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Professional Indemnity Insurance in South Africa

  • May 2016
  • -
  • Finaccord
  • -
  • 32 pages

Professional Indemnity Insurance in South Africa is a report about the South African market for and distribution of policies covering professional liability. For 2011, 2015 and with a forecast for 2019, the study breaks down the market for professional indemnity insurance on a standardised basis by professional group with 13 categories considered as follows:

accountancy and finance;
architecture;
D&B (design and build);
engineering;
estate agency;
financial and insurance intermediation;
healthcare-related services;
IT and business consulting;
legal services;
media and marketing;
medicine and dentistry;
surveying;
other professional sectors.
In particular, the report quantifies the number, growth in number and segmentation of insurable enterprises in South Africa from 2011 to 2015 plus the value, growth and segmentation of the market for professional indemnity insurance over the same time frame and with a forecast to 2019. These segmentations are provided not only for each of the 13 aforementioned professional categories but also by annual fee income or turnover band in order to show the potential and actual market value in South Africa attributable to the largest and smallest professional enterprises.

In addition, three further segmentations of the market value in 2015 are also given: between business dealt with by domestic underwriters and that placed with non-domestic underwriters; between new business and renewals; and between primary layer and excess layer business.Moreover, on the basis of a survey of leading brokers of professional indemnity cover in South Africa, the report identifies the underwriters of this type of insurance that are used most frequently and provides estimates for the market shares by premium income of leading underwriters in 2015 for all forms of professional indemnity cover combined expressed as a percentage range (e.g. 5.0% to 7.5%).

Finally, the study identifies affinity schemes for professional indemnity insurance in South Africa set up between professional / trade associations with a nationwide remit and brokers or underwriters of this type of cover (based on a survey of 165 such associations), highlights other distribution channels used to sell this form of insurance (e.g. brokers, direct sales, online aggregators, other affinity partners) and discusses key issues associated with the market.

Table Of Contents

Professional Indemnity Insurance in South Africa
0.0 EXECUTIVE SUMMARY . 1
1.0 INTRODUCTION 3
What is this report about? 3
Finaccord's study breaks down individual country markets into 13 professional categories… 3
… with a number of other key segmentations also provided . 3
Rationale . 3
This series of reports delivers up-to-date research about a complex, multi-faceted insurance sector… . 3
. with affinity schemes researched in detail through the associated PartnerBASE dataset 4
Methodology . 4
Survey of professional and trade associations 4
Survey of brokers and underwriters . 4
Market data . 6
Definitions . 6
Professional indemnity insurance 6
Professional categories 7
Operating models . 8
Other notes 9
PartnerBASE and market data file 9
Finaccord 9
2.0 MARKET ANALYSIS . 11
Introduction . 11
Number, growth in number and segmentation of insurable enterprises . 12
Two categories are responsible for over a half of insurable professional enterprises in South Africa… . 12
… and one of these has been expanding most rapidly in terms of its number . 13
Just over 6% of professional enterprises have annual fee income or turnover above the lowest band 14
Market value, growth and segmentation . 16
The South African market for professional indemnity insurance has been expanding quite rapidly… 16
… albeit inflation has had a quite significant impact in this respect . 16
One category accounts for close to a third of total premiums 16
In most categories, there is no obligation to purchase professional liability cover… 16
… including that of medicine and dentistry, albeit compulsion has been mooted . 16
Overall, South Africa can be considered an emerging market for professional indemnity cover . 17
Over 40% of the total market value is generated by smaller professional enterprises . 18
The vast majority of South African professional indemnity business is underwritten in South Africa itself 20
New business represents a very significant proportion of the total market… 21
… and excess layer business is also quite important 22
Underwriter utilisation and market shares 22
Three insurers are utilised by more than 60% of brokers placing professional indemnity risks… . 22
… but a specialist direct insurer is likely to rival Santam as the leader by market share… 23
… in an overall market for professional indemnity cover in which around 25 underwriters are competing… . 24
… including several with strengths in particular categories 25
Affinity schemes with professional and trade associations 25
Over 20% of associations researched have an affinity scheme for professional indemnity cover… . 25
… with PI Financial Risk Services having secured the most partnerships among brokers… 26
. followed by Aon and CFP Brokers 26
Across the schemes and insurers identified, Hollard is utilised most regularly as underwriter . 27
Other distribution channels 28
Brokers 28
Brokers of professional indemnity cover also include both generalist and specialist intermediaries 28
Direct sales 28
Direct sales of this type of insurance are seemingly rare… . 28
Online aggregators . 29
… and aggregators have yet to begin distributing it… . 29
Other affinity partners . 29
… although several major banks are able to sell it . 29
Market value forecast . 30
Premiums are likely to rise most rapidly in the IT and business consulting category… . 30
… albeit growth rates are not expected to vary greatly by annual fee income or turnover band . 31

