Cover Image
Market Research Report

UK Employers' Liability Insurance: Market Dynamics and Opportunities 2017

Published by GlobalData Product code 366920
Published Content info 46 Pages
Immediate Delivery Available
Price
Back to Top
UK Employers' Liability Insurance: Market Dynamics and Opportunities 2017
Published: October 10, 2017 Content info: 46 Pages
Description

An unexpected extent of the changes to the Ogden rate has shaken the employers' liability (EL) market. Premium rate rises have been forced on a sector characterized by over-capacity and high levels of competition. In spite of the recent rate increases, underlying market dynamics persists, and the sector faces a period of continued turbulence, due to uncertainties over key pieces of legislation and the performance of the economy.

Key findings include in this report -

  • UK EL market gross written premium (GWP) contracted by 7.4% in 2016.
  • Insurers have responded to the 2017 discount rate change with significant reserve strengthening and premium rate rises, which has led to estimates of more robust GWP growth.
  • The number of accident and disease EL claims recorded fell significantly in 2016-17 (-15.2%) with the impact of the LASPO spike. Noise-induced hearing loss (NIHL) claims have waned in combination with continued improvements in workplace health and safety.

Critical success factors

  • Tackling the impact of Brexit in the face of economic uncertainty - EL insurers need to be prepared to respond in the face of considerable economic uncertainties. A slowdown in GDP growth, higher inflation, interest rate rises, an increase in wage inflation, and the risk of a decline in skilled labor could all impact profitability and demand.
  • Preparation for government reforms - Insurers need to be prepared for any future developments in personal injury reforms. The spiral of NIHL claims has already demonstrated the effect that a shift in the attentions of claimant parties can have. Insurers and regulators therefore need to be on alert for any unintended consequences and knock-on EL impacts.
  • Ogden strategic responses - Insurer responses to the current and future Ogden rate will be vital to success in terms of profitability and market share. Failing to respond sufficiently could lead to long-term profitability issues, while responding too vigorously could cause significant loss of market share. Either way, EL insurers are walking a tightrope. Rating and new business strategies will need close examination, and increasing sophistication in terms of rating factors such as workforce age profile and claims experience will be key to success.

The report "UK Employers' Liability Insurance: Market Dynamics and Opportunities 2017" tracks the health and the shape of the UK employers' liability market, taking into account market size, profitability and performance ratios, and the claims environment. The context of the UK's economic growth, business landscape, and the impact of a post-Brexit environment are all taken into consideration to build a full picture of this space. Key announcements, shifts in the market, and likely future changes are analyzed for impact across all relevant stakeholders.

Companies mentioned in this report: Zurich, Aviva, QBE, AXA, AIG, Allianz, RSA, Liberty Mutual, Travelers, ACE

Scope

  • UK EL market gross written premium (GWP) contracted by 7.4% in 2016.
  • Insurers have responded to the 2017 discount rate change with significant reserve strengthening and premium rate rises, which has led to estimates of more robust GWP growth.
  • The number of accident and disease EL claims recorded fell significantly in 2016-17 (-15.2%) as a result of the impact of the LASPO spike.
  • Noise-induced hearing loss claims waned in combination with continued improvements in workplace health and safety.

Reasons to buy

  • Review your strategy against both the existing and new challenges regarding the employers' liability market.
  • Benchmark against the market's experience of market size, growth, performance, and claims environment.
Table of Contents
Product Code: FS0071IA

