Insurers blame costs and capacity as DWP conference seeks solutions

On the eve of a Department for Work and Pensions (DWP) stakeholder conference into claims costs in employers' liability (EL), insurers said that rising claims costs will force further rate increases in 2004.

The DWP conference, to be held today, will discuss the administrative and legal costs involved in processing EL claims.

It will be attended by a range of stakeholders including DWP representatives, insurers, lawyers and employer groups.

A DWP official said that the conference would discuss ways of "streamlining the existing claims process" and would consider whether alternative ways of dealing with EL claims existed.

But insurers said that despite the discussions, claims costs were continuing to rise and, as a result, capacity would remain tight and rates would increase in 2004.

Norwich Union (NU) does not underwrite EL in the London market, but its director of technical claims services Dominic Clayden said that even without large multinational or high risk exposures, its experience was that EL claims costs were still increasing.

He said that this year's average rate increase of 30% at NU was likely to be sustained in 2004.

Royal & SunAlliance head of technical insurances Phil Bell said that with long-tail issues still creating problems for insurers, decreases in rates were unlikely in the near future. "I really don't envisage any new sources of capital coming into EL," he said.

Allianz Cornhill commercial lines casualty and construction manager Ian Calder agreed. "There's a very powerful need for rates to continue to increase in EL," he said. Calder said that with claims inflation still running at 10% to 15%, premium inflation was likely, though possibly not at the same levels seen in previous years.

A spokeswoman for Zurich UK Commercial and Zurich London said that with issues such as personal injury claims inflation, emerging risks and legal costs still impacting on the market, EL capacity would continue to be restricted.