New research, conducted by market research consultants Finaccord, reveals that “competition among underwriters of professional indemnity insurance in Australia and Canada is at least as strong as in Europe’s more developed markets while South Africa is likely to provide growth potential in several niche segments.”
The three new markets studied by Finaccord are “estimated to have been worth more than US$2.3 billion in terms of gross written premiums and other revenue for professional indemnity insurance in 2011. This compares to about US$8.3 billion in 2011 for the largest ten European markets, which Finaccord analyzed for its report Professional Indemnity Insurance in Europe in 2011.
Bernd Bergmann, a Consultant at Finaccord, commented: “The Australian market is generally characterized by high penetration rates and increasing capacity in those segments which are expected to grow fastest such as IT and business consulting. Most professional groups are well-served and have benefited from competition among providers although some property valuers and financial intermediaries have found it difficult to find affordable cover in recent years. The latter group, in particular, has suffered from an increase in litigiousness in recent years.”
Finaccord noted that the Australian market for professional indemnity insurance is valued at about US$1.06 billion, which is “slightly smaller than its Canadian equivalent at US$1.15 billion, partly because the latter plays host to a higher number of insurable enterprises. In both countries, total premiums have registered moderate growth rates since 2007 despite the fact that average premiums per policy declined in a few segments due to strong competition.”
Bergmann explained that there are two “two key segments” in Canada, namely medicine and legal services, which “are difficult to enter for commercial insurance providers as doctors are usually insured through the CMPA, a medical mutual organization while lawyers receive their mandatory cover from organizations linked to the provincial law societies. This means that sales opportunities among some of the other professional groups are especially contested.”
The South African market, according to Finaccord’s research, is “much smaller than the other two at an estimated US$105 million in gross written premiums and other revenue in 2011.” However, the study also indicates that it is “likely to experience strong momentum in the future as beyond the traditional professions, penetration rates for professional indemnity insurance are still relatively low with more room for providers to develop and market new products.
“A growing segment in South Africa, as in most other markets, is alternative medicine which includes a diverse range of non-traditional healthcare practitioners such as acupuncturists, chiropractors and herbalists. However, in South Africa this growth segment does not currently include traditional African healers, who, despite their large number, are insufficiently regulated to constitute a clear target for litigation.”
In conclusion Bergmann noted: “While Australia and Canada are already highly developed marketplaces for professional indemnity insurance with some segments showing signs of surplus capacity, a large proportion of professionals in South Africa are still uninsured or underinsured. Hence, there is significant potential for those providers who can identify the growing niches. There is, for example, as yet limited provision of professional indemnity insurance to IT and business consultants in South Africa. These segments are likely to become of greater interest to insurance providers due to the increasing risk exposure arising from contractual obligations stipulated by consultants’ clients.”