UK Professional Indemnity Market Review 2018

Table of Contents

1. EXECUTIVE SUMMARY 1

• 1.1. Market summary 1
• 1.2. Key findings 1
• 1.3. Critical success factors 1

2. MARKET CONTEXT 7

• 2.1. Introduction 7
• 2.2. Growth in the PII market was driven by the construction, solicitors’ excess layer, and IFA sectors in 2018 7
• 2.3. Growth in underlying demand for PII remains muted among traditional professions, with slowing growth in ‘miscellaneous’ occupations 9
  • 2.3.1. Growth in the number of potential policyholders in ‘traditional’ professions remains muted 9
  • 2.3.2. Consolidation continues to shape the face of traditional professions 10
  • 2.3.3. Traditional profession turnover has continued to rise, indicating greater risk exposure for PI insurers 11
  • 2.3.4. Over the last five years much of the growth in underlying demand has occurred among non-traditional professions and SMEs 12
  • 2.3.5. Miscellaneous PII is believed to be increasingly saturated, not just among larger risks but also for SMEs 14
• 2.4. 2018 saw the start of a more significant withdrawal of capacity and a shift in premium rates in certain sectors 14
  • 2.4.1. The early indications of change that were starting to emerge in 2017 gathered significant pace in H2 2018 14
  • 2.4.2. Lloyd’s performance management initiatives have galvanized a reduction in capacity 15
  • 2.4.3. Premium rates rose, particularly in the construction, excess-layer solicitors PII, and IFA sectors 15
  • 2.4.4. Spotlight on solicitors 16
  • 2.4.5. Spotlight on construction 17
  • 2.4.6. Spotlight on IFAs 18
• 2.5. Profitability has reached unsustainable levels 18
  • 2.5.1. Lloyd’s market figures illustrate the extent of the PI market’s losses 18
  • 2.5.2. Persistent rate reductions and increased claims frequency and severity have caused the profitability crunch 19
• 2.6. Higher growth is expected in the PII market over the next couple of years 20
  • 2.6.1. Rate increases are expected in many areas of the market in 2019 20
  • 2.6.2. UK PII GWP will show healthier growth in 2019 and beyond 21
  • 2.6.3. A disorderly Brexit could have concerning implications for the PII market 22
  • 2.6.4. Sectoral issues will also impact the future growth of the overall market 23

3. PROFESSIONAL INDEMNITY INSURANCE AND SMES 25

• 3.1. Introduction 25
• 3.2. Over a third of SMEs providing advice do not hold professional indemnity insurance 25
• 3.3. Brokers and organizations such as trade associations remain popular channels for purchasing PII 27
• 3.4. The Internet is the most favored platform for SMEs buying PII 28
• 3.5. Human interaction remains important for small companies 29
• 3.6. Over half of SMEs with PII could be described as price-sensitive 30
• 3.7. Cyber risks remain a key issue, with clear cross-selling opportunities among small and medium companies that offer professional advice 32
  • 3.7.1. Cyber-related PII risks continue to grow 32
  • 3.7.2. The majority of SMEs with cyber cover also have PII 32
  • 3.7.3. There are cross-selling opportunities among small and medium companies that offer professional advice 32

4. COMPETITION 34

• 4.1. Introduction 34
• 4.2. The leading PI insurers differ by sector 34
• 4.3. After a raft of withdrawals in 2018 and increased market scrutiny on PII profitability, Lloyd’s’ share of the market will shrink 34
• 4.4. Travelers, QBE, and AmTrust remain the leading solicitor PII insurers 35
• 4.5. AXA, Aviva, and Hiscox fight it out for SME professional indemnity cover 37
  • 4.5.1. Hiscox has a well-established direct proposition, attracting sole traders 37
  • 4.5.2. AXA is the market leader across other SME segments and has expanded its mid-market appetite 37
  • 4.5.3. Aviva appears to have growing PI appetite 39
  • 4.5.4. Allianz and Zurich have more share among mid to large SMEs 39
• 4.6. Hiscox remains the most favored insurer for PII placement among brokers in 2018 39

5. APPENDIX 41

• 5.1. Abbreviations and acronyms 41
• 5.2. Definitions 41
  • 5.2.1. SMEs 41
• 5.3. Supplementary data 42
• 5.4. Methodology 43
  • 5.4.1. Primary and secondary research 43
  • 5.4.2. GlobalData’s 2018 UK Commercial Broker Survey 43
  • 5.4.3. GlobalData’s 2018 UK SME Insurance Survey 43
• 5.5. Bibliography 44