welcome to informed insurance


For further information about Regulation click here

Regulation predictions

Sustainable aviation fuel will help deliver Jet Zero

With the aviation sector’s carbon footprint estimated at 1.8bn tonnes of carbon dioxide by 2050 if left unchecked, sustainable aviation fuel (SAF) as an alternative fuel has been promulgated worldwide. The International Air Transport Association expects a significant acceleration in its production in the 2030s and estimates that SAF could contribute 65% of the reduction in emissions needed by aviation to reach net zero by 2050. The UK government has likewise published a SAF mandate that may be effective as early as 1 January 2025 requiring SAF to account for 10% of all aviation jet fuel. The mandate also sets parameters on what constitutes SAF (i.e. SAF must have 40% less carbon intensity than fossil fuel-derived kerosene etc). Airlines will have to carefully consider the contents of its chosen SAF to avoid greenwashing claims. As the UK government continues to invest its resources in boosting SAF (e.g. the £165mn Advanced Fuels Fund), we expect further regulation, policies and investments to emerge.

Greener skies ahead: electric air taxis offer a sustainable future

Hyundai’s Supernal is set to unveil a prototype of its electric flying taxi at the Consumer Electronic Show in 2024, signalling a transformative year for urban mobility. The electric vertical take-off and landing aircraft aims for a test flight in December 2024, marking a new era in efficient, sustainable transportation. Supernal’s development suggests a future where clean flight becomes commonplace, offering a swift and environmentally conscious solution to modern transportation challenges. As investments pour into this futuristic venture, companies can redefine the skies and drive us into a greener future. However, in order to make this a reality, regulatory frameworks and infrastructure must also develop in tandem.


Space debris will impact satellite insurers

In 2024 we expect more regulations around space debris, and increased risk for satellite operators. Insurers will likely need to re-evaluate policies and premiums to account for the heightened risks associated with space debris. The fine imposed by the US government on Dish Network for failing to remove a satellite from orbit is pivotal for the industry, highlighting the growing concern over space debris. This development suggests a shift towards greater accountability for satellite operators if they fail to safely retire satellites or defunct equipment from orbit. In addition, more satellites and space equipment are being launched into space, adding to the risk of collisions. Expect a push for regulations and increased scrutiny to ensure responsible space exploration.


Increased focus on drone risk exposures in the UK

The UK government Risk Register 2023 highlighted the risks associated with a malicious drone incident as being limited but with a moderate impact. This translates into the prospect of such an incident being between 0.2% and 1% (compared to, for example, less than 0.2% chance of an aviation collision over UK skies). The government report highlights the significant increase in drone use, for business and pleasure, in recent years. In 2018, the PwC report “Skies Without Limits” predicted 76,000 drones being in use in the UK by 2030. The second edition of the report, published in 2023, has revised that number to more than 900,000. Increased use and numbers does not automatically mean an increased prospect of accidents, but from a risk analysis perspective, it does potentially speak to greater access to hardware which could be used to malicious ends. It will be interesting to see how the UK government continues to assess and mitigate risk in this arena, against what we predict will be the development of European Union Aviation Safety Agency/EU rules (or as a minimum, guidelines) on counter-drone steps.


Package holidays: all change?

The UK Department for Business and Trade has launched a ‘call for evidence’ into the Package Travel Regulations 2018 (PTRs), with a more detailed consultation scheduled for early 2024. We foresee that the experiences of the failure of Thomas Cook and, crucially, the COVID-19 pandemic will have a significant influence on any changes. Key proposals include a possible removal of the concept of Linked Travel Arrangements; exempting packages that involve domestic only activities or no travel element; an exemption for lower priced packages; flexibility in the provision of insolvency protection; and simplifying the meaning of “other tourism services”. One issue that is sure to be raised is the disconnect between the obligations of Organisers to refund customers in full, and the difficulties faced in recovering those costs from suppliers, including airlines.


Regulators around the world will continue to focus on PFAS

Growing environmental concern and awareness of the risks associated with PFAS (known as forever chemicals) will lead to an increase in claims by employees, consumers and the general public. Regulators around the world need to focus on the potential health risks caused by PFAS products both to those employees manufacturing the products and the ultimate consumers. PFAS are used in a wide range of commercial and consumer products such as cosmetics, textiles, furniture and food wrappers, but do not break down in the environment. Additional risks are posed by the unsuitable control of waste material containing PFAS leading to contamination of water sources. Manufacturers are already required to remediate pollution and damage caused by PFAS across Europe and in the US, following events such as environmental contamination from firefighting foams. From a casualty claims perspective, if causal links can be established between exposure to PFAS and personal injury in the US, then discussions around possible injury claims in the UK may follow. However, the prospect of large numbers of PFAS injury claims in the  next year remains low, with any immediate risk of UK litigation being directed at damage caused by PFAS environmental contamination as seen in the US and Europe.


