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Press releases 2004
OFT to carry out follow-up review of liability insurance markets
199/04 3 December 2004
A follow-up review of liability insurance markets was launched by the OFT today. The review will also look at the 'after the event' insurance (ATE) sector (see note 2).
In its June 2003 report on liability insurance, the OFT said that it would continue to keep the markets (see note 1) under review. In particular it would look again in late 2004 at: the level of premiums, including whether proposed initiatives to make the market work better had led to positive change; and at the issue of legal costs to see whether there was any further work which OFT needed to undertake.
In examining whether the markets are now working better than in 2003 the OFT will look to see:
- price developments
- what current costs insurers are taking into account when pricing current policies
- what impact initiatives adopted by insurers are having across the liability insurance markets. These include longer renewal periods and improvements to risk management so that premiums more accurately reflect risk
- whether there are any business sectors which are finding it difficult to obtain cover.
The OFT will be contacting stakeholders for information on levels of premiums as well as seeking to obtain independent data on premium levels.
On the issue of legal costs, the OFT will, during the course of this follow-up review, carry out research into the ATE market, with a view to informing the debate on whether ATE premiums are contributing to the rise of liability insurance premiums (see note 3). The OFT will be aiming to gain an understanding of the structure of this market, including how the product is sold to consumers, the level of premiums and how risks are assessed.
See market study page.
NOTES
1. Liability insurance is insurance against a legal liability which the insured may incur to third parties. It includes policies to protect the insured against:
- liability to third parties as a consequence of negligent acts in the discharge of professional duties (professional liability)
- liability to pay damages resulting from claims for accidental death, bodily injury, illness and disease, to employees arising out of, and in the course of, their employment (employers' liability)
- liabilities to third parties (the public) for accidental death, bodily injury and for any loss of, or damage to, property which is caused by the negligence of the insured or that of his employees in the course of his business (public liability)
- liability for accidental death, bodily injury, illness, loss or damage caused to third parties by their products or products which they are selling (product liability).
2. ATE insurance is used with conditional fee agreements (CFAs). It is taken out once an injury has occurred and the individual has decided to pursue a claim against the liable party. It covers the risk of incurring costs relating to the case in the event of an unsuccessful claim.
3. Since 2000 it has been possible to recover the cost of ATE insurance for personal injury claims from the losing side. Concerns have been expressed that this (along with the cost of conditional fee agreements) is contributing to rising legal costs for personal injury claims which in turn are contributing to rising liability insurance premiums.
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