employers' liability market in 2005 and 2006, adding to the high level of competition - The top 10 increased in market share overall though many players lost market share due to fierce competition for business - Most of the top 10 employers' liability insurers saw their gross claims ratios deteriorate in 2005, though a few achieved improvements The employers' liability market is expected to reach a value of 2.9 billion but will not be profitable in the forecast period - The UK employers' liability market is forecast to reach 2.9 billion by The market is not forecast to return an underwriting profit within the forecast period INTRODUCTION What is this report about? Who is the target reader? How to use this report MARKET CONTEXT Introduction Soft market conditions governed employers' liability in 2005 and 2006, leading to a decrease in GWP, though the market returned a profit - The employers' liability market shrank 7.0 per cent in 2005 as competitive pricing led to premium rate cuts - The market is estimated to have contracted by 7.4 per cent in 2006 as insurers continued to cut premium rates - The market recorded a profit in 2005, as a result of a rise in NWP combined with a fall in claims costs - The employers' liability sector has normalized but permium rate increases are required to sustain profitability into the future The cost and number of employers' liability claims continues to fall, benefiting from ongoing improvements in workplace related accidents and diseases - The cost of employers' liability claims fell by 9.4 per cent in The number of employers' liability claims fell to a five-year low in 2005/6 - The British Coal scheme has cost 3.4 billion so far, although the majority of payments are for minor amounts - Workplace accidents and work-related ill-health dropped again in 2005/6 - Employers' liability claims are both costly and lengthy to settle - Claims costs can accumulate to almost equal the premium income received NHS claw-back, changes to legislation on asbestos claims, and rehabilitation will have an effect on the future claims bill - The NHS will begin recouping the costs of treatments from insurers in Pleural plaque ruling by the House of Lords could end uncertainity over non-cancerous asbestos claims - Joint and several liability for mesothelioma cases was established in the compensation bill in The soft market took its toll on the balance sheets of many of the largest insurers operating in this market in 2005, as all but two insurers suffered worsening gross claims ratios... Andrew Haslip, UK Employers Liability Insurance 2007

5 - Proper indexation is bringing periodic payments back to the forefront of claims issues for employers' liability insurers - Research suggests that rehabilitation can lead to cost savings, particularly if provided early in the process DISTRIBUTION DYNAMICS Introduction Independent intermediaries continue to be the overwhelming channel of choice in commercial general insurance but the direct channel has grown - Brokers remained the dominant distribution channel for commercial general insurance and employers' liability in Direct insurers have targeted the small end of SME with simple products, increasing their market share in 2006 to 8 per cent of GWP - Banks are increasing their share of distribution, though growth is slow - Retailers and affinity groups are unlikely to be more than bit-part players in employers' liability - Company staff and other company agents handle only a minor amount of the commercial market Brokers also dominate commercial liability insurance distribution among the SME segment of the market, though some consumers are interested in buying via other channels - Brokers form the most important distribution channel for SMEs - Brokers would be the first choice for SMEs if they were to switch provider - However, when prompted some SMEs would consider alternative distribution channels, if they could get a better deal that way - Brokers consider direct insurers and other national brokers to be the biggest threat to their business - However, liability is considered the line least under threat from direct insurers by commercial brokers imarket continues to grow in its offering but has faced slow uptake among brokers - imarket is an Internet portal for brokers that allows multiple quotes to be generated from one application form - New insurers have signed up to imarket and have added new products strengthening its offering - Almost 70 per cent of brokers have access to imarket, but brokers do not write a large part of their business via this platform COMPETITIVE DYNAMICS Introduction A number of insurers entered the employers' liability market in 2005 and 2006, adding to the high level of competition - A new insurer, Gable Insurance, entered the UK market early in A number of established insurers branched into employers' liability in 2006 The top 10 increased in market share overall though some players lost market share due to fierce competition for business - The top 10 employers' liability insurers accounted for 61.8 per cent of the market in Three of the top 10 players increased their market share in The soft market conditions of 2005 led to declines in market share for some of the top 10 employers' liability insurers - ACE, New Hampshire and QBE began reporting premium income for employers' liability in Lloyd's market share contracted to 8.7 per cent in Most of the top 10 employers' liability insurers saw their gross claims ratios deteriorate in 2005, though a few achieved improvements THE FUTURE DECODED Introduction Several factors influence future GWP growth for the employers' liability market - GWP growth is closely related to premium rates, which are expected to be soft throughout Claims inflation is expected to continue to be high, necessitating premium rate increases going forward The UK employers' liability market is forecast to reach 2.9 billion by 2011 in scenario 1, but will not return a profit in the forecast period - Sustained competitive pressures in the market will result in premium rate decreases in 2007, but rates are forecast to increase again in The employers' liability market is forecast to achieve a compound average growth rate of 8.6 per cent between 2006 and The market is not forecast to return an underwriting profit within the forecast period In scenario 2, the employers' liability market is forecast to reach 2.6 billion under more pessimistic conditions...sustained competitive pressures in the market will result in premium rate decreases in 2007, but rates are forecast to increase again in Andrew Haslip, UK Employers Liability Insurance 2007

