UK Personal Insurance Distribution 2009

UK Personal Insurance Distribution 2009

Published By: Datamonitor
June 2009
R313-52347
Online Download $4,495.00
Global Site License $11,237.50

Description

Introduction

The distribution of personal lines insurance is going through significant changes as new distribution models challenge all providers. This report analyzes the main distribution channels, providing unique market share estimates and forecasts on personal lines distribution in the UK. The report also details the market shares of the leading insurance brands based on Datamonitor's own consumer survey.

Scope

Datamonitor's unique distribution estimates by channel and platform
Forecasts for the main distribution channels up to 2013, based on Datamonitor's unique model, survey and interviews with industry executives
Analysis of the main developments within each of the main distribution channels
Market shares of the top home and motor insurance distributors

Highlights

An increasing number of high-profile direct motor insurance brands have incorporated an element of a panel into their distribution model, including the motor insurance accounts of More Th>n, AIG Direct and the RAC, which are run by Junction.

The leading banks and building societies cut back their insurance advertising in 2008, spending only £29.9m on their general insurance related offering. The credit crunch has hit these distributors hardest and it is likely that a number of bancassurers cut back their advertising efforts in light of its effects.

In January 2009, Comparethemarket.com launched a new marketing campaign centered around its new mascot, Aleksandr the meerkat. The distinctive campaign is likely to have a positive impact on the company's brand awareness among consumers, with the company actively seeking numerous opportunities do engage with the consumer through its meerkat theme

Reasons to Purchase

Obtain a comprehensive understanding of the key trends driving changes to personal insurance distribution in the UK
Gain insight into the shifting consumer motivations and purchasing strategies for personal insurance
Plan your distribution strategy with confidence using Datamonitor's channel and platform distribution forecasts

