Launched: January 2003
To determine how well markets for liability insurance are working. To establish the scale and nature of recent price rises and identify the factors driving those rises.
(Study followed in-house work.)
The study found no evidence of a widespread lack of availability for liability insurance cover and concluded that market could work better for customers. Evidence suggested that, in 2002, average premiums for employers' liability insurance rose by 50 per cent, public and product liability by 30 - 40 per cent and professional indemnity by 30 - 60 per cent.
his follows a six year period during which liability insurance premiums fell in real terms by about 14 per cent. Possible explanations for the increases in premiums fall into two main categories: increases in insurers' costs and the competitive environment across the sector.
The following recommendations were made to the industry:
1. Lengthened renewal periods - many businesses expressed concern about the limited time they were given to renew their policy or shop around for alternative cover (typically one or two weeks).
2. Initiatives to improve information and risk management.
3. Increasing the use of rehabilitation - to help to reduce costs by increasing a claimant's chance of securing employment.
4. Improved data collection - to allow claims to be better forecast and to show the differential impact between different classes of risk.
5. That businesses check renewal dates for policies, request information on renewing policies as early as possible, shop around, examine whether health and safety practices can be improved, and ask for advice from brokers and trade associations on how to improve systems and present their risk most effectively to an insurer.
The OFT committed to continue to keep liability insurance markets under review and in particular to look again at premiums during late 2004 and the issue of legal costs. Follow up study published in June 2005.
This found lower increases in premiums, better communication between insurers and policyholders and a reduction in the number of businesses denied cover. The OFT looked at 'after the event insurance' and the OFT decided to contribute to the work of the Civil Justice Council and Department for Constitutional Affairs later that year.
Download 'The UK liability insurance market - summary of key findings' (pdf file 288 kb) June 2003
Download the supplemental report 'An analysis of current problems in the UK liability insurance market' (pdf file 787 kb). June 2003
Download OFT Report The UK liability insurance market the full length report (pdf file 457 kb). August 2003
The Department for Work and Pensions (DWP) has also published a report on employers' liability insurance. Copies of the DWP report and press release are available on the DWP website.
Announcement of follow-up study - see press release 'OFT to carry out follow-up review of liability insurance markets'. 3 December 2004
Download The UK liability insurance market - follow-up report (pdf 400kb) June 2005
Download Summary of business survey (pdf file 696 kb) June 2005
See press release 'Liability insurance markets show improvement'. 23 June 2005
See press release on its fact-finding study into the UK liability insurance market 10 December 2002.
See press release 'Liability insurance markets could work better' 3 June 2003.
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