LIST OF GRAPHICS / TABLES
0.0 EXECUTIVE SUMMARY . 1
Number of insurable enterprises and value of professional indemnity insurance in South Africa, segmented by professional sector, 2015 2
1.0 INTRODUCTION 3
Professional associations contacted by Finaccord, segmented by professional category and membership type . 5
2.0 MARKET ANALYSIS . 11
Number of insurable enterprises in South Africa, segmented by professional sector, 2015 . 12
Compound annual growth or decline in number of insurable enterprises in South Africa, segmented by professional sector, 2011 to 2015 . 13
Number of insurable enterprises in South Africa, segmented by professional sector, 2011 and 2015 (table) . 14
Number of insurable enterprises in South Africa, segmented by annual fee income / turnover band, 2011 and 2015 . 15
Number of insurable enterprises in South Africa, segmented by annual fee income / turnover band, 2011 and 2015 (table) . 15
Gross written premiums for professional indemnity insurance in South Africa, segmented by professional sector, 2011 and 2015 . 17
Gross written premiums for professional indemnity insurance in South Africa, segmented by professional sector, 2011 and 2015 (table) 18
Gross written premiums for professional indemnity insurance in South Africa, segmented by annual fee income / turnover band, 2011 and 2015 . 19
Gross written premiums for professional indemnity insurance in South Africa, segmented by annual fee income / turnover band, 2011 and 2015 (table) . 19
Gross written premiums for professional indemnity insurance in South Africa segmented between domestic and non-domestic underwriters, 2015 20
Gross written premiums for professional indemnity insurance in South Africa segmented between new business and renewals, 2015 21
Gross written premiums for professional indemnity insurance in South Africa segmented between primary and excess layer business, 2015 22
Percentage of brokers surveyed making regular use of particular underwriters for professional indemnity insurance in South Africa, 2015 23
Estimated market shares of underwriters of professional indemnity insurance in South Africa, 2015 24
Estimated market shares of underwriters of professional indemnity insurance in South Africa, 2015 (table) . 25
Affinity schemes for professional indemnity insurance offered through professional and trade associations in South Africa: provision rate and operating models, 2015 26
Affinity schemes for professional indemnity insurance offered through professional and trade associations in South Africa: broker share of partnerships, 2015 . 27
Affinity schemes for professional indemnity insurance offered through professional and trade associations in South Africa: underwriter share of partnerships, 2015 . 28
Gross written premiums for professional indemnity insurance in South Africa, segmented by professional sector, 2019 (forecast) . 30
Gross written premiums for professional indemnity insurance in South Africa, segmented by professional sector, 2019 (forecast) (table) 31
Gross written premiums for professional indemnity insurance in South Africa, segmented by annual fee income / turnover band, 2019 (forecast) . 32
Gross written premiums for professional indemnity insurance in South Africa, segmented by annual fee income / turnover band, 2019 (forecast) (table) . 32

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