The condition of rental homes throughout the UK will receive greater attention

The number of claims made for damp and mould will continue to increase. Landlords need to ensure that any rental properties are in a habitable condition and any repairs are made in a timely manner to avoid the risk of claims being made. Both the UK government and the devolved legislatures have introduced provisions to raise the standards of rental accommodation in the private and social sectors. The continued cost of living pressure may mean an increasing number of tenants are unable to heat or adequately ventilate their homes, leading to the development of mould with consequent risks to health. Reduced budgets of landlords, large and small, may limit the ability to inspect rental properties and conduct any necessary repairs. High profile claims involving fatal outcomes following exposure to mould have raised public awareness of this means of redress.


Changes to the civil justice system will impact casualty claims

Further technological and procedural changes to the civil justice system will affect casualty claims. Initiatives such as the introduction of compulsory mediation for civil claims valued at up to £10,000 are intended to reduce the workload of the courts. Although unspecified personal injury claims will not be within the first tranche of claims to be subject to the compulsory regime (no start dates for any part of the scheme having yet been announced), the change will come. Other developments and initiatives can also be expected. We have seen a huge increase in the use of technology within the civil justice system, ranging from the creation of claims portals for certain work types to virtual hearings. These changes are here to stay and we expect further use of technology in the civil justice system to help reduce the workload of the courts.



Gateway 2 of the Building Safety Act may slow down the move to modern methods of construction

Modern methods of construction have been employed for some time in the construction industry, including using off-site construction techniques to accelerate on-site construction programmes. However, the introduction of the Building Safety Act 2022 Gateway 2 on 1 October 2023 may cause delays to on-site programmes. Gateway 2 requires the developer to obtain approval from the Building Safety Regulator (BSR) before it is able to commence works on higher risk buildings, and the developer needs to wait 12 weeks for confirmation from the BSR of whether its application has been successful or not. We predict this ‘stop/go‘ issue will cause difficulties for developers – requiring them to incur steep upfront costs prior to works actually commencing.


Enforcement action to make buildings safe faster will add pressure on an already stretched industry

By way of a joint statement issued by the Department for Levelling Up, Housing and Communities on 26 July 2023, the Building Safety Regulator, the Local Government Association and the National Fire Chiefs Council have all committed to working together to see buildings made safe faster. The joint statement promised robust enforcement action to be taken in Spring 2024 for those who have yet to remediate buildings. While this will no doubt put pressure on the industry to act, it will also increase the workload on an already stretched sector. Increased workload and stretched resources inevitably lead to mistakes happening. In addition to the Building Safety Act bringing in new rules and duties with which to comply, it is possible that a new regulator will be created just for architects, which will create more obligations to observe.


Data ethics will play a greater role in guiding the use of personal and non-personal data

We expect many organisations to begin codifying an approach to data ethics in a formal governance framework to guide not just whether they can use personal and non-personal data, but also whether they should use it. Ethical considerations around the use of data are increasingly coming to the fore, particularly in light of rapidly evolving developments around the use of AI. These considerations are not new. In the past they may have manifested informally, taking into account general considerations such as good outcomes for your customer base or employees, public perception, use of the ‘cool v creepy‘ test and your organisation’s ‘inner conscience‘. However, the ever increasing reliance on data has brought - and will continue to bring - about a greater responsibility on organisations to handle data responsibly (in the broadest sense) and deal with the moral challenges arising out of its use.


The UK government will rebalance its ‘pro-innovation’ approach to AI regulation

We expect to see more action and guidance from the government and regulators on the management of the risks of AI, whether building on existing regulatory frameworks or implementing new measures. Organisations seeking to engage AI within their business will need to keep abreast of these developments. In recent months, there has been increased pressure on the UK government to shift from its ‘pro-innovation’ stance on AI towards a more balanced approach. An interim report by the Science, Innovation and Technology Committee on the governance of AI urged the government to “accelerate, not pause, the establishment of a governance regime for AI“. Further recent recommendations for greater AI regulation have come from bodies such as the Trades Union Congress and the Ada Lovelace Institute. The UK government has already made a move in this direction through the launch of the Artificial Intelligence Safety Institute and we have seen countries around the world endorsing ‘frontier‘ AI safety under the Bletchley Declaration.


Regulators will increasingly collaborate and expand their traditional functions in respect of AI and digital technology

The Financial Conduct Authority and Competition and Markets Authority will continue to play larger roles in the regulation of AI and digital technologies, and increasingly collaborate with the Information Commissioner’s Office. These regulators are already working together as part of the Digital Regulation Cooperation Forum (DRCF) and will shortly launch a multi-regulator sandbox (the DRCF AI and Digital Hub) to support organisations in meeting regulatory requirements for digital technologies. Cross-collaboration is evidently in the minds of policymakers, with the Science, Innovation and Technology Committee interim report on AI governance also concluding that resolving challenges posed by AI “may require a more well-developed coordinating function”.


