the shape of things to come the broker’s vie mcauliffe.pdf · slide 3 the shape of things to come...
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The shape of things to come
The Broker’s ViewTeresa McAuliffe
LUG Conference September 2008
Slide 2
Credits• ABI Statistics September 2007
• Datamonitor – UK Employers’ Liability Insurance Insurance 2008
• HSE – RIDDOR statistics
• Erno Rubik
• Nassim Nicholas Taleb
• Clients and colleagues at Aon
Slide 3
The shape of things to come
In 2008 the market is expected to remain relatively flat . .
In 2009, insurers will have more power to increase rates due to competition relaxing within the market as insurers switch their strategy from competing for market share to increasing profitability which will require greater underwriting discipline.
This will lead to an estimated increase of 6.6%.
In 2011 and 2012 the market will continue to grow, albeit at a slower pace with GWP estimated to reach a total of £2,326bn.
Datamonitor April 2008UK Employers’ Liability Insurance 2008
Slide 4
But . . .
The employers’ liability market is expected to remain unprofitable between 2007 and 2012
due to strong claims inflation which will outstrip overall growth in GWP during this
period. . . claims inflation is expected to reach 8% by 2012 as the effects of claims
indexation and NHS claw-back materialise within the market.
Datamonitor April 2008
UK Employers’ Liability Insurance 2008
Slide 5
The shape of things to come
The market is expected to experience severe unprofitability throughout the forecasting period and will record the highest level of unprofitability in 2012,
indicated by a combined ratio of 135.8%
Datamonitor April 2008
UK Employers’ Liability Insurance 2008
Slide 6
The shape of things to come
Slide 7
The shape of things to come
Slide 8
Results
-8,000
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
1975 1990 1995 2000 2005
£m
Investment IncomeUnderwriting ResultTrading Result
Source: ABI Statistics September 2007
Slide 9
Liability underwriting result
-4,000
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Net UK PremiumOther expensesNet ClaimsUnderwriting Result
£m
Source: ABI Statistics September 2007
Slide 10
EL : Other Liability
-2,000
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2,500
1999 2000 2001 2002 2003 2004 2005 2006
£m Other PremiumEL PremiumOther ClaimsEL Claims
Source: ABI Statistics September 2007
Slide 11
EL Trigger Litigation
Slide 12
Shape shifters?• Manufacturing imports from China and the Far East• Nano-technology • Obesity • Cyber liability • Occupational disease • Asbestos• NHS claw-back• Claims indexation
Slide 13
Commission levels
Insurance chiefs denounce
commissions that top 30%
Post Magazine 7 August 2008
Slide 14
Other LiabilityCommission & Expenses
0
100
200
300
400
500
600
700
1999 2000 2001 2002 2003 2004 2005 20060.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
£m % of UK Net Written Premium
Source: ABI Statistics September 2007
Slide 15
Employers’ LiabilityCommission & Expenses
0
100
200
300
400
500
600
700
1999 2000 2001 2002 2003 2004 2005 2006
£m
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
Total £m % of UK Net Written Premium
Source: ABI Statistics September 2007
Slide 16
Employers’ Liability results
-2,000
-1,500
-1,000
-500
0
500
1,000
1,500
1999 2000 2001 2002 2003 2004 2005 2006
Net UK PremiumOther expensesNet ClaimsUnderwriting Result
£m£m
Source: ABI Statistics September 2007
Slide 17
Employers’ Liability claims
0
50,000
100,000
150,000
200,000
250,000
2002 2003 2004 2005 2006
Number of claims
0
5,000
10,000
15,000
20,000
25,000
£ average cost of claim
Disease claims
Accident claims
Average cost per claim
Source RIDDOR statistics - HSE
Slide 18
Workplace fatalities
0
112
225
337
450
562
674
2002 2003 2004 2005 2006
Self-employedEmployeesMembers of the public
Source RIDDOR statistics - HSE
Slide 19
Workplace injuries
125,000
130,000
135,000
140,000
145,000
150,000
155,000
160,000
2002 2003 2004 2005 2006
Source RIDDOR statistics - HSE
Slide 20
Disease claims numbers
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Other diseases
Stress
Upper Limb disorders
Skin diseases
Cancer
Asthma
VWF
Lung disease
Deafness
Percentage of disease claims by type
Source: ABI Statistics September 2007
Slide 21
Other Liability
-2,500
-2,000
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2,500
1999 2000 2001 2002 2003 2004 2005 2006
Net UK PremiumOther expensesNet ClaimsUnderwriting Result
£m
Source: ABI Statistics September 2007
Slide 22
Cover
• Asbestos exclusions
• Corporate Manslaughter defence costs
• Pollution
• Terrorism
• Financial Loss
Slide 23
Change in provisions
-800
-600
-400
-200
0
200
400
600
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
£mChange in provisionsPosted underw riting resultAdjusted underw riting result
Source: ABI Statistics September 2007
Slide 24
The shape of things to come
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