UK Employers’ Liability Insurance: Market Dynamics and Opportunities 2016
All the vital news, analysis, and commentary curated by our industry experts.
The UK employers’ liability insurance market continues to be characterized by overcapacity and unprofitability. While underlying demand for employers’ liability has steadily increased in recent years, premium rates continue to lag behind claims inflation. In the wake of the uncertainties created by the Brexit vote and the government’s personal injury reforms, the market could be in for a turbulent few years.
• UK employers’ liability market gross written premium grew by 1% in 2015, hampered by tough underwriting conditions in a competitive market. Premium rates are currently reported to be largely flat to slightly negative across the UK as a whole.
• Employers’ liability remains unprofitable; the sector has not made an underwriting profit since 2005. The market continues to be propped up by reserve releases, which are showing no signs of slowing down.
• The level of claims inflation has reduced due to the success of LASPO and fixed recoverable costs. However, this is likely to be temporary, and inflation for catastrophic losses remains above 10%.
• The number of accident and disease employers’ liability claims recorded fell significantly in 2015–16 (-16.3%) due to a reduction in the impact of the LASPO spike, the start of a decline in noise-induced hearing loss (NIHL) claims, and continued improvements in workplace health and safety.
• However, disease claims settled are yet to show any signs of falling (+29.1% in 2015–16), reflecting the greater length of time it takes to settle disease claims and the time lag before insurers will feel the impact of any reduction in NIHL claims recorded.
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Table of Contents
EL market conditions remain tough and the sector faces a turbulent few years
Critical success factors
Underlying demand for EL continued to rise, particularly in service industries
The number of businesses and employees continued to grow in 2015
SMEs account for over 52% of private sector employees
Increasing demand is occurring at the small and large ends of the company size spectrum
The UK economy has continued to shift from manufacturing to services
High levels of competition continue to dampen growth in the EL market
The UK EL market grew slightly in 2015
Premium rates are flat or slightly negative
The underlying macroeconomic environment remained positive but uneven
The top 10 EL insurers increased their market share in 2015
Lloyd's is gaining market share as it increases binder and line slip business
EL remains unprofitable and continues to be propped up by reserve releases
EL has not made an underwriting profit since 2005
EL loss ratios continue to be plagued by claims inflation that outpaces premium rate rises
The number of EL claims recorded is falling
Claims numbers have fallen in both sectors of EL
NIHL continues to take its toll
NIHL drove a spike in disease claims, which peaked in 2013-14
NIHL claims started to wane in 2015-16
Claims settled are still sharply rising, and recorded claims remain significantly above pre-LASPO levels
The number of asbestosis and mesothelioma cases are largely stable
Accident claims numbers have fallen below pre-LASPO levels
Accident claims have dropped significantly since 2011-12
Injuries to employees, the underlying driver of EL accident claims, are in long-term decline
The Claims Portal is having limited success, particularly for disease claims, leading to calls for reform
Only 20% of disease claims are estimated to meet portal criteria
4% of disease claims and 12% of accident claims notified have been settled within the portal
DEVELOPMENTS IN 2016 AND BEYOND
EL GWP is forecast to remain largely flat until 2018
There is little evidence of any near-term shift in premium rates
A significant capacity or investment shock would be required to shift rates
EL GWP is expected to decline slightly in 2017
Underwriting profitability will remain challenging
The negative economic consequences of Brexit will have an adverse effect on EL
The EL product, levels of competition, and health and safety legislation are likely to be unaffected by Brexit
The economic consequences of Brexit will have the greatest impact
The Mesothelioma (Amendment) Bill could place a further levy on EL insurers
Psychological and chronic back pain claims have yet to have any real impact
Government personal injury reforms could have a seismic impact on EL
Government proposals would increase the small claims track limit and remove general damages for minor soft tissue injuries
There is extreme uncertainty over the future passage and scope of the reforms
Impacts of the reforms: wide-ranging with potential for unintended consequences
The increase in the small claims track limit could affect up to 20% of EL claims
Wherever reform lines are drawn, repercussions will be felt in EL
Abbreviations and acronyms
Primary and secondary research
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