UK Employers' Liability Insurance 2009

Published by: Datamonitor

Published: Oct. 2, 2009 - 35 Pages

Table of Contents

Overview

Catalyst

Summary

Executive Summary

The EL sector was challenging in 2008

Lower premium rates due to competition remains the key driver behind the market's decline

Despite increases in net written premiums, the market was unprofitable

Gross claims costs increased in 2008 by 9.6%

Brokers dominate distribution

Independent insurance intermediaries of all types retained their leading market share in 2008

Commercial liability insurance is considered to be least at risk from the direct channel

SMEs are relatively open to internet arrangement of their employers' liability cover

Zurich, Aviva, RSA, AXA and QBE are the top five players

Zurich remained by far the largest insurer in the market

Aviva, RSA, AXA and QBE are firmly entrenched in the top five

The EL market is set to harden

Premium income is forecast to reach a high of £2.4 billion in 2013

Table of Contents

Table of figures

Table of tables

Market Context

Introduction

The EL sector was challenging in 2008

The market shrank in 2008 as rates fell

The Lloyd's market has written a declining amount of employers' liability business in recent years

Premiums rates fell

Lower premium rates due to competition remains the key driver behind the market's decline

Policy count was relatively unchanged in 2008 as the recession had not yet affected the market

The market made an underwriting loss

Despite increases in net written premiums, the market was unprofitable

Commissions and expenses costs are estimated to have continued their decline in 2008

Employers' liability claims costs increased in 2008

Gross claims costs increased in 2008 by 9.6%

Employers' liability claims volumes have declined significantly in recent years

The British Coal schemes' costs have advanced only slightly

Workplace injuries and ill health continued to decline in 2007/08

Incidents of ill health and workplace injuries reported under RIDDOR contracted in 2007/08

Workplace injuries not attributable to violence declined considerably in 2007/08

Workplace fatalities reported under RIDDOR declined from their peak in 2006/07

The estimated total number of workplace accidents is also believed to have declined

Overall ill-health in the UK economy has declined, though cases of lung-related diseases have increased

Regulation is having an impact

A compensation fund along the lines of the Motor Insurance Bureau has been proposed for the market

Zurich has pursued a court case that benefits insurers still active in the market

The updated Health and Safety Act coming into effect could mean higher costs for employers' liability insurers

Employers' liability claims will not be included under the fast track scheme in government reforms

Proposed pleural plaques legislation can cause uncertainty for the market

Fraud is a serious problem for insurers

Fraud is a serious issue for the employers' liability market, particularly in light of the recession

Insurers have invested in anti-fraud programs that also benefit the employers' liability account

Customer Focus

Introduction

Brokers dominate distribution

Independent insurance intermediaries of all types retained their leading market share in 2008

Direct players account for a small but important portion of the commercial general insurance market

Corporate partnerships have maintained only a small presence in the commercial insurance market

Banks and building societies distribute negligible amounts of commercial general insurance

Commercial liability insurance is considered to be least at risk from the direct channel

An internet proposition could gain ground with SMEs

Brokers dominate among all sizes of SMEs, though they have greater market share among larger SMEs

Face-to-face arrangement is popular in the market but is more prevalent among larger SMEs

SMEs are relatively open to internet arrangement of their employers' liability cover

High levels of retention go along with high levels of satisfaction

SMEs are generally happy with their insurance provider

SMEs tend to prefer longstanding relationships with their providers, making an initial pitch critical

A large proportion of SMEs are unlikely to switch to a new provider

More SMEs considered a change of provider in 2009 than in 2008

A variety of companies, from different industries, believe they will change their provider over the next year

SMEs that use the internet to arrange their insurance are the most likely to search out a new provider

Competitive Dynamics

Introduction

Zurich, Aviva, RSA, AXA and QBE are the top five players

Zurich remained by far the largest insurer in the market

Aviva, RSA, AXA and QBE are firmly entrenched in the top five

Travelers bucked the trend

Allianz was the 6th largest EL insurer in 2008

Travelers increased its GWP

Allchurches is the 10th largest player

Lloyd's syndicates underwrote around £100m of EL business

Amlin is a significant player in the Lloyd's employers' liability market

Canopius has developed a large book of UK liability risks through its exposure to Arista

Catlin, which operates the largest syndicate, decreased its UK exposure despite increasing its liability book

The average gross loss ratio was 73%

Gross loss ratios for AIG and Allianz improved substantially in 2008

AXA and ACE experienced only marginal change in their gross claims ratios, which still beat the market average

Gross loss ratios increased for most of the top 10

Future Decoded

Introduction

The EL market is set to harden

The recession will weigh heavily on GWP growth, though it is generally accepted that rates must rise

