
Eleanor Whittaker, Charlotte Halford and Clare Hughes-Williams of DAC Beachcroft look ahead to 2025 as social issues finally come front and centre for the insurance profession
It is not by accident that the ‘S’ of environmental, social and governance (ESG) issues is bookended by the arguably more popular environmental and governance issues. Its placement is in response to concerns that social issues might too easily fall off the radar. It is therefore welcome to see, for the first time, in our predictions for 2025 that there are as many social entries as there are governance ones, both well ahead of the remaining themes of geopolitics, environment, technology and economics.
What, then, are some of the significant social issues for the insurance industry in 2025?
Martyn’s Law to impact the education sector
In legislation, Martyn’s Law and sexual harassment in the workplace will be key. While we are now seeing more engagement on the impact of Martyn’s Law as debate continues in the House of Lords, one particular area of impact is education.
The aim of the Terrorism (Protection of Premises) Bill 2024 (also known as Martyn’s Law) is to reduce/mitigate the risk of terrorist attacks. This will apply to the education sector. When the bill becomes law, it will impose ‘standard tier’ obligations on those responsible for buildings used for childcare or primary provision and secondary or further education. The government recognises that existing safeguarding policies and procedures mean much has already been done to reduce risk and consequently these types of premises will fall within the standard tier, regardless of maximum numbers of attendance.
The bill, as currently drafted, draws a distinction between these types of premises and those used for higher education. Higher education premises may well be freely accessible to members of the public, representing a greater risk profile. The sector will need to keep a watching brief on the bill’s passage through parliament to ensure it is best placed to meet its obligations when it becomes law.
New duty on employers to prevent sexual harassment
On 26 October 2024, a new positive duty on employers to take reasonable steps to prevent sexual harassment in the workplace came into force. Employers must now proactively implement measures to embed a respectful work culture through zero-tolerance policies, staff training on inappropriate conduct, and effective and sensitive complaints handling procedures. Neglecting to prepare for this new duty could lead to an increase in harassment claims and more compensation.
If an employee succeeds with a claim for sexual harassment and the employer has breached the new duty, the tribunal can increase compensation by up to 25%. The Equality and Human Rights Commission (EHRC) can also investigate and take enforcement action. Action can be taken based on a suspicion of non-compliance; there does not need to be an incident of sexual harassment before the EHRC will consider exercising its enforcement powers.
Data breaches to remain a major concern
In the technology arena, data breaches and artificial intelligence (AI) are likely to be key areas of interest.
Threat actors will continue to breach defences and cause loss, with the human factor remaining the weakest part of organisations’ security systems. The continued search for the best balance between system security and usability will allow for continued penetration of systems. New challenges such as AI-related scams will create further risk.
Although tools such as multi-factor authentication make third-party access harder, with cloud-based systems and resilient backups aiding recovery, none represent a panacea. In the future, we anticipate that data will simply be stolen, compared to current trends where data is often encrypted and ransomed against publication. For consumers affected by these incidents, while bank redress schemes may offer some form of remedy, they may encourage threat actors to see data theft as a victimless crime. For businesses, however, there will be no such redress.
AI could lead insurers into a diversity and inclusion minefield
At the 10th Dive In for Diversity Festival in the autumn, Sir Trevor Phillips, former head of the Commission for Racial Equality, warned about the potential negative impacts of AI on diversity and inclusion. He put the market on notice that it must be alive to the dangers of drifting into this minefield unawares.
As certain roles are reshaped or even eliminated by AI, it is necessary to step back and look at the relative impact on disadvantaged groups, asking whether they are disproportionately represented in those roles. Many in the sector are already concerned about the ability of AI to take over certain functions that were always carried out by junior staff and trainees, and how that might impact the future talent pipeline, but they must also look at how that might potentially limit access to the industry and its supporting professions, especially by people from diverse educational backgrounds.
The challenge will be to create entry points for people that ensure everyone has the same opportunities. With greater scrutiny, measurement and monitoring of all aspects of diversity, businesses could quickly find themselves going backwards and publicly held to account if they do not make this a key focus of their adoption of AI.
Protests to continue in 2025
As we predicted last year, geopolitical instability and large-scale protests across the globe have been a common theme, raising several issues for underwriters writing terrorism and political violence cover. Both peaceful and more violent protests (sometimes at the same time) have been a regular theme in the UK and we expect this to continue throughout 2025.
That raises a number of potential issues for insurers including in the UK property market, in particular in relation to when it can be said that a peaceful protest turns into a violent one. Insurers should give careful consideration to their use of terms such as strikes, riots and civil commotion, as well as malicious damage, to make sure that they are appropriate in the current climate of political instability, so that cover is being offered that is within insurers' risk appetite.
Climate change to drive increasing political unrest
Climate change could develop a direct and more obvious correlation with political violence. The effects of climate change are well known – drought, famine and mass migration. Each of these may have a significant impact on already heightened world tensions and the predicted increase in political violence. Already unstable governments may struggle with the increasing needs of their populations in response to a heating planet and changing international views on the subject of foreign aid.
The political violence and terrorism market will need to be wary in the coming 12 months when it comes to risks located in areas bearing the brunt of climate change.
Interconnected risks
What many of these predictions also serve to highlight is that these issues cannot be looked at in isolation. There is a very clear interconnectivity of risks and a similar joined-up response is now needed to find successful solutions in the year ahead.
For the full suite of predictions for 2025, visit Informed Insurance, the home of DAC Beachcroft’s thought leadership for the insurance industry: https://insurance.dacbeachcroft.com
Eleanor Whittaker, Charlotte Halford and Clare Hughes-Williams are partners at law firm DAC Beachcroft