The role of the data protection practitioner will increase in scope

The issues at the forefront of data protection governance have expanded significantly over the past year. At the same time, the role of the data protection practitioner is evolving to keep pace with business needs. As we look to the future, Data Protection Officers (DPO) will increasingly find themselves being asked to opine on considerations outside the confines of the General Data Protection Regulation and Privacy and Electronic Communications Regulations. Some will look to bring issues such as data ethics and governance of non-personal data within their remit. Others may decide to create new roles such as an AI Ethics Officer. However, given the challenges in determining who is best suited to oversee the likes of AI regulatory compliance, many organisations are likely to default to the DPO, at least in the short term.


Connected product legislation will create new risks for insurers of manufacturers and distributors

We predict future discussions within the insurance industry as to whether risks and claims associated with connected products legislation sit within cyber, product liability, technology errors and omissions coverage or whether they will justify an entirely new insurance class. Regulations under the Product Security and Telecommunications Infrastructure Act will come into effect in April 2024, aimed at ensuring that consumer-connectable products are more secure against cyber-attacks. Manufacturers, importers and distributors of such products will need to comply with new security requirements (including bans on default or easily guessable passwords) and provide adequate reporting systems and transparency on a product’s security updates. Penalties for non-compliance include compliance, recall and stop notices and large fines up to £10mn or 4% of worldwide revenue. The recoverability of such fines under a policy will be subject to any exclusionary language and/or the usual ‘illegality defence’ and public policy doctrine(s) surrounding such matters. These are entirely new legal risks for manufacturers and distributors which may prompt discussions as to which insurance line is best suited to meet them.


The ICO will increase enforcement action

Under the UK GDPR (General Data Protection Regulation), the Information Commissioner’s Office (ICO) has a range of enforcement powers at its disposal. These include reprimands, enforcement notices and civil monetary penalties. In recent years, commentators have been critical of the limited number of fines that have been issued relative to the number of breaches reported. This is in part due to the limited resources, both personnel and financial, available to the ICO. Another factor might also be the prospect of the ICO having to self-fund subsequent legal appeals of its fines, which can only act as a disincentive against enforcement. However, since 2022, the ICO has been entitled to retain up to £7.5mn a year of the fines it issues to pay for litigation costs. Although implemented in 2022, we predict that we will only now start to see the results, given it will have taken the first year to build up the fund before providing greater confidence in the issuing of fines or in enforcement appeals.


While cryptocurrencies may become less volatile, investment firms must exercise caution to avoid investor claims

When interest rate rises are seen to have peaked and even begun to reverse, investment firms will look again at digital assets as an investment class. It is likely that sentiment will return so investment in cryptocurrencies is seen as a risky but likely rewarding venture. In a more benign financial environment, however, any investment firm taking this step for even moderately risk averse investors risks claims being made against it if further failures hit the crypto-market. Investors must understand that despite some forms of regulation, mostly around marketing to consumers, it remains largely unregulated and therefore inherently risky as an asset class.


The FCA and PRA will drive greater diversity and inclusion in the workplace

Consultation proposals by both regulators are more far-reaching than expected. They include controversial elements, such as a requirement to set targets to address underrepresentation at all levels of the work force. The proposals are set out in the FCA’s consultation paper entitled “Diversity and inclusion in the financial sector – working together to drive change” and the PRA’s counterpart consultation paper entitled “Diversity and inclusion in PRA regulated firms”, both published on 25 September 2023. Insurers will be required to publish diversity and inclusion (D&I) strategies (including a plan for meeting the goals set out); monitor diversity and inclusion internally; collect and report data across a range of demographic characteristics to the regulators; and make public disclosures of D&I data. It will be challenging to set targets based on characteristics such as sexual orientation or religion, given the heightened sensitivity around the processing of this information on an identifiable basis. Though many larger firms will already have D&I policies and some level of diversity monitoring in place, careful consideration will be needed to ensure compliance with the prescriptive requirements proposed.


The Consumer Duty will continue to challenge the market in 2024

The Consumer Duty, which came into force on 31 July 2023, has been described by the FCA’s CEO as its “most significant reform for decades”. The FCA will assess the impact of the Consumer Duty closely, with a particular focus on the value of insurance products and the effectiveness of the measures taken by insurers to address the needs of vulnerable customers. The Consumer Duty will be an increasing feature of regulatory enforcement action against firms. Insurers and intermediaries will need to show they have taken all reasonable steps to ensure good customer outcomes. It will no longer be enough to show that the relevant rules were complied with; firms will have to demonstrate the additional measures they identified as necessary to meet the four cross-cutting obligations that make up the Consumer Duty, and the steps they took to ensure those measures were carried out.


The Consumer Duty will affect price and value, and may require products to be withdrawn

The Financial Conduct Authority (FCA) will continue its work on fair value for insurance products, but with added impetus under the Consumer Duty. The FCA has expressed surprise at the small number of insurance products withdrawn following firms’ fair value assessments. It is also clear where the FCA will be directing its sights; it has highlighted GAP insurance as being a product it thinks often fails to provide fair value, with claims costs representing as little as 4% of premiums. The FCA has also seen examples of firms paying up to 70% of the value of insurance premiums in commission to distributors of GAP insurance. Products previously highlighted by the FCA as often representing poor value include policies sold as add-ons to non-insurance goods and services, and policies where the distributor’s remuneration represents a high proportion of the premium paid by the customer, particularly where the distributor’s role is limited to non-advised sales. Insurers and distributors with products which may represent poor value should ensure that their value assessments are robust and up-to-date.