Table of Contents

Table of Contents

1 EXECUTIVE SUMMARY 1

  • 1.1. Market summary 1
  • 1.2. Key findings 1
  • 1.3. Critical success factors 1
  • 2. MARKET DYNAMICS 7
  • 2.1. Underlying demand for employers' liability slowed in 2016, particularly among smaller companies 7
  • 2.1.1. The number of businesses and employees continued to grow in 2016, but at a slower rate 7
  • 2.1.2. The greatest slowdown is occurring among smaller companies 9
  • 2.1.3. SMEs account for over 52% of private sector employees 11
  • 2.1.4. The UK economy has continued to shift from manufacturing to services 12
  • 2.1.5. Most sectors have contributed to the slowdown in demand 12
  • 2.1.6. The underlying macroeconomic environment remains positive, but has slowed 15
  • 2.2. High levels of competition continued to dampen EL growth in 2016, but Ogden has since led to premium rate rises 16
  • 2.2.1. The UK EL market contracted in 2016 16
  • 2.2.2. Premium rates were flat or slightly negative in 2016, with EL performance in line with the last few years 18
  • 2.2.3. Changes to the discount rate had a substantial impact on the market, leading to premium rate increases in 2017 18
  • 2.2.4. Competitive positions are believed to have remained largely stable 19
  • 2.3. EL remains unprofitable in spite of recent premium rate increases 21
  • 2.3.1. Employers' liability has not made an underwriting profit since 2005 21
  • 2.3.2. EL loss ratios continue to be plagued by claims inflation that has outpaced premium rate rises in recent years 23
  • 2.3.3. EL expense ratios are under pressure 24
  • 2.4. The number of EL claims recorded is falling, while NIHL continues to drive up claims settled 24
  • 2.4.1. Recorded EL claims continue to fall, driven by drops in accident and disease 24
  • 2.4.2. NIHL claims activity is on the wane 26
  • 2.4.3. The number of asbestosis and mesothelioma cases is largely stable 26
  • 2.4.4. Injuries to employees, the underlying driver of EL accident claims, are in long-term decline 27
  • 2.4.5. Claims settled are still sharply rising and remain significantly above pre-LASPO levels, as the NIHL surge takes time to work its way through the system 29
  • 2.5. The Claims Portal is having a positive impact on claims costs, but remains challenging for disease claims 30
  • 2.5.1. Only 20% of disease claims are estimated to meet the Portal criteria 30
  • 2.5.2. 5% of disease claims and 14% of accident claims notified have been settled within the Portal 30
  • 3. DEVELOPMENTS IN 2017 AND BEYOND 31
  • 3.1. Employers' liability GWP is forecast to rise in 2017 and 2018 31
  • 3.1.1. The future course of changes to the Ogden rate will have a significant impact on the market in 2017 and 2018 31
  • 3.1.2. Other factors could influence market growth in the near term 33
  • 3.1.3. Employers' liability GWP is expected to increase in 2017 before slowing again in 2018 33
  • 3.1.4. Underwriting profitability will remain challenging 35
  • 3.2. Revised personal injury reforms will have less of an impact on EL 36
  • 3.2.1. Government proposals to reform personal injury claims have had a bumpy ride 36
  • 3.2.2. The changing nature of the reforms has lessened the potential impact on EL 36
  • 3.3. The market will be keeping a close watch on other areas of potential reform 37
  • 3.3.1. The proposed LASPO review was due for completion by April 2018 37
  • 3.3.2. Lord Jackson's fixed recoverable cost proposals were revealed in July 2017 38
  • 3.4. The negative economic consequences of Brexit will have an adverse effect on EL 39
  • 3.4.1. The EL product, levels of competition, and health and safety legislation are likely to be unaffected by Brexit 39
  • 3.4.2. The economic consequences of Brexit will have the greatest impact 39
  • 3.5. The growing gig economy is an area to watch for EL insurers 41
  • 4. APPENDIX 42
  • 4.1. Abbreviations and acronyms 42
  • 4.2. Methodology 42
  • 4.3. Bibliography 43
  • 4.4. Further reading 44

List of Tables

List of Tables

  • Table 1: UK employment rate, number of employees, and number of private sector businesses with at least 1 employee, 2012-17 9
  • Table 2: Number of employees and businesses in the UK private sector, split by number of employees, 2012-16 11
  • Table 3: Growth and number of employees and businesses in the UK private sector, by industry, 2016 14
  • Table 4: UK GDP by sector, Q1 2016-Q2 2017 16
  • Table 5: UK employers' and total liability GWP (£m), 2012-16 17
  • Table 6: Top 10 UK EL insurers' market share, 2014-15 20
  • Table 7: UK EL underwriting result and underwriting ratios, 2012-16 23
  • Table 8: Number of employers' liability claims recorded and settled, 2012-17 25
  • Table 9: Employer-reported fatal and non-fatal injuries to employees, 2011-16 29
  • Table 10: UK employers' liability GWP, 2012-21f 35

List of Figures

List of Figures

  • Figure 1: UK private sector employment grew steadily between 2012 and 2016, but is slowing 8
  • Figure 2: The greatest slowdown is occurring among smaller companies 10
  • Figure 3: Most major industry sectors posted a slowdown in employee growth in 2016 13
  • Figure 4: Services remains a largely reliable driver of GDP growth 15
  • Figure 5: Employers' liability GWP contracted in 2016 17
  • Figure 6: ABI data shows an underwriting profit for EL in 2016 as a result of the reinsurance actions of a few major players 22
  • Figure 7: Accident claims dominate the employers' liability market 25
  • Figure 8: Fatal and non-fatal injuries to employees are in long-term decline 28
  • Figure 9: The impact of Ogden will drive higher growth in the short term before the market settles back to the longer-term trend 34
  • Figure 10: Potential impacts of Brexit on the UK employers' liability market 40
Back to Top