Market conditions are expected to remain competitive throughout 2024, with especially strong competition for well-managed providers. While most insurance lines are likely to see premium reductions with effective marketing strategies, motor fleet remains challenging.
Insurers continue to report improved underlying earnings. However, volatility remains because of inflation, cost concerns and supply chain issues. Social inflation, public sentiment and media impact, are driving rising claims costs in liability and motor.
ESG remains a focus for insurers to differentiate risk profiles and direct their capacity.
The commercial property market continues to soften, with insurers more accommodating about the purchase of reinsurance to support increased capacity, reduced rating and removal of minimum premium levels to retain clients.
Due to strong competition, changes in retention levels, programme structure changes or new lead insurers, some well-run risks that haven’t been brought to market in the last few years, have experienced rate reductions as high as -25%. If risks aren’t remarketed, organisations have seen flat to +5% rate increases on average.
In many cases, PDBI programmes are being restructured to stretch layers, allowing for programme efficiencies and reduced Total Cost of Risk.
Long Term Agreements (LTAs) and risk management bursaries are being offered to organisations with appealing and appetite-driven risk profiles. Insurance companies are now open to ending and rewriting an existing LTA.
Underwriters continue to focus on the business and its supply chain resilience, as well as the impact of inflation on property values. Insurers expect to see realistic inflationary increases in values because of a robust buildings valuation strategy.
There remains continued concern and uncertainty around the impact of climate change on natural disasters and weather events. This concern has been heightened by unmodelled CAT events in 2023, for example, the May floods and July hailstorm losses in Italy.
Clear and concise articulation around risk management approach remains a focal point and business continuity plans remain essential for delivering positive marketing results.
A clear broking strategy must be agreed, including early market engagement and informative market presentations, to stimulate competition and alleviate any barriers to drive optimal outcomes.
“Market conditions remained relatively unchanged through H1 2024, with strong competition, particularly for well-managed risks.”- Benita Greenway
Overall capacity remains good, and competition is strong, with significant rate reductions achieved up to -20% for well-run risks. These are characterised by a positive attitude toward risk management, evidenced by targeted investment and limited claims experience.
Treaty reinsurance programmes renewing on 1 January highlighted reinsurers’ concerns around inflation and Perfluoroalkyl and Polyfluoroalkyl Substances (PFAS), as expected. Reinsurers are expecting the direct market to increase premiums in line with inflation, but competitive tension in the direct market means this is difficult to achieve.
Insurers are increasingly asking more questions about the presence of PFAS in products and supply chains, with PFAS exclusions becoming more common, especially in areas with known exposures like chemicals and packaging.
Evidence of robust health and safety risk management is key, as is interrogation of claims to understand loss trends and show post-loss mitigation.
The US market continues to push for rate strengthening, and we expect this trend to continue through 2024. The London market is following suit and pushing for rate strengthening on any US exposure within UK multinationals.
“Rate increases continue to be seen even on risks performing well driven by claims inflation and treaty reinsurance increases.” - Benita Greenway
Motor fleet remains largely unchanged since our last update. Markets keep raising premiums, partly because of their reinsurance treaty premium increases. Most providers are seeing an increase in rates per vehicle.
The Ogden discount rate, which is the mechanism for calculating awards for serious injuries or fatal accidents, is due to be reviewed in 2024. Speculation over the outcome of this review is causing uncertainty among reinsurers and impacting insurers’ treaty renewals, with many buying reduced cover at increased cost. This is inevitably being factored into pricing, driving underwriters’ requirements to achieve rate increases.
The issues affecting profitability and pricing in 2023 continued in H1 2024 including:
Electric vehicles are posing challenges due to a lack of repairers causing delays, as well as the increased fire risk from damaged batteries. Insurers are willing to accommodate, but often at increased terms or excesses.
Some insurers are seeking to impose cyber exclusions related to vehicle technology. The main consequence is the removal of coverage for own damage and third-party property damage resulting from a cyber incident. Therefore, it remains critical to examine your policy wording in detail.
While there is appetite to underwrite well-performing or significantly sized fleets, many insurers are still looking for +6% to +8% on well-run risks, with some insurers seeking up to +90% on provider fleets with poor claims experience.
Claims cleansing and effective risk management remain essential for securing the most favourable terms at renewal.
“Despite some challenges, competition remains consistent with additional capacity entering the market.”- Claire Prosser
Patient expectations and willingness to hold someone to account have led to an increase in the number of claims seen by insurers. After the pandemic, services have become more digitally enabled, like telemedicine and tele-triage. This has created new potential risks that are not yet fully understood.
Insurer concerns relating to litigation costs, both economic and social inflation remain as well as their continued scrutiny of key exposures, particularly relating to provision of mental health services, technology developments, cyber and mergers and acquisitions. Additionally, insurers remain apprehensive about people-related risks, such as the use of agency workers, employee burnout, workplace violence and employee mental health and wellbeing. These factors can contribute to increased allegations of negligence leading to medical malpractice claims against providers.
Despite the known challenges, competition remains consistent, with some additional capacity entering the market. The market has also experienced some consolidation driven by the increasing complexity of medical malpractice risk. The quality of submission remains essential for attracting insurer appetite and the best terms.