Consultation on new framework for captives in Spring 2024 will require bold stance by government and regulators

The UK government, along with the Prudential Regulation Authority and Financial Conduct Authority, will continue to reshape the UK rulebook, taking advantage of the greater flexibility resulting from the UK’s departure from the European Union. Progress continues to be slow and cautious, although there are encouraging signs (for example, the abolition of the cap on bonuses) of a willingness to make changes which make regulatory sense even at the risk of unfavourable headlines. In this light, the announcement in the Autumn Statement on 22 November of a consultation in the Spring of 2024 on the design of “a new framework for encouraging the establishment and growth of captive insurance companies in the UK” is welcome. However, the measures will be successful only if the government and regulators are sufficiently bold to put the UK’s regime at least on a par with those of established captive centres.


Expect greater scrutiny around third party service providers in the name of operational resilience

Financial regulators are becoming increasingly alive to the need for operational resilience around services obtained by regulated firms from third party service providers (TPSPs). TPSPs can pose unique systemic risks where firms are dependent on a limited number of providers; the Bank of England has identified a significant concentration of cloud-based service providers for banks and insurance companies. The Financial Services and Markets Act 2023 establishes a new Critical Third Party (CTP) regime, giving the UK regulators new powers to directly regulate CTPs, rather than rely on firms to manage the risks themselves. This regime will apply where HM Treasury identifies a CTP as ‘critical’ – this is likely to apply to just a small number of TPSPs. In the EU, the Digital Operational Resilience Act will apply broadly similar requirements to EU firms and TPSPs. Firms and potential CTPs alike will need to prepare for much closer regulatory scrutiny than previously. Even where a TPSP is unlikely to be found to be providing ‘critical’ services, more intensive regulatory scrutiny of such arrangements is on its way.

International ESG initiatives will continue to drive sustainable finance regulation in the UK

On 19 September 2023 the Taskforce on Nature-related Financial Disclosures (TNFD) released its final recommendations. It provides a framework enabling companies to assess, disclose and manage nature-related risks and impacts with the aim of consistent and comparable reporting by businesses and financial institutions worldwide. This has been described as a “game changer” for corporates and financial institutions. The output of the TNFD complements that of the Task Force on Climate-related Financial Disclosures (TCFD), enabling financial institutions that are already acting on climate risks to use TNFD’s integrated approach to address nature-related financial risks at the same time. Though the framework is currently a voluntary one, as happened with the TCFD we can expect governments and regulators around the world, including the Financial Conduct Authority in the UK, to move to introduce compulsory nature-related financial disclosures in line with TNFD alongside the current compulsory climate-related financial disclosures for in-scope firms.


Insurers need to focus on the supervision of appointed representatives

The Financial Conduct Authority (FCA) will continue to focus on firms’ supervision of appointed representatives (ARs), including testing whether firms have fully implemented the FCA’s recently enhanced supervisory requirements. We can expect enforcement action where firms have failed to do so, and in the longer term where failings on the part of the AR are the result of poor oversight or due diligence on the part of the principal. Insurers and intermediaries with ARs should review both the terms of their current arrangements and their policies and procedures for overseeing new and renewed appointments. It is likely that the willingness of insurers and intermediaries to take on such responsibilities will reduce given the greater regulatory scrutiny, particularly where the appointment of an AR is not key to the firm’s strategy.


Principles-based regulation will increase

Principles-based regulation has become more widespread in the UK in recent years and the Consumer Duty is a further example. This is to be distinguished from rules-based regulation where the limits of permitted or proscribed conduct are defined. It tends to be outcomes based and, when it works well, prevents technical compliance which ignores the intended purpose of regulations. The Consumer Duty does not attempt to set out what insurers must do in relation to specific underwriting or claims practices, or when drafting policy documents. Instead, it sets out broad principles and it is for insurers to interpret them and modify their practices and policy wordings to ensure compliance. Treating Customers Fairly was an earlier manifestation of this but it has been taken much further. The Financial Conduct Authority is likely to use this tool more widely going forward.


Biodiversity risk will move centre stage in 2024

While it may have been waiting in the wings of the ESG space in 2023, we predict the spotlight will fall on biodiversity risk this coming year. This is based in part on the publication in September 2023 of the recommendations of the Taskforce on Naturerelated Financial Disclosures, providing companies and financial institutions with a risk management and disclosure framework to report and act on nature-related issues. Biodiversity risk also sits in the slipstream of climate change risks and will benefit from a general increase in awareness, despite being a separate risk focused on the direct harm we cause our environment and nature. For liability insurers, new laws and regulation will widen the scope for claims and litigation risks. But the big question is whether we will follow other jurisdictions, such as New Zealand, Canada and Colombia, in giving legal personhood to natural objects, such as rivers and forests. The risk of reputational harm should also not be underestimated.


