UK Professional Indemnity Insurance Market Update 2019

Table of Contents

Table of Contents

1. EXECUTIVE SUMMARY

1.1. Hard conditions prevail in the PII market

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 hard conditions across multiple sectors in 2019

2.3. Growth in underlying demand for PII remains muted among traditional professions and slow for 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 increasingly saturated, not just among larger risks but also for SMEs

2.4. The impact of significant capacity withdrawal led to premium rate rises in 2019

2.4.1. Lloyd's performance management initiatives have led to a significant reduction in capacity

2.4.2. Premium rates rose throughout 2019, particularly in the construction, solicitor, and IFA sectors

2.4.3. Spotlight on solicitors

2.4.4. Spotlight on construction

2.4.5. Spotlight on IFAs

2.5. Higher growth is expected in the market over the next couple of years

2.5.1. Rate increases are expected to continue in many areas of the PII market in 2020

2.5.2. UK PII GWP will continue to show healthier growth in 2020 and beyond

2.5.3. Considerable economic uncertainties could have significant implications for the PII market

2.5.4. Sectoral issues will also impact the future growth of the overall market

3. PROFESSIONAL INDEMNITY INSURANCE AND SMES

3.1. Introduction

3.2. PII penetration is stagnating

3.3. Four out of 10 SMEs providing advice do not hold PII

3.4. Brokers and organizations such as trade associations remain popular channels for purchasing PII

3.5. The internet is the favored platform for SMEs buying PII

3.6. Human interaction remains important for small companies

3.7. Switching has increased due to market conditions

3.8. Cyber risks remain a key issue, with clear cross-selling opportunities among small and medium companies that offer professional advice

3.8.1. Cyber-related PII risks continue to grow

3.8.2. The majority of SMEs with cyber cover also have PII

3.8.3. 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 PI profitability, Lloyd's share of the UK PII market has shrunk

4.4. AXA and Hiscox are among the most selected insurers for SME professional indemnity cover

4.4.1. Hiscox has a well-established direct proposition, attracting sole traders

4.4.2. AXA is the market leader across other SME segments and has expanded its mid-market appetite

4.4.3. Zurich has gained market share

4.5. Hiscox remained the favored insurer for PII placement among brokers in 2019

5. APPENDIX

5.1. Abbreviations and acronyms

5.2. Supplementary data

5.3. Definitions

5.3.1. SMEs

5.4. Methodology

5.4.1. GlobalData's 2019 UK Commercial Broker Survey

5.4.2. GlobalData's 2019 UK SME Insurance Survey

5.4.3. Change in BEIS data presentation

5.5. Secondary sources

5.6. Further reading

List of Figure

List of Figures

Figure 1: UK PII GWP had grown slowly since 2015, with more notable growth achieved in 2019

Figure 2: Growth in the number of employers within traditional PII professions remains muted in comparison to the private sector

Figure 3: Since 2015 average turnover has increased notably faster among traditional PII profession employers than among private sector employers

Figure 4: Premium rate rises will counter slower economic performance and lead to higher rates of growth for UK PII GWP

Figure 5: PII penetration levels are largely stagnant, but showed slight signs of decline in 2019

Figure 6: The majority of SMEs providing advice without PII do not think they need it

Figure 7: SMEs use a variety of channels when purchasing PII

Figure 8: Human interaction is important for small companies buying PII

Figure 9: Levels of shopping around for PI decrease in line with business size

Figure 10: A growing proportion of switchers are looking for increased coverage, more flexibility, and added risk management services

Figure 11: A notable proportion of small and medium companies that provide professional advice have cyber cover but not PII

Figure 12: Hiscox, HCC, and Markel remain brokers' favored PI insurers

List of Table

List of Tables

Table 1: UK PII GWP, 2015-19e

Table 2: UK PII GWP, 2019e-23f

Table 3: PII switching levels and behavior at last renewal by size of SME, 2019

Table 4: Top insurers selected by SMEs purchasing PII, by share of responses, 2019

Table 5: Turnover by size of business in key traditional PI professions (GBPm), 2014-18

Table 6: Number of businesses by size in key traditional PI professions, 2014-18