UK Professional Indemnity Market Review 2018

  • ID: 4726775
  • Report
  • Region: United Kingdom, Great Britain
  • 47 pages
  • GlobalData
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  • AXA
  • HCC
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  • Markel
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UK Professional Indemnity Market Review 2018

Summary

The winds of change gathered pace in 2018, with premium rate rises and significant reductions in Lloyd’s market capacity driving a step-change in H2. Further significant changes are anticipated in 2019 as professional indemnity insurers continue taking steps to address unsustainable levels of unprofitability.

Scope
  • Over the last five years much of the growth in underlying demand has occurred among non-traditional professions and SMEs.
  • Legal services are among the biggest buyers of PII, and, in comparison to other professions, only doctors and dentists have a higher number of insureds.
  • The technology, management consultancy, and freelance sectors can be particularly pinpointed as driving growth in the non-traditional or miscellaneous sectors. Professions impacted by the change in data protection rules through the EU’s General Data Protection Regulation (GDPR), which came into force in May 2018, have reportedly been looking more carefully at the potential benefits of PII and cyber cover.
Reasons to Buy
  • Develop your proposition to target growth segments
  • Ensure you remain competitive as new innovations and insurance models begin to enter the market.
  • Adapt your distribution strategy to ensure it is efficient and still meets customer purchasing habits.
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FEATURED COMPANIES

  • AmTrust
  • AXA
  • HCC
  • Lloyds
  • Markel
  • Omnyy
  • MORE
1. EXECUTIVE SUMMARY
1.1. Market summary
1.2. Key findings
1.3. Critical success factors

2. MARKET CONTEXT
2.1. Introduction
2.2. Growth in the PII market was driven by the construction, solicitors’ excess layer, and IFA sectors in 2018
2.3. Growth in underlying demand for PII remains muted among traditional professions, with slowing growth in ‘miscellaneous’ occupations
2.3.1. Growth in the number of potential policyholders in ‘traditional’ professions remains muted
2.3.2. Consolidation continues to shape the face of traditional professions
2.3.3. Traditional profession turnover has continued to rise, indicating greater risk exposure for PI insurers
2.3.4. Over the last five years much of the growth in underlying demand has occurred among non-traditional professions and SMEs
2.3.5. Miscellaneous PII is believed to be increasingly saturated, not just among larger risks but also for SMEs
2.4. 2018 saw the start of a more significant withdrawal of capacity and a shift in premium rates in certain sectors
2.4.1. The early indications of change that were starting to emerge in 2017 gathered significant pace in H2 2018
2.4.2. Lloyd’s performance management initiatives have galvanized a reduction in capacity
2.4.3. Premium rates rose, particularly in the construction, excess-layer solicitors PII, and IFA sectors
2.4.4. Spotlight on solicitors
2.4.5. Spotlight on construction
2.4.6. Spotlight on IFAs
2.5. Profitability has reached unsustainable levels
2.5.1. Lloyd’s market figures illustrate the extent of the PI market’s losses
2.5.2. Persistent rate reductions and increased claims frequency and severity have caused the profitability crunch
2.6. Higher growth is expected in the PII market over the next couple of years
2.6.1. Rate increases are expected in many areas of the market in 2019
2.6.2. UK PII GWP will show healthier growth in 2019 and beyond
2.6.3. A disorderly Brexit could have concerning implications for the PII market
2.6.4. Sectoral issues will also impact the future growth of the overall market

3. PROFESSIONAL INDEMNITY INSURANCE AND SMES
3.1. Introduction
3.2. Over a third of SMEs providing advice do not hold professional indemnity insurance
3.3. Brokers and organizations such as trade associations remain popular channels for purchasing PII
3.4. The Internet is the most favored platform for SMEs buying PII
3.5. Human interaction remains important for small companies
3.6. Over half of SMEs with PII could be described as price-sensitive
3.7. Cyber risks remain a key issue, with clear cross-selling opportunities among small and medium companies that offer professional advice
3.7.1. Cyber-related PII risks continue to grow
3.7.2. The majority of SMEs with cyber cover also have PII
3.7.3. There are cross-selling opportunities among small and medium companies that offer professional advice

4. COMPETITION
4.1. Introduction
4.2. The leading PI insurers differ by sector
4.3. After a raft of withdrawals in 2018 and increased market scrutiny on PII profitability, Lloyd’s’ share of the market will shrink
4.4. Travelers, QBE, and AmTrust remain the leading solicitor PII insurers
4.5. AXA, Aviva, and Hiscox fight it out for SME professional indemnity cover
4.5.1. Hiscox has a well-established direct proposition, attracting sole traders
4.5.2. AXA is the market leader across other SME segments and has expanded its mid-market appetite
4.5.3. Aviva appears to have growing PI appetite
4.5.4. Allianz and Zurich have more share among mid to large SMEs
4.6. Hiscox remains the most favored insurer for PII placement among brokers in 2018

5. APPENDIX
5.1. Abbreviations and acronyms
5.2. Definitions
5.2.1. SMEs
5.3. Supplementary data
5.4. Methodology
5.4.1. Primary and secondary research
5.4.2. 2018 UK Commercial Broker Survey
5.4.3. 2018 UK SME Insurance Survey
5.5. Bibliography
5.6. Further reading

List of Tables
Table 1: Growth in business numbers within legal, accounting, architectural & engineering by size of business, 2014-18
Table 2: Average turnover by profession, 2014-18
Table 3: UK PII GWP, 2014-22f
Table 4: Top five insurers selected by SMEs purchasing professional indemnity insurance, by share of responses, 2018
Table 5: Turnover by size of business in key 'traditional' PI professions, 2014-18

List of Figures
Figure 1: UK PII GWP has grown slowly since 2015, with more notable growth achieved in 2018
Figure 2: While growth in the number of employers within traditional PII professions has continued to slow, it has generally not been as affected by the economic slowdown as the private sector
Figure 3: Consolidation continues to shape the traditional professions
Figure 4: Tech and management consultancy businesses continue to grow faster than the private sector as a whole
Figure 5: Larger law firms saw premium rate increases in 2017-18
Figure 6: The average solicitor PII premium has declined since 2013, while average turnover has increased
Figure 7: Premium rate rises will counter slower economic performance and lead to higher growth rates for PII GWP
Figure 8: PII penetration rises along with company size
Figure 9: The majority of SMEs providing advice without PII do not think they need it
Figure 10: SMEs use a variety of channels when purchasing PII
Figure 11: Human interaction is important for small companies buying PII
Figure 12: Levels of shopping around for PI decrease with size
Figure 13: 11-12% of small and medium companies that provide professional advice have cyber cover but not PII
Figure 14: There have been a raft of Lloyd’s withdrawals in H2 2018
Figure 15: AXA, Aviva, and Hiscox are the UK's largest SME PI insurers
Figure 16: Hiscox, Markel, and HCC were the most favored PI insurers in the 2018 broker survey
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  • AXA
  • Aviva
  • Hiscox
  • Markel
  • HCC
  • Travelers
  • QBE
  • AmTrust
  • Lloyds
  • Novae
  • Zurich
  • Chancery
  • Locktons
  • Omnyy
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