Table of Contents

Overview: Catalyst; Summary; Executive Summary; Brokers have gained market share while partnerships have stabilized; The direct channel is the primary route to market for private motor insurers; Banks and building societies are the largest distribution channel for home insurance; Three aggregators appeared in the top 10 advertisers in 2008, highlighting their importance to the market; The internet has fast become a major distribution platform for home and motor insurance; The internet dominated new sales for home and motor insurance in 2008; Consumers aged 18-29 were most likely to take up motor insurance for the first time and switch their provider; Brokers have reversed previous losses in market share in both home and motor markets; Brokers gained market share in the private motor insurance market; LV= bought insurer Highway and disposed of its in-house broker Hero; Banks have retained their gains in motor but have suffered in the home insurance market; Lloyds Banking Group has become the largest distributor of home insurance to UK consumers; Lower mortgage volumes have disrupted the flow of new business into many banks' household insurance books; Leading retail brands have secured significant market share in the home and motor markets; Panel underwriting of affinity contracts allows for specialist insurers to take the more difficult risks; Motor manufacturer-branded products are likely to suffer due to the recession; Aggregator-instigated insurance sales have grown dramatically in 2008 highlighting their importance to the industry; Aggregators are estimated to have generated over 40% of new private motor business GWP in 2008; Datamonitor estimates that aggregator-instigated home insurance sales accounted for 4% of new home insurance business sales in 2008; Table of Contents; Table of figures; Table of tables; Personal Insurance Distribution Dynamics; Introduction; Brokers have gained market share while partnerships have stabilized; The direct channel is the primary route to market for private motor insurers; The direct channel continues to be the dominant route to market for private motor insurance; The broker channel is the second largest distribution channel for private motor insurance; Corporate partnerships also play a strong role in the distribution of private motor insurance; Banks and building societies have a market share of 7%; Banks and building societies are the largest distribution channel for home insurance; The majority of home insurance is distributed via banks and building societies; Brokers accounted for an estimated 26% of home insurance premium income in 2008; The direct channel accounts for around a quarter of home insurance premium income; Around 15% of home insurance premium income is distributed via the partnerships channel; The home and motor insurance markets are largely distributed through the same top 10 groups and brands; The largest 10 groups have brands that give them control of the majority of both the private motor and home insurance markets; Direct Line was the top provider of private motor insurance policies and has a particularly strong presence among younger consumers; Lloyds TSB is the market leader in the distribution of home insurance policies; Halifax was the top provider of combined contents and buildings policies, while other top distributors included Direct Line, Lloyds TSB, Norwich Union and More Th>n; Lloyds TSB was the top provider of contents only insurance policies and has a particularly strong hold of consumers aged over 60; A number of aggregators as well as LV= entered the top 10 advertisers in 2008; RBS's biggest brands, Direct Line and Churchill, were the biggest insurance advertisers in 2008; Three aggregators appeared in the top 10 advertisers in 2008, highlighting their importance to the market; LV= entered the top 10 after almost doubling its advertising spending in 2008; Norwich Union Direct's advertising spend declined the most in 2008; The top insurance advertisers devoted the bulk of their budgets to TV advertising in 2008; The top 10 insurance advertisers collectively spent more than £128.6m on TV advertising in 2008; Saga spent the most on direct mail, highlighting its importance in cross-selling; Other media such as radio and press played a smaller role; Personal Insurance Consumers; Introduction; The home and motor insurance markets are the largest potential pool of customers for personal lines insurers; The market for private motor insurance is large, with penetration highest among older and more affluent consumers; Older consumers are more likely to have motor cover, validating the strategy of those catering to over 50s; Motor insurance consumers with higher incomes have higher penetration rates; Consumers in the DE social grade are the least likely to have motor insurance; There is a healthy market for home insurance products, with consumers over 60 being the largest target market; There is a healthy market for home insurance products; Consumers over the age of 60 are the largest target market for combined policies; Higher income households form the core market for combined home insurance cover, while contents only cover is most popular with lower income consumers; Penetration rates are highest among AB and C1 consumers; The internet has fast become a major distribution platform for home and motor insurance; The internet dominated new sales for home and motor insurance in 2008; The vast majority of consumers use the internet and telephone to arrange their motor insurance; Nearly half of the consumers surveyed purchased their motor insurance over the internet; It is essential for home insurance providers to have a phone and internet sales strategy; An internet sales strategy is key to maximizing sales of personal insurance policies among younger buyers; Consumers aged 60-plus were least likely to use the internet to arrange their motor cover; An internet sales strategy is key to maximizing sales of contents insurance among younger buyers; A phone-based sales strategy is important when targeting the over 60s consumer with combined buildings and contents cover; The internet is most effective at targeting mid to high income households; Higher income consumers are more