United Kingdom (UK) Professional Indemnity Insurance Market Dynamics, Trends, Opportunities and Future Market, 2024 Update

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UK Professional Indemnity Insurance Market Report Overview

The UK professional indemnity insurance (PII) market was worth GBP3.3 billion in 2023. With improved profitability, capacity is returning to the market, both in the form of new entrants and existing insurers which have ambitious growth targets. Premium rates are therefore now stable or declining and market growth is forecast to be much slower by 2028. However, market conditions remain very profession-specific and are affected by the size and profile of risk. Professional indemnity underwriters also continue to traverse significant economic uncertainties and forces that could have a significant impact on the future course of the market.

The UK Professional Indemnity Insurance Market Research report provides detailed historical and forecast period data of the UK professional indemnity insurance market, along with sector-specific drivers. This report offers a detailed analysis of the market with the impact of shifting market conditions on SME switching and renewal behaviors, and the factors most important to SMEs when selecting or switching providers.  The report identifies the key distribution trends in the UK PII market.

Key Sector ·                  Solicitors

·                  Construction

·                  Surveyors

·                  Managing General Agents (MGAs)

·                  Direct Propositions

·                  Specialists

Key Distribution Channel ·                  Brokers

·                  Direct Channels

·                  Banks

·                  Price Comparison Websites (PCW)

·                  Others

Key PII Insurers ·                  AXA

·                  Aviva

·                  Zurich

·                  Allianz

·                  Hiscox

·                  Direct Line

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UK PII Market Dynamics

Between 2024 and 2028, the UK PII space is forecast to grow at a slower rate than in recent years, as the market continues to soften. As competition grows, it will be increasingly difficult to make a profit in traditional professions. Underwriters will need to be selective and careful in their approach to avoid a return to the unsustainable rating of the last soft market. It will be imperative for insurers to have a clear understanding of the profitable sub-segments within their portfolios. The strength of their digital platforms and their broker relationships will also be key.

Moreover, the increasing intensity of competition is leading to higher levels of switching and fiercer competition for new business. Professional indemnity insurers should bolster their propositions, looking at packaging opportunities and the potential for risk management and other added-value services. They should also identify new product opportunities created by changes in legislation or regulation.

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UK PII Market Segmentation by Sectors

Legal services are among the biggest buyers of PII. Research published by the Solicitors Regulation Authority and the Legal Services Board in October 2023 revealed that the PII premiums paid by law firms were typically between 3% and 9% of their annual turnover. Smaller firms typically pay a higher proportion, making up 90% of firms paying more than 10% of turnover. There is increasing appetite among existing players, with most leading participating insurers seeking to actively grow their portfolios. There were also two significant new entrants to the solicitors PII market during the latter part of 2023: Howden’s new facility backed by Lloyd’s insurers and Fortegra.

The construction sector witnessed the most notable changes in 2023. One notable change, reflecting growing appetite in the market, is the renewed availability of cladding and fire safety cover for the majority of firms.

UK PII Market Analysis by Sectors, 2023 (%)

UK PII Market Analysis by Sectors, 2023 (%)

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UK PII Market Segmentation by Distribution Channels

As professional indemnity can be a reasonably complex and specialist product, brokers account for the largest share of PII distribution accounting for more than 37% of policyholders in 2023. The ‘others’ category, contains organizations that play an important role in PII distribution such as trade associations.

UK PII Market Analysis by Distribution Channels, 2023 (%)

UK PII Market Analysis by Distribution Channels, 2023 (%)

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UK PII Market – Competitive Landscape

Within each of the major professions, insurers have differing market shares and presence. Over the years the UK’s major professional indemnity insurers have all made different decisions about their appetites for risk in certain sectors, with some choosing not to underwrite in the independent financial advisor, conveyancing, or construction sectors, for example.

 AXA is the market leader, both in terms of policyholder market share and when weighted based on SME turnover, which provides a greater indication of GWP market share. Aviva and Zurich continue to battle it out for second place in the UK PII market.

UK PII Market Analysis by Leading Companies

UK PII Market Analysis by Leading Companies

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Segments Covered in the Report

UK Professional Indemnity Insurance Market Sector Outlook 

  • Solicitors
  • Construction
  • Surveyors
  • Managing General Agents (MGAs)
  • Direct Propositions
  • Specialists

UK Professional Indemnity Insurance Market Distribution Channels Outlook 

  • Brokers
  • Direct Channels
  • Banks
  • PCW

Scope

• The UK PII market was worth GBP3.3 billion in 2023, with slower growth of 3.1% driven by changing market dynamics, counterbalanced by growth in turnover among traditional professions.

