Professional indemnity (PI) insurance rates are falling at an unprecedented pace, with 56% of market participants predicting no rate increases in 2024, according to a new report from law firm Clyde & Co.
The findings highlight the growing impact of competition from new entrants, particularly Managing General Agents (MGAs), which are reshaping the UK market.
Clyde & Co’s fourth annual UK PI Market report, based on surveys with underwriters, brokers, and claims managers, reveals that the surge in capacity has driven rate reductions faster than anticipated.
This trend has emerged despite expectations that 2024 would mark a period of rate stabilisation following two years of increases.
In addition to falling rates, the report sheds light on other challenges facing the PI sector. A significant 74% of respondents expect the severity of PI claims to rise over the next two years, while 90% foresee a broader increase in claims frequency.
These pressures are compounded by evolving risks, such as artificial intelligence (AI), which is simultaneously driving demand for PI cover and introducing new vulnerabilities.
Over 60% of respondents identified cyber and technology, including AI, as key sectors fueling demand for PI insurance.
However, concerns are mounting about the potential risks AI poses to businesses. Nearly three-quarters (72%) believe AI increases operational risks, and 82% flagged inaccuracies and misinformation from AI systems as their top worry.
Regional growth is another focal point of the report. While London remains a key hub, the North of England is emerging as a growth area, with half of respondents predicting increased claims handling and underwriting activity in the region. This growth is driven by substantial construction projects and the expansion of professional services in major cities.
Scotland, Wales, and Northern Ireland present a more nuanced picture. These regions offer opportunities for growth but face unique challenges due to political uncertainties and the complexities of devolved governance.
Sam Godding, Legal Director at Clyde & Co, commented: “The PI market is being tested again. But amidst the uncertainty, transformation within the sector is bringing significant opportunity. A capacity-driven market offers the chance for growth and competitive pricing, but it also requires a deep understanding of risk. With reduced room to rely on traditional levers such as coverage restrictions and higher premiums, risk management is becoming critically important.
“The ability to demonstrate clear, quantifiable steps to reduce exposures and stay abreast of developing regulations and risks will be increasingly prized within the sector. It will be an interesting year ahead as we await the market’s response to these new tests.”