comfortable purchasing their motor cover over the internet; Mid to higher income households are most likely to buy a combined policy over the internet; An internet strategy is the core way of reaching mid and higher income consumers when selling contents insurance policies; AB and C1 consumers prefer to purchase their cover over the internet; The internet was the most popular platform for arranging motor insurance across all social grades; AB and C1 consumers are most likely to purchase a combined policy over the internet; Internet sales of contents insurance policies dominate among AB and C1 consumers; It is easier to grow market share among younger consumers; Younger consumers are more likely to change their provider, presenting an opportunity to gain new customers; Consumers aged 18-29 were most likely to take up motor insurance for the first time and switch their provider; Consumers between the ages of 18 and 29 are the softest targets for contents insurance providers; Switching rates of combined buildings and contents policies are broadly similar across age groups; More affluent consumers were more likely to search for a new quote at next renewal; Switching was relatively common across income bands, but more affluent consumers were more likely to search out a new quote at renewal; Switching of combined contents and building policies stays relatively the same across household income bands; Higher income consumers are most likely to switch their contents insurance provider; It is essential that providers stress a price-based marketing message when selling insurance; Price was cited most often by consumers as a factor in their choice of motor insurance provider; Providers need to stress the low price of their policies in order to acquire buyers of combined policies; The promise of a cheaper quote will attract buyers of all ages, however, providers must place more emphasis on the secondary and tertiary buyer needs for middle aged consumers and those over 60; Older motor insurance consumers are less motivated by price, though it remains important; While price is important to older consumers, they also tend to demand more from their providers as well; Direct Insurance; Introduction; Direct insurers have experienced little change in market share; Direct insurers have maintained their share in the private motor market; Direct insurers distributed an estimated 25% of household insurance in 2008; Large advertising campaigns are a key element of the direct insurance model; The top advertisers among the direct insurers devoted £87.7m to motor insurance advertising; Direct insurers need to market their brand and products through mass market media such as TV; Direct Line remained the top direct insurance advertiser in 2008 but many other brands are gearing up to increase their market share; The direct insurance market is highly consolidated, with the top five players accounting for the majority of policies sold direct; The top direct insurers accounted for a quarter of all motor insurance policies; The top direct insurance brands were strongest in the buildings only insurance market in 2008; Direct insurers have increasingly turned to panels to help widen their customer base; More Th>n adopted a panel to capture more business; AIG Direct has made use of panels for its expansion in home and motor; Norwich Union has enlisted Junction to provide its RAC brand motor insurance with a panel; Norwich Union has rebranded to Aviva; Brokers and Intermediaries; Introduction; Brokers have reversed previous losses in market share in both the home and motor insurance markets; Brokers gained market share in the private motor insurance market; Brokers distributed an estimated 26% of household insurance GWP in 2008; Brokers have mainly focused on advertising home and motor insurance through direct mail; The top brokers primarily draw in consumers with motor and home insurance advertising; Brokers have focused on direct mail, supporting a cross-selling strategy; The AA supported its substantial market share with a large investment in marketing; The largest brokers held approximately 10% of the market in the UK home and motor insurance markets; Large broker brands have been able to obtain substantial market share in the motor insurance market; Brokers faired the best in the contents only insurance market; Mergers and acquisitions in the broker sector continued despite the credit crunch; IAG disposed of its UK distribution assets via a sale to Swinton and a management buyout; LV= bought insurer Highway and disposed of its in-house broker Hero; Aggregators have continued to challenge brokers, though they offer an opportunity to grow; Brokers can compete more effectively with direct insurers and affinity brands through partnering with aggregators; Aggregators have taken steps to increase the number of brokers appearing on their sites, improving coverage; Banks and Building Societies; Introduction; Banks have retained their gains in motor but have suffered in the home insurance market; Bank distributed motor insurance accounted for an estimated 7% of the market in 2008; The credit crunch has resulted in a decline in bank-distributed home insurance; Advertising by the leading bancassurance advertisers declined in 2008; Banks have focused on their core product of home insurance while scaling back advertising; Bank marketing strategies are heavily reliant upon direct mail campaigns; The majority of the top 10 bancassurers spent less money on insurance advertising in 2008; The leading banks have substantial market share in the home market but struggle in motor; Only Lloyds TSB has achieved a significant market share among motor insurance consumers; The top bank brands are among some of the largest distributors in the home insurance market; The credit crunch is causing significant consolidation within the bancassurance channel; Major new distributors of home insurance have been created as a result of consolidation; Lloyds Banking Group has become the largest distributor of home insurance to UK consumers; Santander has become one of the top 10 distributors of home insurance in the UK as a result of acquisitions; Britannia and Co-operative to merge to form a 'super mutual' with a significant