Overview 1
Catalyst 1
Summary 1
Executive Summary 2
The EL sector was challenging in 2008 2
Lower premium rates due to competition remains the key driver behind the market's decline 2
Despite increases in net written premiums, the market was unprofitable 2
Gross claims costs increased in 2008 by 9.6% 2
Brokers dominate distribution 2
Independent insurance intermediaries of all types retained their leading market share in 2008 2
Commercial liability insurance is considered to be least at risk from the direct channel 3
SMEs are relatively open to internet arrangement of their employers' liability cover 3
Zurich, Aviva, RSA, AXA and QBE are the top five players 4
Zurich remained by far the largest insurer in the market 4
Aviva, RSA, AXA and QBE are firmly entrenched in the top five 4
The EL market is set to harden 5
Premium income is forecast to reach a high of ú2.4 billion in 2013 5
Table of Contents 6
Table of figures 7
Table of tables 8
Market Context 9
Introduction 9
The EL sector was challenging in 2008 9
The market shrank in 2008 as rates fell 9
The Lloyd's market has written a declining amount of employers' liability business in recent years 10
Premiums rates fell 12
Lower premium rates due to competition remains the key driver behind the market's decline 12
Policy count was relatively unchanged in 2008 as the recession had not yet affected the market 12
The market made an underwriting loss 14
Despite increases in net written premiums, the market was unprofitable 14
Commissions and expenses costs are estimated to have continued their decline in 2008 15
Employers' liability claims costs increased in 2008 16
Gross claims costs increased in 2008 by 9.6% 16
Employers' liability claims volumes have declined significantly in recent years 17
The British Coal schemes' costs have advanced only slightly 19
Workplace injuries and ill health continued to decline in 2007/08 20
Incidents of ill health and workplace injuries reported under RIDDOR contracted in 2007/08 20
Workplace injuries not attributable to violence declined considerably in 2007/08 21
Workplace fatalities reported under RIDDOR declined from their peak in 2006/07 21
The estimated total number of workplace accidents is also believed to have declined 22
Overall ill-health in the UK economy has declined, though cases of lung-related diseases have increased 23
Regulation is having an impact 25
A compensation fund along the lines of the Motor Insurance Bureau has been proposed for the market 25
Zurich has pursued a court case that benefits insurers still active in the market 25
The updated Health and Safety Act coming into effect could mean higher costs for employers' liability insurers 26
Employers' liability claims will not be included under the fast track scheme in government reforms 26
Proposed pleural plaques legislation can cause uncertainty for the market 26
Fraud is a serious problem for insurers 27
Fraud is a serious issue for the employers' liability market, particularly in light of the recession 27
Insurers have invested in anti-fraud programs that also benefit the employers' liability account 28
Customer Focus 29
Introduction 29
Brokers dominate distribution 29
Independent insurance intermediaries of all types retained their leading market share in 2008 29
Direct players account for a small but important portion of the commercial general insurance market 29
Corporate partnerships have maintained only a small presence in the commercial insurance market 30
Banks and building societies distribute negligible amounts of commercial general insurance 30
Commercial liability insurance is considered to be least at risk from the direct channel 32
An internet proposition could gain ground with SMEs 33
Brokers dominate among all sizes of SMEs, though they have greater market share among larger SMEs 33
Face-to-face arrangement is popular in the market but is more prevalent among larger SMEs 34
SMEs are relatively open to internet arrangement of their employers' liability cover 35
High levels of retention go along with high levels of satisfaction 36
SMEs are generally happy with their insurance provider 36
SMEs tend to prefer longstanding relationships with their providers, making an initial pitch critical 37
A large proportion of SMEs are unlikely to switch to a new provider 38
More SMEs considered a change of provider in 2009 than in 2008 38
A variety of companies, from different industries, believe they will change their provider over the next year 39
SMEs that use the internet to arrange their insurance are the most likely to search out a new provider 40
Competitive Dynamics 42
Introduction 42
Zurich, Aviva, RSA, AXA and QBE are the top five players 42
Zurich remained by far the largest insurer in the market 42
Aviva, RSA, AXA and QBE are firmly entrenched in the top five 42
Travelers bucked the trend 42
Allianz was the 6th largest EL insurer in 2008 42
Travelers increased its GWP 43
Allchurches is the 10th largest player 43
Lloyd's syndicates underwrote around ú100m of EL business 45
Amlin is a significant player in the Lloyd's employers' liability market 45
Canopius has developed a large book of UK liability risks through its exposure to Arista 45