6 UK Employers Liability Insurance In scenario 2, the market will remain soft throughout 2007, with premium rates only increasing in the second half of GWP is forecast to grow by 6.2 per cent on a compound average growth rate between 2006 and 2011 in scenario 2 - Profitablity will suffer as the market is forecast to return combined ratios up to per cent - The employers' liability market's profitability is extremely sensitive to premium rate movement in 2007 and 2008 APPENDIX Supplementary data - Performance Ratios Definitions - SME - Definitions of ABI terms - Definitions of general terms - Liability business Research methodology - Lloyd's market data - Employers' liability claims data - Datamonitor's Commercial Broker Survey - Datamonitor's SME Survey - Competitor data - Accuracy of figures Further reading Relevant links Do you need more information? - Datamonitor Financial Services Consulting SPP writing team LIST OF TABLES Table 1: Employers' liability insurance GWP, e Table 2: Employers' liability detailed underwriting result, Table 3: Employers' liability gross claims incurred, Table 4: Number of employers' liability personal injury claims split by accident and disease, 2001/2-2005/6 Table 5: Number of claims made to the DTI and total compensation paid for respiratory disease and vibration white finger under the British Coal scheme as of 4th of March 2007 Table 6: Profile of offers made by the DTI to claimants for respiratory disease under the British Coal Scheme, up to 4 march Table 7: Workplace injuries reportable under RIDDOR, 2001/2-2005/6p Table 8: Workplace injuries, reportable under RIDDOR, excluding acts of violence, p Table 9: Workplace fatalities reported under RIDDOR, Table 10: Total estimated workplace injuries reportable to the HSE, p Table 11: Workplace fatalities reported under RIDDOR, p Table 12: Number of employers' liability claims paid by year of origin, Table 13: Employers' liability claims costs as a percentage of GEP in year of origin, Table 14: Average cost of paid employers' liability claims by year of origin, Table 15: Market share of distribution channels in the commercial general insurance market, Table 16: Commercial broker threat perception, H Table 17: Perceived threat from the direct channel to commercial brokers by line of business, 2006 H2 Table 18: imarket access among commercial brokers, 2006 Table 19: Proportion of business conducted through imarket by commercial brokers with access to the portal, 2006 Table 20: Market share split by market leader, top 10 and rest of the market, Table 21: Employers' liability market shares by Table 22: Employers' liability premium income by Table 23: Gross claims ratio of top 10 employers' liability insurers, Table 24: Claims costs of top 10 employers' liability insurers, Table 25: Employers' liability GWP forecast, scenario 1, f Table 26: Employers' liability forecast for GWP, gross claims, gross loss ratio, net expense ratio and combined ratio, scenario 1, f Table 27: Employers' liability GWP forecast, scenario 2, f Table 28: Employers' liability forecast for GWP, gross claims, gross loss ratio, net expense ratio and combined ratio, scenario 2, f Table 29: Employers' liability combined ratio forecast, scenario 1 and 2, f Table 30: Employers' liability premium income by Contact us... From Europe: tel: fax: fsinfo@datamonitor.com From the US: tel: fax: usinfo@datamonitor.com From Asia Pacific: tel: fax: apinfo@datamonitor.com

