United Kingdom

Navigating a changing insurance market

Change is coming to the European insurance market says Aon’s latest report – Navigating a changing insurance market – as insurers struggle to cope with factors such as unprecedented loss rates, evolving buyer demands, reinsurance pressures and an increase in the cost of doing business. For the UK market, the outlook is one of a more disciplined phase with areas of difficulty for commercial insurance buyers expected in lines such as directors’ and officers’, professional indemnity, and marine cargo.

Insurers’ attitudes shift

Across Europe there is a marked change in the attitude of insurers as loss rates continue to erode balance sheets. 2017 saw three of the top ten costliest insured losses ever in hurricanes Harvey, Irma and Maria at a combined loss of USD $90 billion finds Aon’s report, with 2018’s losses also running at 26% above the ten-year average. In addition to catastrophe losses, lines such as motor, construction, professional indemnity, and directors’ and officers’ have also been hurting insurers.

It's not just losses either, changing exposures in key business risks such as brand, intellectual property, cyber and non-damage business interruption are testing insurers to develop new products, while the costs of doing business are also rising and hitting bottom line performance.

Impact on buyers

For commercial insurance buyers the consequences range from rate increases, reduced capacity in certain lines, tighter terms and conditions, and a growing scrutiny on insureds’ risk management practices.

In the UK, it is not yet a picture of rates hardening across all lines. In general liability and marine liability for example, the Aon report finds that rates are flat, while construction, motor fleet, property and business interruption are seeing rates firm from 5-10% with capacity generally available. The biggest challenges lie in directors’ and officers’, marine cargo and professional indemnity where there are rate increases of above 10% and problems with capacity, as well as an increased likelihood of underwriting referrals.

How to get ahead

Given the changing market, Aon’s report urges buyers to take control and allow more time for their renewals, while refreshing risk assessment processes and exploring alternative risk financing options, as well as focusing on better claims management and a review of insurance wordings on existing policies.

Aon’s top five recommendations for buyers:

  1. Prepare – allow more time for renewal
  2. Develop a strong relationship with broker and insurer
  3. Challenge practices and approaches
  4. Use data and analytics to make informed recommendations and decisions
  5. Positively differentiate to improve the organisation’s risk marketability.

Download the full report – Navigating a changing insurance market, a European perspective