customer pool; Smaller building societies have consolidated as a result of the credit crunch, resulting in fewer but more lucrative accounts; Nationwide, Britain's biggest building society, was also the most active in its M&A activity; The Chelsea Building Society announced it was merging with the Catholic Building Society in June 2008; Skipton Building society, one of the more active in the insurance market, merged with the Scarborough; Barnsley Building Society merged with the Yorkshire Building Society; Lower mortgage volumes have disrupted the flow of new business into many banks' household insurance books; The UK government has become a majority shareholder in major home insurance distributors; Government-owned Northern Rock should be able to gain more market share in the home insurance market; A number of bancassurance deals were agreed in 2008 and 2007; HSBC and Norwich Union renewed their insurance partnership in 2007; Junction now provides a panel for HSBC's motor insurance product; Nationwide and LV= are now partners for motor and travel insurance; West Bromwich renewed its motor contract with Norwich Union; Bradford & Bingley retained Zurich on its home insurance panel; Affinity Groups and Retailers; Introduction; Affinities have gained ground in the home insurance market; Affinity groups and retailers distributed 17% of private motor insurance GWP in 2008; Weakness in traditionally dominant distributors has allowed affinities to gain business in home insurance; The top affinity insurance advertisers have pursued a cross-selling strategy; Insurance products such as warranties and home emergency dominated affinity marketing; The top 10 affinity partnership advertisers leveraged their customer databases with direct mail campaigns; Most of the top 10 brandassurer advertisers had a smaller advertising spend in 2008; Leading retail brands have secured significant market share in the home and motor markets; Retailers have become major distributors of motor insurance products; Leading retail brands figure less prominently in the home insurance market, though Tesco still leads; A number of important accounts changed hands in 2008; Ford and RSA agreed to a five-year affinity contract for motor insurance; General Motors changed the underwriter for its branded motor insurance products; Tesco bought out RBS's stake in their joint venture, Tesco Personal Finance; Panel underwriting and a downturn in car sales are having significant impacts on the affinity channel; Panel underwriting of affinity relationships has become more prominent, allowing for wider risk selection at competitive rates; Panel underwriting of affinity contracts allows for specialist insurers to take the more difficult risks; Greenbee has opted for a panel for its motor insurance products; Auto Trader extended its partnership with Junction for motor insurance; Norwich Union and Asda use broker BDML to provide a panel; The Post Office extended its panel arrangement with Junction until 2014; Motor manufacturer-branded products are likely to suffer due to the recession; Aggregators and Price Comparison Sites; Introduction; Aggregator-instigated insurance sales have grown dramatically in 2008 highlighting their importance to the industry; Aggregators are estimated to have generated over 40% of new private motor business GWP in 2008; Datamonitor estimates that aggregator-instigated home insurance sales accounted for 4% of new home insurance business sales in 2008; Aggregators have become major insurance advertisers, though mainly only for motor insurance; Advertising spend has dramatically increased as new competitors step up their marketing campaigns; The leading aggregators are still using TV to establish themselves in the personal insurance market; Very little aggregator advertising is conducted by those outside of the top five; New players have established strong brand awareness among consumers; TescoCompare.com is well positioned to compete with established players in the market; More than 60% of consumers that visit price comparison sites paid a visit to Confused.com; Comparethemarket.com is likely to see a large increase in brand awareness as a result of its 'meerkat' campaign; Aggregators have matured in the market, resulting in regulatory scrutiny and consolidation; BIBA's study revealed consumer confusion over price comparison sites; An FSA study found that certain price comparison sites had shortcomings; A subsequent FSA review found that price comparison sites have made significant improvements; The consumer group Which? scrutinized the accuracy of price comparison sites in August 2008; Competition between aggregators has been costly and already resulted in some brands dropping out; Future Decoded; Introduction; Affinity partnerships and direct players are expected to gain in the private motor market; The direct channel is predicted to remain the largest distribution channel for the private motor insurance market; Brokers are predicted to retain their market share over the forecast period; The affinity channel is predicted to revive and attain a market share of 19% in 2013; Banks will struggle to maintain market share in private motor; Direct insurers and banks are predicted to increase household insurance market share; Banks and buildings societies are predicted to recover market share lost due to the credit crunch; Broker market share is forecast to be approximately 26% throughout the forecast period; Direct insurers are predicted to gain market share; Affinity partnerships are predicted to remain significant distributors of home insurance
APPENDIX: Definitions; Premium income measures; Earned premiums; Gross Premium; Net Premium; Written premiums; Distribution definitions; Bancassurers; Banks/building societies; Brandassurers; Broker; Company staff; Direct; 'Other' company agents; Partnerships; Methodology; Datamonitor Consumer Survey; Primary and secondary research; Distribution estimates and forecast methodology; Advertising and marketing spend data; Further reading; Ask the analyst; Datamonitor consulting; Disclaimer

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PUBLICATION: UK Personal Insurance Distribution 2009
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