UK Employers' Liability Insurance: Market Dynamics and Opportunities 2017

  • ID: 4413780
  • Report
  • Region: United Kingdom, Great Britain
  • 46 pages
  • GlobalData
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FEATURED COMPANIES

  • ACE
  • AIG
  • Allianz
  • Aviva
  • AXA
  • Liberty Mutual
  • MORE
UK Employers’ Liability Insurance: Market Dynamics and Opportunities 2017

Summary

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.
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FEATURED COMPANIES

  • ACE
  • AIG
  • Allianz
  • Aviva
  • AXA
  • Liberty Mutual
  • MORE
1 EXECUTIVE SUMMARY
1.1. Market summary
1.2. Key findings
1.3. Critical success factors

2. MARKET DYNAMICS
2.1. Underlying demand for employers’ liability slowed in 2016, particularly among smaller companies
2.1.1. The number of businesses and employees continued to grow in 2016, but at a slower rate
2.1.2. The greatest slowdown is occurring among smaller companies
2.1.3. SMEs account for over 52% of private sector employees
2.1.4. The UK economy has continued to shift from manufacturing to services
2.1.5. Most sectors have contributed to the slowdown in demand
2.1.6. The underlying macroeconomic environment remains positive, but has slowed
2.2. High levels of competition continued to dampen EL growth in 2016, but Ogden has since led to premium rate rises
2.2.1. The UK EL market contracted in 2016
2.2.2. Premium rates were flat or slightly negative in 2016, with EL performance in line with the last few years
2.2.3. Changes to the discount rate had a substantial impact on the market, leading to premium rate increases in 2017
2.2.4. Competitive positions are believed to have remained largely stable
2.3. EL remains unprofitable in spite of recent premium rate increases
2.3.1. Employers’ liability has not made an underwriting profit since 2005
2.3.2. EL loss ratios continue to be plagued by claims inflation that has outpaced premium rate rises in recent years
2.3.3. EL expense ratios are under pressure
2.4. The number of EL claims recorded is falling, while NIHL continues to drive up claims settled
2.4.1. Recorded EL claims continue to fall, driven by drops in accident and disease
2.4.2. NIHL claims activity is on the wane
2.4.3. The number of asbestosis and mesothelioma cases is largely stable
2.4.4. Injuries to employees, the underlying driver of EL accident claims, are in long-term decline
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
2.5. The Claims Portal is having a positive impact on claims costs, but remains challenging for disease claims
2.5.1. Only 20% of disease claims are estimated to meet the Portal criteria
2.5.2. 5% of disease claims and 14% of accident claims notified have been settled within the Portal

3. DEVELOPMENTS IN 2017 AND BEYOND
3.1. Employers’ liability GWP is forecast to rise in 2017 and 2018
3.1.1. The future course of changes to the Ogden rate will have a significant impact on the market in 2017 and 2018
3.1.2. Other factors could influence market growth in the near term
3.1.3. Employers’ liability GWP is expected to increase in 2017 before slowing again in 2018
3.1.4. Underwriting profitability will remain challenging
3.2. Revised personal injury reforms will have less of an impact on EL
3.2.1. Government proposals to reform personal injury claims have had a bumpy ride
3.2.2. The changing nature of the reforms has lessened the potential impact on EL
3.3. The market will be keeping a close watch on other areas of potential reform
3.3.1. The proposed LASPO review was due for completion by April 2018
3.3.2. Lord Jackson’s fixed recoverable cost proposals were revealed in July 2017
3.4. The negative economic consequences of Brexit will have an adverse effect on EL
3.4.1. The EL product, levels of competition, and health and safety legislation are likely to be unaffected by Brexit
3.4.2. The economic consequences of Brexit will have the greatest impact
3.5. The growing gig economy is an area to watch for EL insurers

4. APPENDIX
4.1. Abbreviations and acronyms
4.2. Methodology
4.3. Bibliography
4.4. Further reading

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

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