• PII penetration rates are recovering after a slight dip in the wake of COVID-19 pressures and the peak of the hard market, particularly among sole traders, micro enterprises, and those not providing professional advice.

• However, SMEs are re-evaluating their PII holdings as a result of cost pressures; a quarter of medium-sized companies and 16.3% of small companies are currently considering or have considered canceling their PII policy.

Key Highlights

  • We estimate the UK PII market to be worth £2.9 billion in 2021, with growth driven by premium rate rises across most market sectors. While premium adjustments will continue during 2022, it is expected that by the end of the year flatter rates will return.
  • PII penetration rates have fallen among micro-enterprises and those not providing professional advice, as coronavirus pressures mean SMEs are re-evaluating their insurance holdings.
  • Professional indemnity insurers are already dealing with coronavirus-linked claims. While many SMEs have made a successful claim on their PII policy as a result of the COVID-19 pandemic, the figures suggest that many claims are rejected as well.
  • AXA is the SME market leader, while Hiscox and Tokio Marine HCC are the most favored insurers among brokers for PII placement.

Reasons to Buy

  • Understand the current and forecast size and growth of the UK professional indemnity insurance market, along with sector-specific drivers.
  • Gain insight into the effect of volatile market conditions on SME switching and renewal behaviors.
  • Discover the SME market shares of the leading professional indemnity insurers and understand broker preferences.
  • Learn about key distribution trends in the market.

Aviva
Allianz
AXA
Zurich
Hiscox
Tokio Marine
Direct Line
Ageas
NFU Mutual

Table of Contents

1. Executive Summary

1.1 Market overview

1.2 Key findings

1.3 Critical success factors

2. Market Dynamics

2.1 Traditional professions account for 75–80% of GWP

2.2 PII market growth stabilized in 2023

2.3 Sector-specific forces still dominate different professions

2.4 SME penetration rates are recovering but cost pressures are impacting product holding

2.5 While profitability has been restored, claims inflation remains challenging

3. Competitive Landscape

3.1 Capacity and appetite are returning to the market

3.2 The leading insurers differ by sector

3.3 AXA is the SME PII market leader

3.4 Tokio Marine, Markel, and Hiscox are broker market leaders

4. Distribution

4.1 SMEs use a variety of distribution channels for PII

4.2 Switching has increased as competition returns

5. Future of the Market

5.1 UK PII market growth will be impacted by softening conditions

5.2 Economic uncertainties for the PII market

5.3 Additional forces that could impact PII market performance

6. Appendix

6.1 Abbreviations, acronyms, and initialisms

6.2 Methodology

6.3 Definitions

6.4 Secondary sources

6.5 Further reading

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Table

Table 1: Impact of cost pressures on PII policyholding considerations among SMEs, 2023

Table 2: Examples of new entrants and additional capacity in the UK PII market, 2023

Table 3: UK PII SME market shares by sector, 2023

Table 4: Method most recently used by SMEs to purchase PII by size of SME, 2023

Table 5: Length of time SMEs have been with their PII provider, 2023

Table 6: PII switching levels and behavior at last renewal by size of SME, 2023

Table 7: UK PII GWP, 2019–28f

Table 8: Economic indicators that will impact the future of the PII market

Table 9: Risks that could influence the future direction of the PII market

Figures

Figure 1: PII market GWP is stabilizing, following significant hard market growth

Figure 2: PII penetration levels have shown signs of recovery in some SME sectors

Figure 3: Sole traders and micro enterprises are increasingly purchasing PII as part of a package

Figure 4: SMEs are re-evaluating their PII holdings as a result of cost pressures

Figure 5: AXA is the leading SME professional indemnity insurer

Figure 6: Hiscox has a particular focus on micro enterprises and sole traders

Figure 7: Tokio Marine, Markel, and Hiscox lead the way for PII among commercial brokers

Figure 8: Brokers are the main channel used by SMEs to purchase PII

Figure 9: The internet is used by the majority of SMEs for PII

Figure 10: Almost four in 10 SMEs have been with their PII provider for less than three years

Figure 11: PII switching levels have increased among SMEs

Figure 12: Price and added risk management services are increasingly important drivers of switching among SMEs

Figure 13: Around three in 10 SMEs with PII would like risk management services from their insurance provider but are not currently receiving them

Figure 14: UK PII GWP growth is set to stabilize to 2028

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