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The Actuary The magazine of the Institute & Faculty of Actuaries

Liability market review and changes

The UK liability insurance markets could work better, an Office of Fair Trading (OFT) fact-finding study has found. The five-month study was undertaken in the light of concerns over sharp and often sudden increases in premiums, reported reductions in underwriting capacity, and increases in the excesses borne by policyholders.

Evidence from the study suggests that in 2002 average premiums for employers’ liability insurance rose by 50%, public and product liability by 30–40%, and professional indemnity by 30–60%. This follows a six-year period during which liability insurance premiums fell in real terms by about 14%.

The study found no evidence of a widespread lack of availability of liability insurance cover. However, there appear to be problems obtaining cover for asbestos-related risk and for professional indemnity insurance for independent financial advisers (and actuaries).

The report notes a number of changes which could be made to improve the current situation. Some of these are already in progress. These include:

  • lengthened renewal periods;
  • initiatives to improve information and risk-management;
  • increasing the use of rehabilitation; and
  • improved data collection.