UK: Health And Social Care Insurance Market Update – H1 2024

Find smarter ways to position your risk to markets through the latest insights on multiple insurance lines, including property damage/business interruption, liability, motor, directors' and officers' indemnity, medical malpractice and cyber.

Insurers still seek increases for some classes albeit lower than in previous months, and premium reductions can be achieved in most lines other than motor fleet, which remains a challenge.

Insurers continue to report improved underlying earnings. However, volatility persists due to inflation, cost concerns and supply chain issues. Social inflation, driven by factors such as tort reform, public sentiment, media impact, and litigation funding, is contributing to rising claims costs in liability and motor insurance.

ESG remains a focus for insurers to differentiate risk profiles and direct their capacity.

Property damage and business interruption

The property market continues to moderate, with some clients experiencing rate reductions as high as -25% for well-run risks that have not been brought to market in the last few years due to strong competition, changes in retentions, structure or lead insurer.

Long-term agreements and bursaries are being offered to clients with appealing and appetite-driven risk profiles. However, rates are still being applied to those clients who do not meet the criteria.

Underwriters continue to focus on client's business and supply chain resilience, as well as the impact of inflation on property values. Insurers expect to see realistic inflationary increases in values as a result 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 a client's 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 positive market presentations, to stimulate competition and alleviate any barriers to drive optimal outcomes. Market exhaustion still prevails for some accounts that are frequently remarketed or benchmarked, so long-term account strategy should be given due consideration.

Liability

Market conditions remained relatively unchanged through Q4 2023, with strong competition particularly for well-managed clients.

Overall capacity remains good, and competition is strong, with significant rate reductions achieved up to -15% for well-run risks. These are characterized by a positive attitude towards risk management, evidenced by targeted investment and limited claims experience.

Treaty reinsurance programmes renewing at 1/1 highlighted reinsurers' concerns around inflation and PFAS, as expected. It appears that 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.

PFAS exclusions are becoming more commonplace, particularly where there is a known exposure such as chemicals and packaging.

Evidence of robust health and safety risk management is key as is interrogation of claims to understand loss trends and demonstrate post-loss mitigation.

The local US market continued 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.

Motor Fleet

Rate increases continue to be seen even on risks performing well, and this trend is driven by claims inflation and treaty reinsurance increases.

Markets continue to drive premium increases with the majority of clients seeing an increase in rate 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 and into 2024 include:

• Claims inflation, labour costs and time to settle are impacting hire car charges by approximately 10% for both injury and damage settlements
• Supply chain issues are affecting the availability of new vehicles and courtesy cars, driving up the second-hand market costs
• The weakening pound has increased the prices of parts, leading to a rise in thefts of car parts
• New technology found in vehicles is more expensive to repair.

Electric vehicles can present challenges due to a shortage of repairers, leading to delays, and an increased risk of fire from damaged batteries. Insurers are generally willing to accommodate these challenges but often impose increased terms or excesses.

Some insurers are seeking to impose cyber exclusions related to vehicle technology. The main consequence of this 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 consistently an appetite to underwrite well-performing or significantly sized fleets, many insurers have stated their intention to implement substantial rating increases in 2024.

Claims cleansing and effective risk management remain essential for securing the most favorable terms at renewal.

On average, rate increases are at 8%, with some insurers seeking up to a 40% increase for fleets with poor claims experience.

Medical Malpractice

Not much has changed in the medical malpractice market since our last update. Competition and capacity remain consistent, although concerns relating to claims and social inflation abound.

The quality of your submission remains key and insurers continue to scrutinize staffing levels with concern over strikes and resultant quality of care.

There is pressure to increase deductible/excess levels and abuse coverage is extremely limited and, in some cases, unavailable.

February 2024 marked the fourth anniversary of the U.K. Government's Paterson Inquiry, and insurers await the final outcome of the report. This report will determine whether current doctors' discretionary cover will end and whether separate cover will be required to be sourced by doctors or healthcare entities to cover both NHS and private work. The market has already responded with medical defence organisations setting-up commercial insurance products for future use if necessary, and brokers establishing alternative facilities. However, whether these will see much uptake is uncertain until the Paterson Inquiry report is published.

For 2024, we anticipate accounts performing within expectations. Providers who can articulate a positive risk management story could achieve between flat rates to + 10%.

Directors' and officers' liability (D&O)

The significant improvements in the GB D&O market through 2023 continues, with most clients 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.

Cyber

The trajectory seen in H1 2023 continues with a very strong appetite from GB Cyber insurers on both primary and excess layers. There's also a notable increase in the number of insurers competing, leading to greater underwriting flexibility, higher limits, improved cover and reduced rates.

Market conditions continue to provide existing cyber insurance buyers with options to purchase increased policy limits.

We expect capacity levels to remain high through 2024 as insurers seek continued growth. Further new primary layer options will be available in 2024, particularly from within the existing the pool of insurers currently writing predominantly excess layer business, who are seeking to add primary business to their cyber portfolios.

Clients continue to achieve material pricing reductions of up to -10 to -30%. However, we may see this trend tail off as renewals benefit from reductions that commenced in 2023. Q1 2023 was the least competitive quarter of 2023; we expect placements in Q1 2024 to benefit from the largest percentage discount.

Self-insured retentions remain stable and insurers have generally been willing to provide alternative lower options/structures. Policy coverage, particularly concerning systemic risk (such as war and infrastructure exclusions), remains a hot topic. Insurers are increasingly willing to grant coverage extensions, such as for supply chain business interruption risk, and are showing more willingness to offer quotations with less granular underwriting information than in recent years.

The 2024 WTW Global Claims Insights report indicates that healthcare remains the number one sector for cyber notifications, with over 50% of loss events reported relating to a privacy/data breach incident. It also highlights that the highest reported number of incidents in healthcare are attributed to accidental breaches rather than malicious ones.

The insurance market continues to pay special attention to the level of cyber maturity of health and social care providers through the adoption of key cybersecurity controls and processes. The above findings only reinforce the importance of having regular cybersecurity training to raise awareness and vigilance among employees, to help reduce the human error factor.

When reviewing market conditions, Cyber Insurance buyers and those exploring insurance markets in H2 2023 with a positive risk profile experienced strong competition to deploy capacity on both primary and excess layers. We expect this trend to persist and will continue to provide existing cyber insurance buyers with options to purchase increased policy limits. Non-buyers should review the available options for obtaining cyber insurance.

Further H2 2024 perspectives

Crime cover capacity remains limited and average rate increases for clients with a good claims experience are 3%-5%. Insurers continue to focus on social engineering and fraud-related controls and processes.

For specialist guidance on smarter ways to present your risk, get in touch.

The percentages have been presented as rounded figures for ease. All rate changes are for guidance

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.