Professional indemnity (PI) rates fell at “unprecedented speeds” in 2024, surprising the market which expected another year of stabilization, according to the fourth edition of the UK PI Market report from Clyde & Co.
The report, which surveys PI market professionals such as underwriters, claims managers and brokers, showed that 56% of respondents expected there to be zero increase in rates this year. However, in recent months, there has been a drop in rates due to increasing competition from MGAs.
“The PI market is being tested again,” Clyde & Co. legal director Sam Godding said. “But amidst the uncertainty, transformation within the sector is bringing significant opportunity.”
About 31% of the respondents expect capital allocation to be the “most important structural influence” on the volume of PI business written in the UK over the next year, according to the survey.
However, 90% of the respondents believe that the number of PI claims will increase in the next couple of years as capacity within the market grows, with 74% believing the severity of the claims will also increase.
Outside of London, PI claims handling and underwriting hubs are also increasing, with 29% of respondents expecting to see growth in these roles in the South of England over the next 12 months, while 50% expect growth in the North of England. The growth is being attributed to client demand driven by significant construction projects and professional sector development in key cities.
“Scotland, Wales and Northern Ireland present more complex pictures, as significant growth opportunities are balanced against political uncertainty and the intricacies of devolved government,” according to the survey.
Meanwhile, more than 60% of the respondents said that cyber and technology, including AI, will further drive demand for PI cover in the coming months. Market professionals are also growing consistently concerned about the technology, with 72% of the respondents believing that AI will increase the risks of the practice and 82% suggesting inaccuracy and false information as the biggest concerns around the technology.
“The ability to demonstrate clear, quantifiable steps to reduce exposures and stay abreast of developing regulations and risks will be increasingly prized within the sector,” Godding said. “It will be an interesting year ahead as we await the market’s response to these new tests.”