7 Table 31: Employers' liability market share by competitor, Table 32: Commercial liability competitors by loss ratio, Table 33: Commercial liability expense ratio by Table 34: Commercial liability combined ratio by Table 35: Commercial liability commission ratio by Table 36: Commercial liability management expense ratio by Table 37: Commercial liability net gross premium ratio by Table 38: What business sector are you involved in? LIST OF FIGURES Figure 1: The number of claims filed continued to shrink in 2005, falling an additional 9.4 per cent Figure 2: The top 10 accounted for a larger share of the market in 2005 than in 2004 Figure 3: Employers' liability GWP has fallen since 2005, following large increases in 2002 and 2003 Figure 4: The employers' liability market moved into profit in 2005, supported by an increase in NWP Figure 5: Claims costs continued to shrink in 2005, falling an additional 9.4 per cent Figure 6: The number of claims filed continued to shrink in 2005, falling an additional 9.4 per cent Figure 7: The vast majority of offers under the British Coal Scheme are below 5,000 Figure 8: Workplace fatalities went down in 2005/6p, apart from among members of the public and the self-employed Figure 9: All disease-related fatalities, including lungrelated fatalities, declined in 2005 Figure 10: Employers' liability claims have a long latency period Figure 11: Employers' liability claims costs accumulate over time Figure 12: The average cost of settling an employers' liability claim increases with time Figure 13: National brokers dominate the distribution of commercial insurance Figure 14: Most SMEs buy their commercial liability insurance from brokers Figure 15: Most SMEs would approach another broker if looking to change their provider Figure 16: Half of SMEs will consider buying commercial liability insurance direct if they can get a cheaper quote Figure 17: The SMEs that would consider buying commercial liability insurance from a bank or building society do so in the hope of a cheaper price Figure 18: Other brokers are increasingly seen as a threat to brokers surveyed Figure 19: Liability insurance, including employers' liability, is the line least at risk from the direct channel Figure 20: Almost 70 per cent of brokers have access to imarket Figure 21: Most commercial brokers still do not use imarket for a significant sum of business Figure 22: The top 10 accounted for a larger share of the market in 2005 than in 2004 Figure 23: Zurich was still the largest liability player in 2005 despite losing market share Figure 24: All top 10 employers' liability insurers recorded gross claims ratios below 100 per cent in 2005 Figure 25: Key to the relative importance of forecast variables Figure 26: Key factors affecting future employers' liability GWP growth, 2006e-11f Figure 27: GWP growth is forecast to recover after 2007, following three years of declines Figure 28: In scenario 1 the market is not expected to reach profitability in the next five years Figure 29: Scenario 2 envisions a steeper decline in 2007 followed by a more gradual recovery in GWP Figure 30: The market is not expected to reach profitability in the next five years Figure 31: Profitability will be adversely affected if insurers wait until mid 2008 to raise premium rates Figure 32: The SMEs surveyed in Q come from a variety of business sectors, though most are involved in retail Contact us... From Europe: tel: fax: fsinfo@datamonitor.com From the US: tel: fax: usinfo@datamonitor.com From Asia Pacific: tel: fax: apinfo@datamonitor.com

8 UK Employers Liability Insurance 2007 Datamonitor: Your total information solution Datamonitor is a premium business information company helping 5,000 of the world's leading companies across the Automotive, Consumer Markets, Energy, Financial Services, Healthcare and Technology sectors. Our products and services are specifically designed to support our clients key business processes from corporate strategy to competitive intelligence. We provide an independent and trustworthy source of data, analysis and forecasts to improve these processes and ultimately, to help grow your business. Corporate Strategy & Business Planning Quality Data Make more effective strategic and business decisions Product Development & Commercialization Targeting & Influencing the Market Expert Analysis Accelerate delivery of commercial success Assess and influence your commercial and market environment HELPING TO GROW YOUR BUSINESS Market & Competitive Intelligence Future Forecasts Maintain or obtain critical competitive advantage Nothing speaks louder than our clients Abbey ABN AMRO AIB Bank AIG Alliance & Leicester American Express AXA Bank of Ireland Barclays BNP Paribas Bradford & -Bingley BUPA Capital One Citibank Commerzbank Co-operative Group Crédit Agricole Crédit Lyonnais Credit Suisse Deutsche Bank Dresdner Bank Fortis Friends Provident Gartmore GE Group Halifax Plc HBOS HFC HSBC ING Intelligent Finance Invesco JP Morgan Legal & General Lloyd s of London Lloyds TSB Marsh MBNA Merrill Lynch National Australia Group Nationwide Building Society NFU Mutual NM Rothschild Nordea Asset Management Prudential Rabobank Royal & SunAlliance Royal Bank of Scotland Scottish Widows Skandia International Société Générale Standard Life Group UBS VISA Western Union Zurich Group...For 91% of our clients, Datamonitor research helps their company to respond to competitive threats...

9 UK Employers Liability Insurance Interested in this topic? Datamonitor's General Insurance portfolio is designed to provide fundamental forecasts, industry analysis and competitive intelligence all needed to survive throughout the underwriting cycle in this turbulent market. The program is a tool to aid planning and decision-making across the entire spectrum of general insurance, encompassing both personal and commercial lines. Other reports available in this series UK Commercial Insurance Distribution 2006 A comprehensive analysis of commercial insurance distribution. Published: Apr-07 Product code: DMFS1960 UK Commercial General Insurance 2006 Detailed analysis of the UK commercial general insurance market comprising data on GWP, profitability and competitor performances for group accident and health, liability, motor, pecuniary loss, and property sectors. Published: Mar-07 Product code: DMFS1991 Claims Management in UK General Insurance 2006 An examination of trends and statistics in UK claims management. Published: Feb-07 Product code: DMFS1948 For more information about our products visit Subscribe to Monitor A monthly update of Datamonitor's new financial services products, delivered to you by . monitor@datamonitor.com

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