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Direct Insurance Market Assessment 2007

Product Type: Market Research Report
Published by: Key Note Publications Ltd
Published: April 2007
Product Code: R310-1432
Description
Executive Summary
Increasingly, direct insurance is the preferred method used by large financial services companies to deliver personal-lines general insurance. Before the arrival of direct-distribution models, insurance brokers and other intermediaries formed the main distribution channels for personal-lines insurance. This still applies to commercial lines, but personal-lines direct insurance is rapidly taking market share.

Direct Line set up the first dedicated direct insurance operation in the UK in 1985. The market share taken by direct players has increased steadily ever since, partly at the expense of companies' own sales staff and agents, and partly at the expense of intermediaries. This trend has intensified since 1999, when retailers also entered the market.

The obvious success of direct insurance companies prompted traditional insurance players to set up their own distinct direct insurance brands. New entrants have also been attracted to the direct insurance market, as a result of the lower operating costs made possible by call-centre and Internet-based operations. The new entrants include utilities, retailers and affinity groups.

There has also been specialisation in the distribution chain, as distributors of personal-lines insurance are increasingly separated from underwriters, with each tackling their specialist cost bases. Many market participants have established partnerships with firms that are able to offer economies of scale in terms of expertise, or which have access to a large number of customers.

Direct insurance companies have developed strong brand names to differentiate them from their fiercely competitive rivals. The publicity of these companies — such as `Quote me happy' from Norwich Union Direct or `Just AAsk' from the AA — reinforces the differences from their rivals, as well as their `no-nonsense' approach towards customer needs.

The direct insurance industry is aggressively innovative in using technology to gain speed in obtaining competitive quotations. Direct insurers invest heavily in IT, and make great use of customer relationship management (CRM) techniques to supplement their call-centre and Internet sales opportunities.

Key Note's exclusive consumer research indicates that clients are more likely to select an insurer based on convenience, rather than on price or even on reputation. The research also shows that usage of the Internet to buy insurance policies direct is now high, rivalling other remote channels, such as the telephone. However, broker- or branch-mediated purchases remain important. Despite the rise in direct insurance, the ability to purchase insurance from a branch office remains important to many customers.

The development of websites and of broadband Internet access is likely to lead to more integrated insurance purchase, as consumers research the Web and then choose a direct supplier either online or through a retail outlet. The introduction of more IT and consolidation of brokers is still inevitable, as brokers face heavy regulatory burdens and higher demands from customers, who expect high-quality service and solutions to their insurance problems that direct insurers do not necessarily want to consider.
Table of Contents
Executive Summary

1. Introduction

OVERVIEW

DEFINITION

2. Strategic Overview

MARKET DYNAMICS AND SEGMENTATION

Market Segmentation

Current Status of the Market

The General Insurance Market

Personal-Lines General Insurance

Direct Insurance

Total Industry Value and Growth

Table 1: The Total UK General Insurance Market by Net Written Premiums (£m and index 2002=100), 2002-2006

Figure 1: The Total UK General Insurance Market by Net Written Premiums (£m), 2002-2006

Table 2: The Total UK Market for General Insurance — UK Risks — by Net Written Premiums (£m and index 2002=100), 2002-2006

Figure 2: The Total UK Market for General Insurance — UK Risks — by Net Written Premiums (£m), 2002-2006

The Largest Sector and Market Share

Table 3: UK General Insurance Premiums† — UK Risks — by Source of Personal-Lines Business (%), 2002-2006

Figure 3: UK General Insurance Premiums† — UK Risks — by Source of Personal-Lines Business (%), 2002-2006

The Fastest-Growing Sectors

The Slowest-Growing Sectors

DISTRIBUTION

Direct Sales Forces

Direct Selling

Company Agents

Independent Intermediaries

Tied Agents

Insurance Brokers

Banks and Building Societies

Telephone-Based Selling

Internet-Based Selling

Retail Chains

Financial `Supermarkets'

Interactive Digital Television

Competitive Structure

Table 4: Banks' Links With Insurers, 2006

Table 5: Direct Insurers' Links with Traditional Insurers, 2006

Significant Players

Table 6: The Top 16 General Insurers by Gross Written Premiums, 2004 and 2005

Non-UK Sectors

Most Significant Outlet

ADVERTISING

Main Media Advertising Expenditure

Table 7: Main Media Advertising Expenditure by Leading General Insurers (£000), Year Ending September 2006

Direct Sales

THE CONSUMER

Who is the Consumer?