Regulation of European litigation funding will progress

Formal proposals for the regulation of third-party litigation funding in Europe will become clearer in 2024. In October 2022, the European Parliament made recommendations to the Commission for the introduction of minimum standards for funders, including a limit on sums that could be paid from settlements or damages to funders. Progress has been slow, with the Commission needing to balance the desire to prevent abusive claims with the crucial role that funding can play in promoting access to justice. By comparison, the UK’s litigation funding market remains largely self-regulated on a voluntary basis, with funders currently focused on the implications of the Supreme Court’s decision in PACCAR. Our guess is that the regulation in Europe, when it comes, will be relatively light touch, so as not to strangle the growth of mass actions for consumer claims now provided for by the Representative Actions Directive.


Marine cyber threats will move from external to internal

Shipowners and operators will continue to adopt solutions for greater connectivity at sea, bringing more equipment and crew online. Increased connectivity will increase the external cyber threat landscape, making internal threats easier to overlook. Older legacy technology, where patches or updates are no longer being published, could create a new internal threat of equipment failure. New International Association of Classification Societies regulations coming into force in 2024 will embed cyber security by design into new build vessels but vulnerabilities for existing vessels and equipment will remain, whether through improper integration of individual equipment into the vessel’s overarching cyber-security plan or through outdated equipment that is not properly segregated.


Transport companies need to prepare for a surge in new regulations

EU ETS, CRSD, CII, CSDDD, ESG…the acronyms, and compliance requirements, for maritime supply chain regulation are seemingly endless. With increasing focus from regulators on supply chain transparency and emissions reporting, this trend is likely to continue, forcing companies to better understand their supply chains and their role in the supply chains of others. As key nodes in global supply chains, transport companies will need to ensure they are able to provide visibility to customers and provide accurate and complete reporting to satisfy the regulators. This will almost inevitably mean getting to grips with a lot of data and using digital tools to ease the compliance burden. For cargo insurers this should translate into better risk management, and better data availability for risk analysis, as their insureds gain a greater understanding of who their suppliers are and how their goods are transported.


New discount rate review in 2024 may impact insurance reserves

Following the implementation of Part 2 of the Civil Liability Act 2018, the first review of the Personal Injury Discount Rate took place in July 2019, when the Discount Rate was set at minus 0.25%, where it has stayed to date. As a review must take place every 5 years, we can expect the next review to commence by July 2024. Underwriters will therefore want to keep a close review on reserves towards the last quarter of 2024 and the first quarter of 2025. Following a government consultation looking at the discount rate in other jurisdictions, we wait to see whether a dual rate approach will be adopted in the UK for the first time. This may allow longer-term losses to benefit from a higher discount rate (and therefore reduction in overall quantum) but may be offset by higher legal costs per claim amid more use of financial specialist evidence.


Expect greater regulation of non-surgical cosmetic procedures to promote higher standards and best practice

The non-surgical cosmetic procedure sector contributed over £24bn to GDP in 2022, and has increased exponentially over the last 10 years. Anti-wrinkle injections (commonly known as Botox), dermal fillers and chemical peels are increasingly popular and now commonly available on most British high streets. However, concerns over safety and outcomes of unlicensed treatment have caused the government to consult on the introduction of a licensing regulation scheme, including a practitioner licence and a premises licence, potentially to be administered and enforced by local authorities. Insurers of cosmetic treatment providers will want to keep a close eye on the scope of this consultation, so that their evaluation and underwriting of risks in this space are updated accordingly.


Med mal claims will be impacted by the new fixed costs regimes

After several years of speculation and several consultations, two regimes will introduce fixed recoverable costs into medical malpractice claims. The first applies to the introduction of fixed costs for all money claims valued over £25,000 up to £100,000, where the cause of action accrued after 1 October 2023. Clinical negligence claims will be included in this regime if breach of duty and causation are admitted, so long as no exception applies. The second regime, expected in April 2024, will introduce fixed costs for all clinical negligence claims valued up to £25,000 (excluding stillbirth and neonatal claims). This will introduce early exchange of evidence and a neutral evaluation (to be paid for by the defendant) if a matter is not resolved. Where claims fall within scope, healthcare providers and their insurers will need to accelerate investigations and decisions on admissions or defensibility at the earliest opportunity in order to benefit from better proportionality of costs.


Automated Vehicles Bill will face bumpy road to become law

The Automated Vehicles Bill will face significant challenges in becoming law before the conclusion of the current parliament. Adopting a number of the Law Commission’s recommendations, the draft legislation focuses on a safety framework, clear legal liability, data sharing and security, and responsible marketing. It also accommodates the divergence in regulation as between private cars and automated passenger service vehicles. There will need to be substantial stakeholder involvement on multiple points before secondary legislation can be finalised. The Automated and Electric Vehicles Act 2018, a relatively narrow piece of legislation forming part of the rolling programme of regulation for AVs, concluded its parliamentary journey in around 9 months. The proposed Automated Vehicles Bill will deal with many of the fundamental issues necessary for the effective deployment of automated vehicle technology. If there is a general election in May 2024, then the Bill is unlikely to pass. A later election would allow more parliamentary time, but would still not guarantee the Bill’s passage onto the statute books. In addition, a Labour government may not prioritise automated vehicles in its initial transport agenda.


