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Professional Indemnity Insurance in Australia

  • March 2016
  • -
  • Finaccord
  • -
  • 33 pages

Professional Indemnity Insurance in Australia is a report about the Australian 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 Australia 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 Australia 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 Australia, 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 Australia set up between professional / trade associations with a nationwide remit and brokers or underwriters of this type of cover (based on a survey of over 130 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.For further information about this research, please access the table of contents and series prospectus by clicking on the links at the top of this page, or e-mail info@finaccord.com.

Table Of Contents

Professional Indemnity Insurance in Australia

TABLE OF CONTENTS
00 EXECUTIVE SUMMARY 1
10 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
20 MARKET ANALYSIS 11
Introduction 11
Number, growth in number and segmentation of insurable enterprises 12
The largest category accounts for 22% of insurable professional enterprises 12
A slowing of Australia's economy has caused shrinkage in the number of enterprises in certain categories… 13
… especially among those in the lowest annual fee income or turnover band 14
Market value, growth and segmentation 16
The market for professional liability insurance in Australia has increased at a modest rate… 16
… with around 30% of its value due to the medicine and dentistry category 16
Obligatory purchase in certain sectors pushes the take-up rate to over two thirds of all insurable enterprises 16
A high share of premiums is paid by enterprises with annual fee income or turnover below USD 1 million 18
A significant proportion of the total market value is placed with underwriters at Lloyd's of London 20
In any given year, on-going premiums exceed new premiums by a factor of almost three to one 21
Excess layer business is relatively important in the Australian professional indemnity insurance market 22
Underwriter utilisation and market shares 23
QBE, Chubb and Allianz enjoy the highest reported utilisation among brokers… 23
… albeit there is a long tail of smaller competitors, including underwriting agencies 23
The market share of the leading underwriter is likely to be between 15% and 20% of total premiums… 24
… with those outside of the top ten together accounting for up to 20% of the residual market 25
Including MGAs, there are around 50 underwriters of professional liability cover in total… 25
… comprising both specialists and multi-category underwriters 26
There are four medical liability insurance specialists in Australia… 26
… which is one factor causing limited growth in premiums 26
A proposed merger of MDA National with MIGA fell through in October 2014 27
Affinity schemes with professional and trade associations 27
Most affinity partnerships with associations are intermediated by an external broker… 27
… with Aon claiming the most such relationships 28
Guild Insurance and QBE are the leading underwriters of nationwide affinity schemes 28
PROFESSIONAL INDEMNITY INSURANCE IN AUSTRALIA
© FINACCORD (03/2016) ii
Other distribution channels 29
Brokers 29
Numerous brokers possess demonstrable expertise in professional indemnity cover… 29
… and Isure has set up a dedicated online proposition for it… 30
Direct sales 30
… although few underwriters sell it directly 30
Online aggregators 30
Several insurance comparison sites offer quotes for professional liability cover… 30
Other affinity partners 30
… and several sports organisations have schemes for it as does one major bank 30
Market value forecast 30
Growth in premiums is predicted to be highest in the category of financial and insurance intermediation… 30
… and among the largest enterprises by annual fee income or turnover 32
PROFESSIONAL INDEMNITY INSURANCE IN AUSTRALIA
© FINACCORD (03/2016) iii
LIST OF GRAPHICS / TABLES
00 EXECUTIVE SUMMARY 1
Number of insurable enterprises and value of professional indemnity insurance in Australia, segmented by professional sector, 2015 2
10 INTRODUCTION 3
Professional associations contacted by Finaccord, segmented by professional category and membership type 5
20 MARKET ANALYSIS 11
Number of insurable enterprises in Australia, segmented by professional sector, 2015 12
Compound annual growth or decline in number of insurable enterprises in Australia, segmented by professional sector, 2011 to 2015 13
Number of insurable enterprises in Australia, segmented by professional sector, 2011 and 2015 (table) 14
Number of insurable enterprises in Australia, segmented by annual fee income / turnover band, 2011 and 2015 15
Number of insurable enterprises in Australia, segmented by annual fee income / turnover band, 2011 and 2015 (table) 15
Gross written premiums for professional indemnity insurance in Australia, segmented by professional sector, 2011 and 2015 17
Gross written premiums for professional indemnity insurance in Australia, segmented by professional sector, 2011 and 2015 (table) 18
Gross written premiums for professional indemnity insurance in Australia, segmented by annual fee income / turnover band, 2011 and 2015 19
Gross written premiums for professional indemnity insurance in Australia, segmented by annual fee income / turnover band, 2011 and 2015 (table) 19
Gross written premiums for professional indemnity insurance in Australia segmented between domestic and non-domestic underwriters, 2015 20
Gross written premiums for professional indemnity insurance in Australia segmented between new business and renewals, 2015 21
Gross written premiums for professional indemnity insurance in Australia segmented between primary and excess layer business, 2015 22
Percentage of brokers surveyed making regular use of particular underwriters for professional indemnity insurance in Australia, 2015 24
Estimated market shares of underwriters of professional indemnity insurance in Australia, 2015 25
Estimated market shares of underwriters of professional indemnity insurance in Australia, 2015 (table) 26
Affinity schemes for professional indemnity insurance offered through professional and trade associations in Australia: provision rate and operating models, 2015 27
Affinity schemes for professional indemnity insurance offered through professional and trade associations in Australia: broker share of partnerships, 2015 28
Affinity schemes for professional indemnity insurance offered through professional and trade associations in Australia: underwriter share of partnerships, 2015 29
Gross written premiums for professional indemnity insurance in Australia, segmented by professional sector, 2019 (forecast) 31
Gross written premiums for professional indemnity insurance in Australia, segmented by professional sector, 2019 (forecast) (table) 32
Gross written premiums for professional indemnity insurance in Australia, segmented by annual fee income / turnover band, 2019 (forecast) 33
Gross written premiums for professional indemnity insurance in Australia, segmented by annual fee income / turnover band, 2019 (forecast) (table) 33

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