UK Professional Indemnity Insurance 2008

Published by: Datamonitor

Published: Jul. 28, 2008 - 6 Pages

Table of Contents

Overview

Catalyst

Summary

Executive Summary

Professional indemnity GWP continued to fall in 2007 due to weakening premium rates

The professional indemnity market declined by 2.0% between 2006 and 2007

Professional indemnity players are looking to the online platform to grow their business

The internet has become an increasingly popular method for attracting PI business

Lloyd's share of the professional indemnity market continues to be eroded by the company market, although the rate of decline is slowing slightly

Lloyd's continues to lose market share in the professional indemnity market

The market is expected to harden early in 2009 and GWP will grow strongly

A variety of factors are likely to contribute towards GWP growth during the forecast period, however, premium rates are expected to have the greatest impact

Table of Contents

Table of figures

Table of tables

Chapter 1: Introduction

What is this report about?

Who is the target reader?

How to use this report

Chapter 2: Market Context

Introduction

Professional indemnity GWP continued to fall in 2007 due to weakening premium rates

The professional indemnity market declined by 2.0% between 2006 and 2007

Premium rates declined across all areas of professional indemnity, although product penetration increased

The 10% decline in premium rates in 2007 was smaller than the fall witnessed in 2006

Reduced premiums and fierce competition have left the solicitors' market in a precarious situation

New markets are continuing to drive the take up of PI

Competition remained fierce despite the market being broadly unprofitable

Profitability suffered in 2007, as competitors continued to compete fiercely for business

Claims costs have remained at low levels

The downturn in the housing market is likely to increase the volume of claims

The downturn in housing prices is likely to impact negatively on the market, as mortgage fraud may push up claims in 2008

Poor quality guidance on the value of an estate may lead to an increase in claims

Two rulings set new precedents in the professional indemnity market, while the Legal Services Act will also shake up the market

No indemnity payout for partners that condoned dishonest dealings in Zurich v Karim case

High Court ruling may raise future PI payouts

The Legal Services Bill should simplify the process for lower-value loss claims

Insurers remain reluctant to offer midwives professional indemnity insurance, despite proposed law changes

Chapter 3: Distribution

Introduction

Brokers continued to dominate the distribution of commercial insurance

National brokers have lost distribution market share to the direct channel, chain brokers and telebrokers

The direct channel increased its share of commercial insurance GWP by 1% in 2006

Affinity groups remain a small channel for the distribution of commercial insurance

Banks and building societies continue to play a small role in the distribution of commercial insurance

Professional indemnity distribution is likewise dominated by the broker model

Professional indemnity insurance is predominantly distributed through the broker channel

Marsh remains the largest distributor of solicitors' and lawyers' professional indemnity

Brokers with a regional presence are strong in the professional indemnity insurance market

Professional indemnity players are looking to the online platform to grow their business

The internet has become an increasingly popular method for attracting PI business

Liberty began offering a PI website facility for brokers

Exclusivity deals and MGA arrangements are blurring the boundaries between insurers and brokers

RSA intends to make PI available through three channels

A significant proportion of SMEs are open to purchasing their insurance via the internet or phone

Many SMEs considering a telephone purchase do so because of its convenience

However, many SMEs remain unwilling to purchase their insurance over the telephone

Over a third of SMEs would consider making a purchase online

Less than half of SMEs would be willing to purchase their PI cover online

Chapter 4: Competitive Dynamics

Introduction

Underwriters are looking at ways to enter the market or expand their existing professional indemnity offering

AIG launched a regional assault on the solicitors' PI market

AXA aims to build up professional indemnity share among small businesses

Allianz Commercial looks to set up new PI team

Dual expands PI offering

RSA relaunched its PI offering in summer 2007

Despite exiting from solicitors' professional indemnity, Hiscox has been active within the professional indemnity market

Hiscox agreed to provide capacity for the PI business of Collegiate Underwriting and took a large stake in Allison & Partners

Lloyd's share of the professional indemnity market continues to be eroded by the company market, although the rate of decline is slowing slightly

Lloyd's continues to lose market share in the professional indemnity market

New Hampshire remained dominant in the professional indemnity market

Average loss ratios deteriorated between 2006 and 2007

Chapter 5: The Future Decoded

Introduction

The market is expected to harden early in 2009 and GWP will grow strongly

A variety of factors are likely to contribute towards GWP growth during the forecast period, however, premium rates are expected to have the greatest impact

GWP is expected to experience strong growth from 2009 until the end of the forecast period

APPENDIX

Definitions

Brokers

National brokers

Other intermediaries & brokers

Chain brokers & telebrokers

Employers' liability

Professional indemnity

Directors' and officers' liability

Earned premiums

GWP

NWP

Methodology

Primary and secondary research

Data on the Lloyd's market

SynThesys Non-Life database (GEP/GWP)

Datamonitor's SME Insurance Survey Q1 2008

Competitor estimates

Professional indemnity market size

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: Estimated professional indemnity premium income, 2003-07

Table 2: Market share of distribution channels in the commercial general insurance market, 2003-06

Table 3: Lloyd's premium income and share of the UK professional indemnity market, 2002-06

Table 4: The top 10 professional indemnity players by market share, 2002-07 (%)

Table 5: The top 10 professional indemnity players by income, 2002-07

Table 6: Gross loss ratios for the top 10 professional indemnity insurers, 2002-07

Table 7: Gross claims incurred by the top 10 professional indemnity insurers, 2002-07

Table 8: Key variables affecting the professional indemnity insurance market, 2007-2012f

Table 9: Forecast GWP for professional indemnity insurance, 2002-12f

Table 10: Q: What business sector are you involved in?

Table 11: Q: How large is your company in terms of number of employees?

Table 12: Q: How large is your company in terms of turnover?

List of Figures

Figure 1: In 2007, the professional indemnity market declined for the third year in a row

Figure 2: National brokers dominate the distribution of commercial general insurance in the UK in terms of GWP

Figure 3: Marsh has the largest share of professional indemnity distribution in the legal channel

Figure 4: Most SMEs hold an employers' liability and public liability policy

Figure 5: Many insurers and brokers now quote and sell professional indemnity online

Figure 6: The convenience factor appeals to many SMEs prepared to purchase insurance over the phone

Figure 7: A significant proportion of SMEs would not consider a telephone purchase because they simply prefer face-to-face

Figure 8: A significant proportion of SMEs would consider a purchase online in a bid to save money

Figure 9: SMEs show a greater inclination to purchase employers' liability and public liability via the telephone and internet

Figure 10: Lloyd's share of the market fell every year between 2002 and 2006

Figure 11: In 2007, New Hampshire was the largest company player in professional indemnity insurance

Figure 12: In 2007, there was a large variance between the loss ratios for the top 10 professional indemnity providers, with an average loss ratio of 70.8%

Figure 13: GWP is set to record moderate growth in 2008 before rates turn in 2009 and GWP experiences robust growth

Abstract

• Estimates of the professional indemnity insurance market size.
• Market share data for the top ten professional indemnity insurers.
• Forecasted scenario for the market until 2012, developed with industry representatives and Datamonitor's in-house expertise

• Gain an understanding of the key drivers of the professional indemnity market in 2007
• Understand how the distribution of professional indemenity insurance is evolving
• Develop your business strategy using Datamonitor's unique sector forecast

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