Review of Judicial College Guidelines and whiplash tariff will see injury claims inflation

Inflationary pressures will lead to an increase in the guideline figures for injury in the 17th Edition of the Judicial College Guidelines expected in March 2024. Any changes may impact the track to which cases are allocated. The whiplash tariff also established in the 2021 regulations must also be reviewed by May 2024, in line with the three year anniversary of the Civil Liability Act coming into force. Any increase will serve to dissipate the intended benefits of the reforms and should be accompanied by a corresponding increase in the small claims limit, to account for inflationary pressures on general damages.


Mandatory mediation will herald a change in claims handling processes for low value fixed sum claims

Mandated use of mediation in low value, fixed sum claims will require parties to re-think their approach to pre-action processes and disclosure. This will be especially prevalent in areas such as alternative vehicle hire claims for a specified sum, where claims are often document and evidence heavy. As yet, there is no specific date for the implementation of the Ministry of Justice’s intention to mandate the use of the Small Claims Mediation Service on specified claims post-filing of a Directions Questionnaire. We expect this will occur in 2024. The intention is to help reduce backlogs and free up court lists to enable judges to hear more complex cases.


Cross-jurisdictional collaboration will help inform the approach to setting the personal injury discount rate

A cross-jurisdictional approach will help to inform whether a single or dual personal injury discount rate (PIDR) should be used across the UK jurisdictions. The PIDR is under review in all three UK jurisdictions during 2024. We are likely to see a further call for evidence before the review commences. The panel of experts appointed will be advising the Lord Chancellor on issues including whether there should be a single or dual rate, and what form a dual rate should take. The review must commence by 15 July 2024 and be completed by 10 January 2025. The review process for Scotland and Northern Ireland is different. If changes are to be made to the process, methodology for calculating or structure of the rate, those changes need to be in place before the Government Actuary’s Department starts its review by 1 July.


There will be a better understanding of the impact of a proposed cold calling ban on motor claims

The proposal to ban cold calling for consumer financial services and products has the potential to significantly impact the motor claims market. The response to the HM Treasury consultation is expected during 2024. A ban would have the potential to impact both insurers and those providing claimant-related services. The intention, as stated in the consultation, is that the products and services intended to fall into scope would include credit and debt, including individual voluntary arrangements. Given the non-exclusive nature of the examples and the potentially extremely wide ambit of “credit and debt” services (in particular, going well beyond just those services that are regulated by the Financial Conduct Authority), the impact of any ban could be wide-ranging.


Integration of AI into products highlights defects in UK product liability legislation

The development of new products with increasingly sophisticated software or AI capabilities will challenge the efficacy of the UK’s existing product liability regime. The recent consultation on reforming product safety in the UK highlighted succinctly that existing definitions such as ‘product’ and ‘defect’ in the context of product liability are not adequate for consumer connected products with or without artificial intelligence. Manufacturers, importers and distributors have been provided with guidance on security requirements for connected products via upcoming regulations pursuant to the Product Security and Telecommunications Infrastructure Act. However, UK businesses lack clarity on liability triggers in the event that AI or software integrated into a product fails, causing injury and/or damage. The proposed EU Product Liability Directive will extend the definition of product to include software. Manufacturers of components, which can include those integrated or interconnected with products, would also be liable for defects caused by those components. This may serve as a backdrop against which UK legislative change is made.


Products will be at the heart of class action growth in Europe

The impact of the Representative Actions Directive means that manufacturers and distributors of products, as well as their insurers, will have to contend with an increase in class actions for defective or unsafe products in the coming years. At the heart of this expected increase is legislative change in relation to consumer protection in Europe. Consumer protection is nothing new but product safety is currently the focus of widespread reforms aimed at updating and enforcing standards and facilitating access to justice. The new General Product Safety Regulations will introduce new requirements on the reporting of accidents caused by products, labelling and the advertising of product recalls. In parallel, the new Product Liability Directive (PLD) is a legislative proposal intended to update the product liability framework in Europe. The PLD is intended to replace the existing 40-year old Directive, bringing software and certain digital services into the scope of EU product liability, raising the prospect of mass claims following incidents such as defective software updates.


Product liability reform may be a victim of political timing

The prospect of detailed legislative proposals to reform the UK’s product liability regime in the next 12 months are slim in our view. The recent wide-ranging consultation on the UK’s product safety framework concluding in October 2023 did seek responses commenting on the defects of the current liability regime and did highlight concerns raised within the Call for Evidence 2021. Specific problems around the existing regime were identified but overall the consultation was light on detail and proposed changes. The UK lags behind the EU, with the Product Liability Directive being updated to cover connected products and software. We have no doubt there is an appetite to ensure that UK legislation covers recent technological advances, but any discussions around responsibility for non-physical elements of products will be complex. Against this backdrop, lengthy legislative timetables and a General Election to occur sometime in 2024, product liability reform is likely to fall within the remit of the next government, irrespective of political leaning.