Consumer Loyalty

Consumer Factors Affecting the Market

REGULATION

Markets in Financial Instruments Directive

Third Money Laundering Directive

Unfair Commercial Practices Directive

Solvency 2 Directive

Insurance Guarantee Schemes Directive

Financial Ombudsman Service

Table 8: Number of Complaints About General Insurance to the Financial Ombudsman Service, 2002/2003-2005/2006

Figure 4: Number of Complaints About General Insurance to the Financial Ombudsman Service, 2005/2006

MARKET FORECASTS

Market Size

Future Prospects for Direct Insurance

Future Impact of Regulatory Changes and Growth in E-Business

3. Motor Insurance

BACKGROUND

MARKET SIZE

Table 9: UK Domestic Motor Insurance† by Net Written Premiums (£m and index 2002=100), 2002-2006

MARKET SHARE

Table 10: The Top 20 Private Motor Insurers by UK Net Written Premiums, 2004 and 2005

CONSUMER TRENDS

Household Expenditure on Motor Insurance

Table 11: Annual UK Household Expenditure on Motor Insurance (£ and %), 2000/2001-2005/2006

Figure 5: Percentage of Households Buying Motor Insurance Per Annum, 2000/2001-2005/2006

Consumer Dynamics

I Buy My Motor Insurance Through a Broker

I Prefer to Buy My Motor Insurance Direct

MARKETING ACTIVITY

Advertising

Home and Motor Insurers

Table 12: Main Media Advertising Expenditure on Home and Motor Insurance (£000), Year Ending September 2006

Motor Insurance

Table 13: Main Media Advertising Expenditure on Motor Insurance (£000), Year Ending September 2006

Online Motor Insurance

Table 14: Main Media Advertising Expenditure on Online Motor Insurance (£000), Year Ending September 2006

DISTRIBUTION

Table 15: UK Personal Motor Insurance Premiums by Source of Business (%), 2002-2006

SUPPLIERS

Table 16: The Top Ten Most Popular Motor Insurance Websites, February 2007

4. House Insurance

BACKGROUND

Buildings Insurance

Contents Insurance

MARKET SIZE

Table 17: UK Domestic Property Insurance† by Net Written Premiums (£m and index 2002=100), 2002-2006

MARKET SHARE

Table 18: The Top 20 UK Domestic Property Insurers by Net Written Premiums, 2004 and 2005

CONSUMER TRENDS

Household Expenditure on House Insurance

Table 19: Annual UK Household Expenditure on House Insurance by Type (£ and %), 2000/2001-2005/2006

Figure 6: Annual UK Household Expenditure on House Insurance by Type (£), 2000/2001-2005/2006

Consumer Dynamics

Buildings Insurance

I Buy My Buildings Insurance Through a Broker

I Buy My Buildings Insurance Direct

Contents Insurance

I Buy My Home Contents Insurance Through a Broker

I Buy My Home Contents Insurance Direct

MARKETING ACTIVITY

Advertising

Buildings and Contents Insurance

Table 20: Main Media Advertising Expenditure on Buildings and Contents Insurance (£000), Year Ending September 2006

Contents Insurance

Table 21: Main Media Advertising Expenditure on Contents Insurance (£000), Year Ending September 2006

DISTRIBUTION

Table 22: UK Property Insurance Premiums by Source of Business (%), 2002-2006

SUPPLIERS

Table 23: The Top Ten Most Popular House Insurance Websites, February 2007

5. Travel Insurance

BACKGROUND

MARKET SIZE

CONSUMER TRENDS

Household Expenditure on Travel Insurance

Table 24: Annual UK Household Expenditure on Non-Package Travel Insurance (£ and index 2001/2002=100), 2001/2002-2005/2006

Consumer Dynamics

I Buy My Travel Insurance Through a Broker

I Buy My Travel Insurance Direct

MARKETING ACTIVITY

Advertising

Table 25: Main Media Advertising Expenditure on Travel and Sport Insurance (£000), Year Ending September 2006

DISTRIBUTION

SUPPLIERS

Table 26: The Top Ten Most Popular Travel Insurance Websites, February 2007

6. Health Insurance

BACKGROUND

Table 27: Percentage of Households with Health Insurance, 2004/2005

MARKET SIZE

Table 28: UK Accident and Health Insurance† by Net Written Premiums (£m and index 2002=100), 2002-2006