Premium income is forecast to reach a high of £2.4 billion in 2013

The combined ratio is expected to remain well above 100%

APPENDIX

Definitions

Premium income measures

Earned premiums

Gross premium

Net premium

Written premiums

Distribution

Direct

Other company agents

Utilities/retailers/affinity groups

Company staff

Banks/building societies

Definitions of general terms

Channel

Platform

Employers liability (including the employers liability part of mixed liability packages but excluding mixed commercial packages)

Methodology

Commercial Insurance Broker Survey - March 2009

Datamonitor's SME Insurance Survey Q2 2009

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: UK employers' liability insurance GWP (ABI members), 2000-08 (£m)

Table 2: Lloyd's market UK employers' liability insurance GWP, 2005-08p

Table 3: UK company insolvencies, 2004-2009 Q1p

Table 4: UK employers' liability underwriting result, 2004-08 (£m)

Table 5: Employers' liability gross claims costs, 2004-08 (£m)

Table 6: Number of employers' liability personal injury claims split by accident and disease, 2003/04-2008/09

Table 7: Number of claims made to the DTI and total compensation paid for respiratory disease and VWF under the British Coal scheme as of April 5, 2009

Table 8: Workplace injuries reportable under RIDDOR, 2003/4-2007/8p

Table 9: Workplace injuries reportable under RIDDOR, excluding acts of violence, 2003/04-2007/08p

Table 10: Workplace fatalities reported under RIDDOR, 2003/04-2007/08p

Table 11: Total estimated workplace injuries reportable to the HSE, 2003/04-2007/08p

Table 12: Number of cases of occupational disease and work related mental ill-health, 2003-07p

Table 13: Estimated number of work-related and occupational respiratory disease, 2003-07p

Table 14: Market share of the distribution channels in the commercial general market, 1999-2008 (%)

Table 15: Q: "How long have you been with your current insurance provider?"

Table 16: Q: "Do you think you will change your commercial insurance provider in the next 12 months?"

Table 17: Top 10 UK employers' liability insurers by market share and GWP, 2007-08

Table 18: Gross claims ratio of the top 10 employers' liability insurers, 2004-08 (%)

Table 19: Key variables affecting employers' liability insurance GWP, 2008e-13f

Table 20: Employers' liability premium income forecast (ABI members), 2003-13f (£m)

Table 21: Forecast of EL combined ratio, 2009-13 (%)

Table 22: What banding does your company fall into in terms of general insurance premium income turnover?

Table 23: Q: "What business sector are you involved in?"

Table 24: Q: "How large is your company in terms of number of employees?"

Table 25: Q: "How large is your company in terms of turnover?"

List of Figures

Figure 1: SMEs show the greatest willingness to purchase public and employers' liability insurance online

Figure 2: Lloyd's market players have continued to write a declining amount of UK employers' liability business

Figure 3: UK company liquidations increased sharply in 2008 due to the recession

Figure 4: The employers' liability market made another underwriting loss in 2008

Figure 5: Gross claims costs resumed their growth in 2008, after a sharp decline in 2007

Figure 6: The number of employers' liability claims relating to disease has fallen significantly in recent years

Figure 7: Workplace deaths have declined from their most recent peak in 2006/07

Figure 8: Cases of lung-related occupational disease increased in 2007

Figure 9: National brokers witnessed a significant increase in their share of the UK commercial insurance market in 2008

Figure 10: Commercial motor is considered to be at most risk from the direct channel

Figure 11: Brokers have the highest penetration among medium-sized firms

Figure 12: Micro SMEs are most comfortable with arranging their cover over the telephone

Figure 13: SMEs show the greatest willingness to purchase public and employers' liability insurance online

Figure 14: Satisfaction levels in the market remain high

Figure 15: Very few SMEs have changed their provider in the last two years

Figure 16: Companies in the education sector are the most likely to seek out a new quote in the next 12 months

Figure 17: Clients which arrange their insurance through the internet are the most likely to search for another provider

Figure 18: Zurich remains the clear market leader

Figure 19: Loss ratios for the top 10 insurers generally deteriorated

Figure 20: The market is predicted to grow between 2009 and 2013

Figure 21: The combined ratio is expected to remain at well over 100% across the forecast period

Abstract

• A discussion of the competitive issues and prevailing trends within the employers' liability market
• Analysis of the factors driving the market's recent performance
• Forecasts of GWP growth up to and including 2013, based on Datamonitor's in-house expertise and interviews with senior industry executives

• Obtain a comprehensive understanding of the key trends in the employers' liability market insurance in the UK.
• 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 for the employers' liability insurance market.

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