Medical Malpractice coverage can sometimes be extended to cover abuse, which is more often found under a Public Liability policy. However, where available, cover is limited.
Following the 2020 UK Government Paterson Inquiry into doctors’ discretionary cover for NHS and private work, the Department of Health and Social Care (DHSC) has issued a statement. The Medical Defence Organisations (MDOs) will introduce a sector-led Code of Practice by the end of 2024. This code aims to enhance transparency in the use of discretionary indemnity, detailing decision-making processes for compensating patients and including an escalation procedure with independent reviews for disputed claims. The DHSC also plans to update on further reforms to the clinical negligence cover system, addressing issues like cover for criminal acts or deviations from terms of cover.
The Personal Injury Discount Rate (PIDR) is used to calculate how much money an insurance company should pay to a person who’s suffered life-changing injuries to compensate them for their future financial losses. The aim is to give the claimant full compensation to cover future lost earnings, as well as paying for any care costs. If money can be spent, the claimant should be in the same position as they would have been in, without the injury. This is called the 100% compensation principle. However, because it is paid in a lump sum which will be invested when it is received, the amount is adjusted to account for the interest they would expect to earn. This is where the discount rate comes in.
Under the Civil Liability Act 2018, the Government is required to review the discount rates in England and Wales at least every five years. The next review has commenced, and we expect a determination by January 2025.
For 2024, we anticipate accounts performing within expectations. Average reductions are seen in flat to +5% by providers able to articulate a positive risk management story.
After a period of significant disruption in the D&O market pre-2023, resulting in wholesale policy contraction, significant pricing hikes and increased self-insured retention, current conditions remain buoyant.
The significant improvements in the GB D&O market through 2023 continued in H1 2024, with most organisations experiencing premium reductions averaging -20%. Insurers continue to offer greater capacity and flexibility over underwriting, including policy retentions.
Providing detailed underwriting information around governance, risk and compliance controls remains essential to secure improved pricing.
WTW's 2024 Global Directors' and Officers' survey revealed that the top three risks concerning health and social care providers are health and safety, cyber-attack (including cyber extortion) and data loss, marking a shift from previous years. Additionally, the health and social care sector, unsurprisingly, ranks regulatory breaches highly, placing it at number five.
“As market conditions remain buoyant through H1 in 2024, providers need to focus on improving cyber security to mitigate risks from growing threats, such as the recent CrowdStrike incident that affected various sectors including health and social care.”- Rachel Phillips
H1 2024 offered exceptionally favourable conditions for health & social care providers in the cyber market, with significant improvements in rates and pricing, and a wider range of policy options due to increased appetite and capacity among GB Cyber insurers, both primary and excess layer. This competition has led to greater underwriting flexibility, higher limits, improved coverage and reduced rates, allowing cyber insurance buyers to secure increased policy limits.
As noted in our March 2024 update, we anticipate high capacity levels throughout the year as insurers aim for continued growth. New primary layer options will emerge in 2024, especially from insurers traditionally focused on excess layer businesses who are now expanding into primary coverage.
Organisations have achieved substantial pricing reductions, ranging from -10% to -30%. However, this trend may stabilise as renewals benefit from reductions enjoyed in 2023.
Self-insured retentions have remained stable, with insurers generally open to offering alternative, lower options/structures.
Insurers are increasingly willing to offer higher policy limits and extend coverage including risks like supply chain business interruption. They are also more open to providing quotes with less detailed underwriting information than in recent years.
The insurance market is increasingly focusing on the cyber maturity of health and social care providers, emphasising the adoption of key cybersecurity controls and processes. This highlights the critical need for regular cybersecurity training to enhance employee awareness and reduce human errors.
The 2024 WTW Claims Insights report identifies healthcare as the number one sector for cyber notifications, with over 50% of loss events related to a privacy/data breach incident. It notes that most healthcare incidents are accidental, not malicious, and mentions a rise in ransomware notifications in 2023 compared to 2022.
The February 2024 ransomware attack on Change Healthcare highlighted yet another supply chain vulnerability – the WTW Claims Insights report notes that a ransom payment is often less than 20% of the total cost of a ransomware incident, dwarfed by business interruption (at 50%+).
In addition, we have yet to see how the insurance market responds to the recent CrowdStrike Falcon incident which impacted multiple organisations, including hospitals and other healthcare providers. This incident caused widespread disruption and disabled essential services globally. Although not malicious, the incident serves as a stark reminder of the vulnerabilities inherent in supply chains.
Policy coverage, particularly regarding systemic risks such as war and infrastructure exclusions, was already a prominent topic. We have yet to see whether insurers will start to limit or exclude System Failure Contingent Business Interruption coverage or other elements related to system failure losses. They will undoubtedly require more information to underwrite their accumulated exposure to some of the known system failure risks.
Considering the state of the cyber market after several quarters of rate reductions, these incidents will have impacted insurers' profitability, and pricing may also be affected.
Crime cover capacity remains limited although competition has returned for small to medium-sized providers. Average rate increases for providers with a good claims experience remain at +3% to +5%. Insurers continue to focus on social engineering and fraud-related controls and processes
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Rating trends are for guidance only and vary depending on risk profile and individual circumstances.
