The Office of Fair Trading has launched a fact finding study into the UK liability insurance market.

The study looks at public, product, professional and employers' liability insurance.

The study hits insurers with a list of 44 questions they must answer if they want to take part in the OFT's liability review.

The OFT's liability market review will feed into the Department of Work and Pensions' (DWP) investigation of the employers' liability (EL) crisis.

Insurers must respond to the OFT by the first week of March.

The survey questions are below:

GENERAL INFORMATION

1.Please provide details of the general liability lines your company currently supplies.

2.To which UK business sectors do you currently supply liability cover (categorised by liability line)?

3.With respect to the aforementioned sectors, for which are you accepting only renewal business? (or is this assessment made on a company specific basis)

4.What % of last year's business could be described as 'new business'? What was the value of this new business?

5.Are there types of a) business sector and b) risk which you either no longer cover or would never cover. If so please provide details, distinguishing between no longer providing cover and never providing cover.

6.Please provide a brief explanation for your answers to question 5.

7.Do you have any intention of returning/moving back into this type of insurance? Please explain your answer.

DISTRIBUTION

8.Do you provide cover to end customers a) direct, b) exclusively through brokers or c) both channels?

9.Please explain the benefits / problems of selling through the channels detailed.

10.What proportion of your gross income is accounted for by sales through a) brokers and b) direct?

11.How do you compete for business? Please reply in respect of both the end customer and brokers.

COMPETITION

12.Are there any barriers to entry to liability insurance?

13.Are there any switching costs / exit costs which you consider important in relation to liability insurance?

14.To the best of your knowledge which insurance companies have totally pulled out of EL or other liability lines?


15.Do you specialise in providing cover for any particular business sectors occupations or size of business eg SMEs? If yes please provide details. What specialist expertise do you possess in relation to these sectors?

16.Please provide details of your main competitors both generally across all liability insurance, and in respect of any specialist sectors in which you operate.

17.Generally, what do you consider to be your company's main competitive advantage?

RATES

18. How are your book ratings reached? For example are they based solely on your own loss statistics, or statistics shared with other insurers?

19.What is the threshold between providing cover by virtue of book rating and individual/experience rating? How is this reached?

20.What is the split across your business between book and individual rates? How has this changed over the last two years?

21.Do you offer discounts on premiums for individual businesses / occupations? If so under what circumstances and to the best of your knowledge are these passed on to customers?

22.Do you provide advice to customers on what they can do to secure discounts on premiums?

23. Do you feel your customers have sufficient incentives to minimise claims?

24.What rate increases (%) have you imposed over the last two years? Where these across the board or specific to particular classes of risk, or both?

25.What rate increases do you think will be necessary over the next two years?

26.What are the reasons behind rate changes?

27.Current perception seems to be that the market is experiencing severe difficulties. The cyclical nature of the sector would suggest that the market has been hard before. What (if anything) makes the current situation different?

28.In what ways might we see the market adjust to address the current difficulties? For example is capacity likely to increase?

29.Falling equity prices are seen as an aggravating factor. For the period 1990 to date, please highlight the proportion of those assets underlying the Liability book and General Insurance business that were invested in equities.


PACKAGES

30.Do you bundle policies together, and sell them in the form of a package? What are the [common) components of the package?

31.What are the advantages to businesses of buying liability insurance as part of a package? Who puts the package together? How is the price of the package calculated?

32.What proportion of business is sold this way?

33.Are packages favoured by particular types of business sectors? Please explain.

34.Has selling liability insurance within a package affected the performance of the liability market in general?

CLAIMS HANDLING

35.Are you part of the Financial Ombudsman Service?

36.Do you handle claims in﷓house or through a third party provider? If the latter please provide details of the provider.

37.Across the sector generally, is there scope for more efficient claims handling?

38.Have there been changes in the ways claims have been handled over the last few years? If so please provide details.

REINSURANCE

39.How easy has it been over the last two years for you to secure re﷓insurance cover? Please explain any difficulties.

40.What has happened to re﷓insurance rates over the last two years and what affect (if any) has this had on liability insurance rates?

41.Have you noticed an expansion of re﷓insurance capacity in the last month or so?

BROKERS

42.Do you deal with a small or wide range of brokers? Please explain the benefits/problems of both approaches.

43.Do you stipulate minimum requirements in dealing with brokers? For example a certain level of business or minimum customer size. if so please explain what these requirements are and the benefits.

44.To what extent do brokers churn customers? What impact does this have on:
a) your business b) the market?

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