Published : Oct-2017
No. of Pages : 46
1 EXECUTIVE SUMMARY 1
1.1. Market summary 1
1.2. Key findings 1
1.3. Critical success factors 1
2. MARKET DYNAMICS 7
2.1. Underlying demand for employers' liability slowed in 2016, particularly among smaller companies 7
2.1.1. The number of businesses and employees continued to grow in 2016, but at a slower rate 7
2.1.2. The greatest slowdown is occurring among smaller companies 9
2.1.3. SMEs account for over 52% of private sector employees 11
2.1.4. The UK economy has continued to shift from manufacturing to services 12
2.1.5. Most sectors have contributed to the slowdown in demand 12
2.1.6. The underlying macroeconomic environment remains positive, but has slowed 15
2.2. High levels of competition continued to dampen EL growth in 2016, but Ogden has since led to premium rate rises 16
2.2.1. The UK EL market contracted in 2016 16
2.2.2. Premium rates were flat or slightly negative in 2016, with EL performance in line with the last few years 18
2.2.3. Changes to the discount rate had a substantial impact on the market, leading to premium rate increases in 2017 18
2.2.4. Competitive positions are believed to have remained largely stable 19
2.3. EL remains unprofitable in spite of recent premium rate increases 21
2.3.1. Employers' liability has not made an underwriting profit since 2005 21
2.3.2. EL loss ratios continue to be plagued by claims inflation that has outpaced premium rate rises in recent years 23
2.3.3. EL expense ratios are under pressure 24
2.4. The number of EL claims recorded is falling, while NIHL continues to drive up claims settled 24
2.4.1. Recorded EL claims continue to fall, driven by drops in accident and disease 24
2.4.2. NIHL claims activity is on the wane 26
2.4.3. The number of asbestosis and mesothelioma cases is largely stable 26
2.4.4. Injuries to employees, the underlying driver of EL accident claims, are in long-term decline 27
2.4.5. Claims settled are still sharply rising and remain significantly above pre-LASPO levels, as the NIHL surge takes time to work its way through the system 29
2.5. The Claims Portal is having a positive impact on claims costs, but remains challenging for disease claims 30
2.5.1. Only 20% of disease claims are estimated to meet the Portal criteria 30
2.5.2. 5% of disease claims and 14% of accident claims notified have been settled within the Portal 30
3. DEVELOPMENTS IN 2017 AND BEYOND 31
3.1. Employers' liability GWP is forecast to rise in 2017 and 2018 31
3.1.1. The future course of changes to the Ogden rate will have a significant impact on the market in 2017 and 2018 31
3.1.2. Other factors could influence market growth in the near term 33
3.1.3. Employers' liability GWP is expected to increase in 2017 before slowing again in 2018 33
3.1.4. Underwriting profitability will remain challenging 35
3.2. Revised personal injury reforms will have less of an impact on EL 36
3.2.1. Government proposals to reform personal injury claims have had a bumpy ride 36
3.2.2. The changing nature of the reforms has lessened the potential impact on EL 36
3.3. The market will be keeping a close watch on other areas of potential reform 37
3.3.1. The proposed LASPO review was due for completion by April 2018 37
3.3.2. Lord Jackson's fixed recoverable cost proposals were revealed in July 2017 38
3.4. The negative economic consequences of Brexit will have an adverse effect on EL 39
3.4.1. The EL product, levels of competition, and health and safety legislation are likely to be unaffected by Brexit 39
3.4.2. The economic consequences of Brexit will have the greatest impact 39
3.5. The growing gig economy is an area to watch for EL insurers 41
4. APPENDIX 42
4.1. Abbreviations and acronyms 42
4.2. Methodology 42
4.3. Bibliography 43
4.4. Further reading 44
List of Tables
Table 1: UK employment rate, number of employees, and number of private sector businesses with at least 1 employee, 2012-17 9
Table 2: Number of employees and businesses in the UK private sector, split by number of employees, 2012-16 11
Table 3: Growth and number of employees and businesses in the UK private sector, by industry, 2016 14
Table 4: UK GDP by sector, Q1 2016-Q2 2017 16
Table 5: UK employers' and total liability GWP (£m), 2012-16 17
Table 6: Top 10 UK EL insurers' market share, 2014-15 20
Table 7: UK EL underwriting result and underwriting ratios, 2012-16 23
Table 8: Number of employers' liability claims recorded and settled, 2012-17 25
Table 9: Employer-reported fatal and non-fatal injuries to employees, 2011-16 29
Table 10: UK employers' liability GWP, 2012-21f 35
List of Figures
Figure 1: UK private sector employment grew steadily between 2012 and 2016, but is slowing 8
Figure 2: The greatest slowdown is occurring among smaller companies 10
Figure 3: Most major industry sectors posted a slowdown in employee growth in 2016 13
Figure 4: Services remains a largely reliable driver of GDP growth 15
Figure 5: Employers' liability GWP contracted in 2016 17
Figure 6: ABI data shows an underwriting profit for EL in 2016 as a result of the reinsurance actions of a few major players 22
Figure 7: Accident claims dominate the employers' liability market 25
Figure 8: Fatal and non-fatal injuries to employees are in long-term decline 28
Figure 9: The impact of Ogden will drive higher growth in the short term before the market settles back to the longer-term trend 34
Figure 10: Potential impacts of Brexit on the UK employers' liability market 40
