Abstract
Overview
Introduction
Soft market conditions continued to affect business in the UK professional indemnity market in 2007, with low claims volumes allowing competition to remain strong and premium rates to decline. Premiums continued to fall despite new business driving an increase in policy numbers.
Scope
- 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
Highlights
An increasing number of brokers have opened regional branches in order to get closer to more remote clients. This is allowing them to gain market share at the expense of those brokers and insurers which are becoming increasingly centralized, and this could effectively lead to de-consolidation in the PI market.
Lloyd' s share of GWP continued on its downward trend in 2006, falling by 1.5 percentage points to 33.6%. Since 2002, Lloyd' s share of the professional indemnity market has fallen from 56.6% to its current level.
The decline in premium rates was partly offset by growth in the take up of PI in 2007. On average, interviewees estimated that the number of policies-in-force increased by approximately 5-10%. The impetus behind the policy growth is the result of various new professions requiring PI as government regulation and UK society develop.
Reasons to Purchase
- 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
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
- Professional indemnity GWP continued to fall in 2007 due to weakening
premium rates
- 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 un profitable
- 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
- The internet has become an increasingly popular method for attracting
PI business
- 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
- Many SMEs considering a telephone purchase do so because of its
convenience
- 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
- Definitions
- 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
