The U.K.’s Office of Fair Trading (OFT) has published a study that highlights “key improvements” in Britain’s liability insurance markets. These include: “Lower increases in premiums, better communication between insurers and policyholders and a reduction in the number of businesses denied cover.”
The Association of British Insurers (ABI) welcomed the OFT’s findings. “We are pleased that the OFT has recognised steps the industry is taking to help stabilise the liability markets”, stated Nick Starling, the ABI’s Director of General Insurance. “However, to achieve long- term stability we must reduce the level of legal and other transactional costs, and improve access to rehabilitation. We need to reduce the 40 percent of money paid out to lawyers and other representatives, rather than to claimants. A more streamlined, cost-effective system will ensure that the right form of compensation is delivered to the right people as quickly as possible. We continue to work hard to achieve this,” he added.
In a previous study the OFT said it had “identified a number of concerns in the UK liability insurance markets, and undertook to review the markets in order to assess whether further action was necessary.”
The follow-up study “found that the average premium rises in 2004, while still ahead of general inflation, had fallen to seven per cent for employer’s liability (compared to rises of 50 per cent observed in 2002), and four per cent for public liability and professional indemnity insurance (compared to rises of between 30 and 60 per cent in 2002).
“Further, significantly fewer businesses than identified by the previous study were being denied renewal of cover by their insurer or denied cover by other insurers. In the case of employer’s liability insurance, for example, the number of businesses denied cover fell by two thirds to three per cent. Those sectors which were identified in the 2003 report as experiencing significant problems in getting cover showed signs of improvement in both availability and lower than expected price increases this time around.”
In addition the OFT report concludes: “Insurers and policyholders should also be benefiting from initiatives, led by government departments and the industry itself, aimed at making the markets work better. Longer renewal notice periods and efforts to improve information and risk management, so that premiums more accurately reflect risk (for example, by taking better account of good health and safety practice), seem to be providing benefits for all concerned.”
The ABI noted that “initiatives, such as the code of practice on minimum renewal notice periods, and the ABI ‘s ‘Making the Market Work’ scheme will have long – term benefits to the market and to customers.”
It also said: “The OFT’s decision to invite the Civil Justice Council to bring together all stakeholders to analyse and then seek to resolve difficulties arising from recoverable After-The-Event insurance is sensible. The announcement today of the CJC’s involvement offers a more effective and sustainable alternative way of resolving these issues, and the ABI and its member companies will play a constructive part in this process.”
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