Catlin, which operates the largest syndicate, decreased its UK exposure despite increasing its liability book 45
The average gross loss ratio was 73% 45
Gross loss ratios for AIG and Allianz improved substantially in 2008 45
AXA and ACE experienced only marginal change in their gross claims ratios, which still beat the market average 46
Gross loss ratios increased for most of the top 10 46
Future Decoded 48
Introduction 48
The EL market is set to harden 48
The recession will weigh heavily on GWP growth, though it is generally accepted that rates must rise 48
Premium income is forecast to reach a high of ú2.4 billion in 2013 49
The combined ratio is expected to remain well above 100% 51
APPENDIX 54
Definitions 54
Premium income measures 54
Earned premiums 54
Gross premium 54
Net premium 54
Written premiums 54
Distribution 54
Direct 54
Other company agents 54
Utilities/retailers/affinity groups 54
Company staff 54
Banks/building societies 55
Definitions of general terms 55
Channel 55
Platform 55
Employers liability (including the employers liability part of mixed liability packages but excluding mixed commercial packages) 55
Methodology 55
Commercial Insurance Broker Survey - March 2009 55
Datamonitor's SME Insurance Survey Q2 2009 56
Further reading 58
Ask the analyst 58
Datamonitor consulting 58
Disclaimer 58
List of Tables
Table 1: UK employers' liability insurance GWP (ABI members), 2000?08 (úm) 10
Table 2: Lloyd's market UK employers' liability insurance GWP, 2005-08p 11
Table 3: UK company insolvencies, 2004-2009 Q1p 14
Table 4: UK employers' liability underwriting result, 2004?08 (úm) 16
Table 5: Employers' liability gross claims costs, 2004-08 (úm) 17
Table 6: Number of employers' liability personal injury claims split by accident and disease, 2003/04-2008/09 18
Table 7: 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 19
Table 8: Workplace injuries reportable under RIDDOR, 2003/4?2007/8p 20
Table 9: Workplace injuries reportable under RIDDOR, excluding acts of violence, 2003/04?2007/08p 21
Table 10: Workplace fatalities reported under RIDDOR, 2003/04?2007/08p 22
Table 11: Total estimated workplace injuries reportable to the HSE, 2003/04?2007/08p 23
Table 12: Number of cases of occupational disease and work related mental ill-health, 2003?07p 24
Table 13: Estimated number of work-related and occupational respiratory disease, 2003-07p 27
Table 14: Market share of the distribution channels in the commercial general market, 1999-2008 (%) 32
Table 15: Q: How long have you been with your current insurance provider? 38
Table 16: Q: Do you think you will change your commercial insurance provider in the next 12 months? 39
Table 17: Top 10 UK employers' liability insurers by market share and GWP, 2007-08 44
Table 18: Gross claims ratio of the top 10 employers' liability insurers, 2004-08 (%) 47
Table 19: Key variables affecting employers' liability insurance GWP, 2008e-13f 49
Table 20: Employers' liability premium income forecast (ABI members), 2003-13f (úm) 51
Table 21: Forecast of EL combined ratio, 2009-13 (%) 53
Table 22: What banding does your company fall into in terms of general insurance premium income turnover? 56
Table 23: Q: What business sector are you involved in? 57
Table 24: Q: How large is your company in terms of number of employees? 57
Table 25: Q: How large is your company in terms of turnover? 58
List of Figures
Figure 1: SMEs show the greatest willingness to purchase public and employers' liability insurance online 4
Figure 2: Lloyd's market players have continued to write a declining amount of UK employers' liability business 11
Figure 3: UK company liquidations increased sharply in 2008 due to the recession 13
Figure 4: The employers' liability market made another underwriting loss in 2008 15
Figure 5: Gross claims costs resumed their growth in 2008, after a sharp decline in 2007 17
Figure 6: The number of employers' liability claims relating to disease has fallen significantly in recent years 18
Figure 7: Workplace deaths have declined from their most recent peak in 2006/07 22
Figure 8: Cases of lung-related occupational disease increased in 2007 24
Figure 9: National brokers witnessed a significant increase in their share of the UK commercial insurance market in 2008 31
Figure 10: Commercial motor is considered to be at most risk from the direct channel 33
Figure 11: Brokers have the highest penetration among medium-sized firms 34
Figure 12: Micro SMEs are most comfortable with arranging their cover over the telephone 35
Figure 13: SMEs show the greatest willingness to purchase public and employers' liability insurance online 36
Figure 14: Satisfaction levels in the market remain high 37
Figure 15: Very few SMEs have changed their provider in the last two years 38
Figure 16: Companies in the education sector are the most likely to seek out a new quote in the next 12 months 40
Figure 17: Clients which arrange their insurance through the internet are the most likely to search for another provider 41
Figure 18: Zurich remains the clear market leader 43
Figure 19: Loss ratios for the top 10 insurers generally deteriorated 47
Figure 20: The market is predicted to grow between 2009 and 2013 50
Figure 21: The combined ratio is expected to remain at well over 100% across the forecast period 52