Image of outside building. Side view.

Claims handling

Published on 10 January 2022

In this chapter of our Annual Insurance Review 2022, we look at the main developments in 2021 and expected issues in 2022 for Claims handling.

Key developments in 2021 

Volume claims handling in professional and financial lines in 2021 has seen evidence of the hardening market and tough trading conditions across all lines of business. This development has led to a significant increase in co-insurance at primary layer with reduced limits and a punishing renewal cycle for Insureds, underwriters and brokers around the old common renewal date in the solicitors' market.  Claims volumes have remained consistently high with an intense focus on cost control from all stakeholders.

Consolidation within the marketplace has seen a number of firms fall into run off with some high-profile volume firms failing.  The claims fallout of this kind of movement is an increase in policy attachment issues with greater chance of disputes as between insurers arising and in the solicitors' market a rump of Run-off policies which will have a long tail over the next few years. 

In the solicitors' market some excellent work has been accomplished to obtain helpful rulings to limit insurers' exposure to the many ground rent claims. Although there is still work to do as tenants negotiate to vary onerous terms and some homeowners are still discovering that they may have a claim.  Court backlogs and delays which are COVID related have seen some claims which arose as a result of remote working and sickness and more claims are likely to be revealed as the backlog in hearings is worked through by the Courts. The Legal Ombudsman backlog is also holding up claims resolution and at present a realistic plan to reduce the backlog within a reasonable time is not on the table.

What to look out for in 2022

In 2022 within the solicitors' market we anticipate claims arising from the termination of the SDLT holiday, which will be a direct cause of claims as well as an indirect cause arising from the potential for a drop in the standard of work as a result of pressure of work on fee earners as well as the impact of remote working through the pandemic. Conveyancing claims continue to stand out as the foremost cause of claims within this line of business and we expect that trend to be maintained.  

Across all lines of business we anticipate an uptick in claims arising out of or impacted by insolvency and the withdrawal of government support for business alongside an increased appetite for pursuing claims against professionals.  As recent premium increases will have focussed insured's minds on the cost of claims, we may also see Insured's attempting to avoid notifying claims leading to an increase in breaches of policy terms and coverage disputes. In such a market, payment of the excess can quickly become a hurdle to claims resolution which can also be a point of tension as between insurers and the insured. 

Finally, we anticipate further growth in claims arising from data breaches and the fallout of system penetration by criminals within the professional sector, where insured's are often holding large and sensitive amounts of data. 

Written by Sarah Armstrong.

Download our full Annual Insurance Review 2021 for more insights.