50 predictions on insurance

Insurers fear a Brexit ‘crash landing’ the most, according to DAC Beachcroft’s annual Insurance market conditions & trends report.

In this scenario, Brexit would be ‘acrimonious, inconclusive or fragmented’ with everyone left guessing what rules are still in place and how they are to be applied, and frantic sector-by-sector discussions about how to create an ‘orderly transition to a destination that itself will be uncertain’.

The best result for the insurance industry would be a ‘managed transition’ with amicable relations and a broad range of transitional arrangements in place, perhaps keeping in place many of the structures and rules that underpin access to the Single Market.

Second best would be the ‘big bang’, a well-managed hard Brexit. While this would not be good for insurers, it at least would bring clarity, the report said. It concludes that the insurance industry is ‘as well prepared as it can be, given all of the uncertainties’.

The report makes 50 predictions for the year ahead. DAC Beachcroft partner Nick Young predicts that law firms will increasing adopt contingency fees to pursue clients’ subrogation claims. Currently, law firms can use damages-based agreements (DBAs) but not hybrid arrangements, resulting in a negligible take-up of DBAs.

Young notes, however, that ‘creative third-party funders and insurers have stepped in to develop several useful funding products which are legitimising the use of hybrid DBAs through another route.

Young identifies escape of water claims as a major new area for fraudsters, with an increase in claims from leaking pipes and faulty plumbing systems. A leaking tap, he says, is an easier route to recovery than arson.

Partner Tom Baker says hands-off driving in a limited way could be piloted on motorways by 2019, and will raise tricky issues for insurers. Drivers will be able to take their hands off the steering wheel for three minutes at a time but must remain engaged with the vehicle, which could pose liability problems. However, he predicts it will be 2021 at the earliest before fully automated driving on motorways becomes a reality.