UK Employers' Liability Insurance 2009

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

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
• 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
• 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
  • Distribution
  • Definitions of general terms
• Methodology
  • Commercial Insurance Broker Survey - March 2009
  • Datamonitor' s SME Insurance Survey Q2 2009
• Further reading
• Ask the analyst
• Datamonitor consulting
• Disclaimer

TABLES

• Table: UK employers' liability insurance GWP (ABI members), 2000 - 08 (£m)
• Table: Lloyd' s market UK employers' liability insurance GWP, 2005 - 08p
• Table: UK company insolvencies, 2004 - 2009 Q1p
• Table: UK employers' liability underwriting result, 2004 - 08 (£m)
• Table: Employers' liability gross claims costs, 2004 - 08 (£m)
• Table: Number of employers' liability personal injury claims split by accident and disease, 2003/04 - 2008/09
• Table: 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: Workplace injuries reportable under RIDDOR, 2003/4 - 2007/8p
• Table: Workplace injuries reportable under RIDDOR, excluding acts of violence, 2003/04 - 2007/08p
• Table: Workplace fatalities reported under RIDDOR, 2003/04 - 2007/08p
• Table: Total estimated workplace injuries reportable to the HSE, 2003/04 - 2007/08p
• Table: Number of cases of occupational disease and work related mental ill-health, 2003 - 07p
• Table: Estimated number of work-related and occupational respiratory disease, 2003 - 07p
• Table: Market share of the distribution channels in the commercial general market, 1999 - 2008 (%)
• Table: Q: "How long have you been with your current insurance provider?"
• Table: Q: "Do you think you will change your commercial insurance provider in the next 12 months?"
• Table: Top 10 UK employers' liability insurers by market share and GWP, 2007 - 08
• Table: Gross claims ratio of the top 10 employers' liability insurers, 2004 - 08 (%)
• Table: Key variables affecting employers' liability insurance GWP, 2008e - 13f
• Table: Employers' liability premium income forecast (ABI members), 2003 - 13f (£m)
• Table: Forecast of EL combined ratio, 2009-13 (%)
• Table: What banding does your company fall into in terms of general insurance premium income turnover?
• Table: Q: "What business sector are you involved in?"
• Table: Q: "How large is your company in terms of number of employees?"
• Table: Q: "How large is your company in terms of turnover?"

FIGURES

• Figure: SMEs show the greatest willingness to purchase public and employers' liability insurance online
• Figure: Lloyd' s market players have continued to write a declining amount of UK employers' liability business
• Figure: UK company liquidations increased sharply in 2008 due to the recession
• Figure: The employers' liability market made another underwriting loss in 2008
• Figure: Gross claims costs resumed their growth in 2008, after a sharp decline in 2007
• Figure: The number of employers' liability claims relating to disease has fallen significantly in recent years
• Figure: Workplace deaths have declined from their most recent peak in 2006/07
• Figure: Cases of lung-related occupational disease increased in 2007
• Figure: National brokers witnessed a significant increase in their share of the UK commercial insurance market in 2008
• Figure: Commercial motor is considered to be at most risk from the direct channel
• Figure: Brokers have the highest penetration among medium-sized firms
• Figure: Micro SMEs are most comfortable with arranging their cover over the telephone
• Figure: SMEs show the greatest willingness to purchase public and employers' liability insurance online
• Figure: Satisfaction levels in the market remain high
• Figure: Very few SMEs have changed their provider in the last two years
• Figure: Companies in the education sector are the most likely to seek out a new quote in the next 12 months
• Figure: Clients which arrange their insurance through the internet are the most likely to search for another provider
• Figure: Zurich remains the clear market leader
• Figure: Loss ratios for the top 10 insurers generally deteriorated
• Figure: The market is predicted to grow between 2009 and 2013
• Figure: The combined ratio is expected to remain at well over 100% across the forecast period