New international medicines recognition scheme will reap benefits

The Medicines and Healthcare Products Regulatory Agency (MHRA) has announced a new licensing route for medicines which started operation on 1 January 2024. Companies that have already received a marketing authorisation for the same medicine can apply under the new International Recognition Procedure for expedited access to the Great Britain market based upon the regulatory decisions of one of the MHRA’s specified Reference Regulators. These trusted competent authorities are Australia, Canada, Switzerland, Singapore, Japan, the United States Food and Drug Administration and the European Medicines Agency. The MHRA retains the power to conduct a full assessment where considered necessary. With companies needing to make decisions on which markets to prioritise, this is a welcome move. It also demonstrates the regulatory flexibility which the MHRA, as a sovereign regulator, can now use for the benefit of patients.


UK clinical trials will get back on track

Clinical trials are a key element of healthcare innovation but the UK has experienced a sharp decline in clinical trial activity in recent years. Recognising that clinical trials regulation should be flexible and proportionate to the risks, the Medicines and Healthcare products Regulatory Agency (MHRA) has announced a new streamlined notification scheme for the lowest-risk Phase 3 and 4 clinical trials. The scheme will see applications processed by the MHRA in half the current time, with about 20% of UK applications expected to be eligible. The scheme is based on that outlined in the MHRA’s Clinical Trial consultation. Its goals were to enhance the UK’s attractiveness as a home for clinical research as well as giving UK patients quicker access to potentially life-saving medicines. This initiative is just part of the biggest overhaul in UK clinical trials regulation in over 20 years, with this boost for clinical trials presenting an opportunity for insurers who offer coverage for clinical trial risk to write additional policies.


Will the UK vaping epidemic go up in smoke?

The recent policy paper and consultation published by the UK government on tackling the rise in youth vaping is a precursor to legislative change aimed at enabling vape use by adult smokers to help with cessation, but limiting uptake by young people. Existing legislation has not prevented widespread use by young people, and recently announced curbs in Australia to be underpinned by legislation may serve as a template for measures in the UK. For example, in Australia, vapes containing nicotine will only be available with a prescription from pharmacies, and other restrictions include limits on flavours, colouring and other ingredients. As mentioned in the King’s Speech, the UK government already intends to take tougher measures to restrict the sale of disposable vapes, restricting the marketing of vapes and strengthening enforcement activity. It is possible that additional attempts to limit risks to public health caused by counterfeit or unregulated products in supply chains may form part of other measures proposed following the conclusion of the consultation. Insurers may choose to exercise restraint when writing liability risks covering both vaping devices and liquids in the face of further regulation.


Accountants: Financial Reporting Council regulatory activism will continue

Increasing numbers of audits being investigated by the Financial Reporting Council (FRC) and increasing headline fines are trends that are set to continue. Audit quality is improving but until a homogenisation of improved audit practices is achieved across the board, accountancy firms remain vulnerable to findings that their audit work falls beneath the low bar justifying investigation and sanction. Historic audit work will also come under scrutiny in the event of corporate insolvencies, which are on the rise due to challenging economic conditions, interest rate hikes and the corresponding rise in the cost of debt. As regards level of sanctions and fines, the Carillion investigation headline fine for the firm under investigation of £26.5mn (reduced by 30% to £18.5mn to reflect the firm’s co-operation and admissions) may be an outlier due to the unusual facts, however it has unarguably raised the overall ceiling for fines, and deterrence, not just fairness, is an important objective for the FRC, which explains why with each passing year we have seen FRC fines increase rather than stabilise.


Financial Advisers: Post-implementation challenges presented by the new Consumer Duty

With the Consumer Duty in force from 31 July 2023, the implementation phase is now over but the challenges will continue. The Financial Conduct Authority (FCA) has emphasised that it is not a one-off duty but something advice firms will need to continue to monitor and improve upon. And the FCA will be testing firms’ implementation and taking action where it is deemed insufficient. Firms will have to grapple with the challenge of what this means for the way they conduct their business. In the complaints area, firms now have an enhanced obligation to take appropriate action (including providing redress) where they have caused foreseeable harm to a retail customer. The likelihood is that this will lead to more voluntary and enforced past business reviews.