Private Medical Insurance

Long-Term Care

Sickness Insurance

MARKET SHARE

Accident Insurers

Table 29: The Top 20 Accident Insurers by UK Net Written Premiums, 2004 and 2005

Health Insurers

Table 30: The Top 20 Health Insurers by UK Net Written Premiums, 2004 and 2005

CONSUMER TRENDS

Household Expenditure on Health Insurance

Table 31: Annual UK Household Expenditure on Medical Insurance (£ and %), 2000/2001-2005/2006

Figure 7: Annual UK Household Expenditure on Medical Insurance (£), 2000/2001-2005/2006

Table 32: Average Weekly Expenditure on Medical Insurance by Gross Income Decile Group (£), 2002/2003, 2004/2005 and 2005/2006

Consumer Dynamics

I Buy My Health Insurance Direct

MARKETING ACTIVITY

Advertising

Table 33: Main Media Advertising Expenditure on Private Healthcare (£000), Year Ending September 2006

DISTRIBUTION

SUPPLIERS

Table 34: The Top Nine Most Popular Health Insurance Websites, February 2007

7. Pet Insurance

BACKGROUND

MARKET SIZE

Table 35: UK Pet Insurance by Net Written Premiums (£m and index 2002=100), 2002-2006

Figure 8: UK Pet Insurance by Net Written Premiums (£m), 2002-2006

CONSUMER TRENDS

Consumer Dynamics

I Buy My Pet Insurance Direct

MARKETING ACTIVITY

Advertising

Table 36: Main Media Advertising Expenditure on Livestock and Pet Insurance (£000), Year Ending September 2006

DISTRIBUTION

SUPPLIERS

8. An International Perspective

MARKET SIZE

Outlook

MARKET BACKGROUND

DISTRIBUTION

Europe

Leading Players

The Netherlands

Italy

France

9. PEST Analysis

POLITICAL FACTORS

The Future

ECONOMIC FACTORS

The Future

SOCIAL FACTORS

The Future

TECHNOLOGICAL FACTORS

The Future

10. Consumer Dynamics

OVERVIEW

Summary of Results

Table 37: Summary of Results (% of respondents), 2005 and 2007

CHOOSING AN INSURANCE COMPANY

I Choose My Insurance Company on the Advice of an Independent Broker

I Choose My Insurance Company on the Advice of my Bank or Building Society

Table 38: Choosing an Insurance Company (% of respondents), 2007

DIRECT PURCHASING OF INSURANCE POLICIES

I Buy My Insurance Company's Own Policies Direct

I Buy My Bank's Own Policies Direct

I Buy My Insurance Direct from a Retailer or Another Non-Financial Company or Service

Table 39: Direct Purchasing of Insurance Policies (% of respondents), 2007

METHODS FOR ARRANGING INSURANCE AND ONLINE SEARCHES

I Want to Arrange My Insurance Face-to-Face with the Insurer

I Want to Arrange My Insurance Direct with the Insurer by Telephone

I Want to Do My Own Online Search Before Choosing My Insurer

Table 40: Methods for Arranging Insurance and Online Searches (% of respondents), 2007

MOTOR INSURANCE

I Buy My Motor Insurance Through a Broker

I Prefer to Buy My Motor Insurance Direct

Table 41: Purchasing of Motor Insurance (% of respondents), 2007

HOUSE INSURANCE

Buildings Insurance

I Buy My Buildings Insurance Through a Broker

I Buy My Buildings Insurance Direct

Table 42: Purchasing of Buildings Insurance (% of respondents), 2007

Contents Insurance

I Buy My Home Contents Insurance Through a Broker

I Buy My Home Contents Insurance Direct

Table 43: Purchasing of Contents Insurance (% of respondents), 2007

TRAVEL INSURANCE

I Buy My Travel Insurance Through a Broker

I Buy My Travel Insurance Direct

Table 44: Purchasing of Travel Insurance (% of respondents), 2007

HEALTH AND PET INSURANCE

I Buy My Health Insurance Direct

I Buy My Pet Insurance Direct

Table 45: Purchasing of Health and Pet Insurance (% of respondents), 2007

CONVENIENT AND CHEAP INSURANCE

I Will Use the Most Convenient Means to Get Insurance Cover

I Want to Get the Cheapest Insurance Cover

Table 46: Convenient and Cheap Insurance (% of respondents), 2007

11. Company Profiles

ADMIRAL GROUP PLC

Corporate Strategy

Strengths and Weaknesses

New Product and Brand Development

Advertising

Distribution

Profitability

Table 47: Financial Results for Admiral Group PLC (£000, % and £), Years Ending 31st December 2003-2005