Lawyers: SRA presses for increased fining powers

A further expansion of the Solicitors Regulation Authority’s (SRA) power to impose fines without referral to the Solicitors Disciplinary Tribunal (SDT) is anticipated. In 2022, the maximum fine for traditional law firms was raised from £2,000 to £25,000, however the SRA is lobbying for more. Although solicitors often prefer to resolve conduct issues directly with the SRA to avoid the costs and adverse publicity associated with a referral to the SDT, there is a balance to be struck between the efficient disposal of cases and access to justice. This has been brought into sharp focus by the Economic Crime and Corporate Transparency Act 2023 which removes the statutory cap on the SRA’s power to levy financial penalties for cases involving financial crime including so called Strategic Litigation Against Public Participation. The Law Society and the SDT have expressed opposition to this proposal and have voiced concerns about the SRA acting as “investigator, prosecutor and judge”. The SDT provides a transparent and objective forum for the consideration of more serious cases and it remains to be seen whether the Legal Services Board will act on the concerns expressed by the Law Society. For larger firms whose turnovers would result in the imposition of higher fines this could have a significant impact.


Lawyers: The claims environment will heat up in respect of climate change advice

We predict that the incidence of claims against lawyers in relation to climate-related advice will increase unless firms and in house legal teams support their colleagues to upskill in this area. In October 2023, the Law Society issued guidance to the profession on climate change, governance and the risks associated with greenwashing. The Law Society distinguished between the advice on issues such as greenwashing, that in-house lawyers may be under a duty to provide to their company’s Board, and advice given to clients by solicitors in private practice. The Law Society also identified the areas of risk for companies and clients and the relevant legislation that lawyers should have in mind when advising. The message from this is two-fold. Training is key to ensure that solicitors are competent to give advice in this critical but emerging area. In addition, solicitors must scope out their retainers carefully, so that clients are clear about the limits of the advice they will receive and when they may need to instruct a specialist.


Media and Legal Professionals: Reforms will curb Strategic Litigation Against Public Participation

A new early dismissal mechanism will be coming into effect next year to address Strategic Litigation Against Public Participation (SLAPPs) in economic crime proceedings (under the Economic Crime and Corporate Transparency Act 2023). If a claim is held to be a SLAPP, the court will only allow it to continue if the claimant can show that it is likely to succeed at trial. If it does proceed, a court may not order a defendant to pay the claimant’s costs (except where misconduct of the defendant justifies such an order). The reforms will give defendants an opportunity, for the first time, to be able to strike out SLAPPs. Where a SLAPP case is allowed to proceed, defendants will not face the risks of excessive costs burdens in paying the claimant’s costs. However, the test to determine if a claim is a SLAPP may include an assessment of the claimant’s conduct of the litigation and we anticipate that this will be an area of dispute, given the lack of clarity around the threshold for improper conduct. It could also result in SRA scrutiny and professional negligence allegations against claimant solicitors where the conduct of the litigation is held to have been improper.


Pensions: A consolidation agenda

Significant changes and reform should continue to be expected by all those in the pension industry. This time it is the efficiencies of scale and using investments to drive growth which is the focus of the proposals. In July 2023, the Chancellor announced a number of reforms for Defined Contribution (DC) and Defined Benefit (DB) schemes which had consolidation at their heart. For DC schemes, the Chancellor indicated that “a programme of DC consolidation” was required to deliver diverse portfolios and best possible returns. Schemes that do not deliver “the best possible outcomes” will face regulatory intervention and wind up. For DB schemes, the Chancellor said the market was too fragmented and the government would introduce a new ‘Superfund’ in which public sector funds may lead the way. A change in government is unlikely to derail this consolidation agenda, with Labour making similar proposals. The Pensions Regulator is also supporting this direction of travel, announcing in October 2023 that its regulatory approach is evolving to “help shape the pensions market to fewer, larger well-run schemes” and, only a month later, approving the first DB Scheme transfer into new Superfund, Clara-Pensions. As insurers will know all too well, years of reform in this sector have illustrated that there are always mistakes to be made or discovered when changes are introduced.


The Terrorism (Protection of Premises) Bill will bring positive outcomes for property insurers

Having been included in the Queen’s Speech in May 2022, the Terrorism (Protection of Premises) Bill (also known as Martyn’s Law) was included again in the King’s Speech in November 2023. While the Bill is of significant interest for liability insurers, requirements for proportionate protective security measures are likely to have a positive knock on effect for property insurers as well, potentially reducing other crime and antisocial behaviour and in turn the likelihood of material damage and theft claims. As to when the new legislation may be passed, our prediction is that it will not be this side of the general election, whether in Spring or Autumn 2024, in light of the King’s Speech reference to the need for a further consultation on standard tier venues. Regardless, this is a Bill that should be high on the radar for insureds, brokers, underwriters, claims handlers and reinsurers alike.


There will be greater focus on autonomous vehicles and cyber risk

As vehicles become increasingly connected, there will be an increasing exposure to cyber risk. Cyber-attacks can take many forms and may target a single vehicle, or type of vehicle, or all vehicles that have adopted common operating systems. Beyond the constraints of Part VII, Road Traffic Act 1988 and Part 1, section 2, Automated and Electric Vehicles Act 2018, insurers need to consider to what extent such risks should be written as standard and whether they should be sub-limited or excluded. Such risks also require consideration in relation to reinsurance contracts. These may not be entirely back to back to the extent that motor policies protect against more risk than is mandated by the Road Traffic Act.

Back to top