Future Company Developments

BUPA INSURANCE Ltd

Corporate Strategy

Strengths and Weaknesses

New Product and Brand Development

Advertising

Distribution

Profitability

Table 48: Financial Results for BUPA Insurance Ltd (£000, % and £), Years ending 31st December 2003-2005

Future Company Developments

CHURCHILL INSURANCE COMPANY LTD

Corporate Strategy

Strengths and Weaknesses

New Product and Brand Development

Advertising

Distribution

Profitability

Table 49: Financial Results for Churchill Insurance Company Ltd (£000, % and £), Years Ending 31st December 2003-2005

Future Company Developments

DIRECT LINE INSURANCE PLC

Corporate Strategy

Strengths and Weaknesses

New Product and Brand Development

Advertising

Distribution

Profitability

Table 50: Financial Results for Direct Line Insurance PLC (£000, % and £), Years Ending 31st December 2003-2005

Future Company Developments

ESURE INSURANCE LTD

Corporate Strategy

Strengths and Weaknesses

New Product and Brand Development

Advertising

Distribution

Profitability

Table 51: Financial Results for esure Insurance Ltd (£000, % and £), Years Ending 31st December 2003-2005

Future Company Developments

MORE THAN (ROYAL & SUNALLIANCE INSURANCE PLC)

Corporate Strategy

Strengths and Weaknesses

New Product and Brand Development

Advertising

Distribution

Profitability

Table 52: Financial Results for Royal & SunAlliance Insurance PLC (£000, % and £), Years Ending 31st December 2003-2005

Future Company Developments

TESCO PERSONAL FINANCE GROUP LTD

Corporate Strategy

Strengths and Weaknesses

New Product and Brand Development

Advertising

Distribution

Profitability

Table 53: Financial Results for Tesco Personal Finance Group Ltd (£000, % and £), Years Ending 31st December 2003-2005

Future Company Developments

12. Forecasts

MARKET FORECASTS

General Insurance

Table 54: The Forecast Total UK General Insurance Market by Net Written Premiums (£m and index 2007=100), 2007-2011

Table 55: Forecast UK General Insurance Premiums† — UK Risks — by Source of Personal-Lines Business (%), 2007-2011

Figure 9: Forecast UK General Insurance Premiums† — UK Risks — by Source of Personal-Lines Business (%), 2007-2011

Motor Insurance

Table 56: Forecast UK Domestic Motor Insurance† by Net Written Premiums (£m and index 2007=100), 2007-2011

Table 57: Forecast UK Personal Motor Insurance Premiums by Source of Business (%), 2007-2011

House Insurance

Table 58: Forecast UK Domestic Property Insurance† by Net Written Premiums (£m and index 2007=100), 2007-2011

Table 59: Forecast UK Property Insurance Premiums by Source of Business (%), 2007-2011

Other Personal-Lines Insurance

STRATEGIC OPTIONS

BROKER NETWORKS

FUTURE REGULATORY CHANGES

DISTRIBUTION CHANNELS

Interactive Digital Television

Mobile Telephones

The Internet

CONCLUSION

13. Consumer Confidence

METHODOLOGY

KEY FINDINGS THIS QUARTER

THE WILLINGNESS TO BORROW

Confidence Improves

Table A: The Average Amount Consumers Are Willing to Borrow in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), February 2006-2007

Willingness to Borrow Slips Slightly

Table B: The Number of Adults Willing to Borrow in Order to Purchase Expensive Items (000 and %), February 2006-2007

SPENDING FROM SAVINGS

Slight Increase in Spending from Savings

Table C: The Average Amount Consumers Are Willing to Spend from Savings in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), February 2006-2007

Saving Grows in Relative Importance

Table D: The Average Amounts Adults Are Confident Spending to Purchase Expensive Items (£ and %), February 2006-2007

14. Further Sources

Associations

Publications

General Sources

Government Publications

Other Sources

Bisnode Sources

Ordering and More Information
Price and Delivery Options


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