Product Type: Market Research Report
Published by: Mintel International Group Ltd.
Published: April 2008
Product Code: R560-3237Description Legal changes have made LEI increasingly applicable to the UK. While it will never match the size of other sectors of the general insurance industry, it has seen rapid growth in sales and uptake in the past few years as it is increasingly sold as a near-standard add-on feature to a motor, household or travel insurance product. GWP reached £666 million in 2006, compared with just £159 million in 2000, with Mintel expecting the market to have seen further growth of 11% in 2007.
The future shape of the market is now being impacted by new legislation, principally the Legal Services Act, which could result in a new vertically integrated structure to LEI sales, with insurers joining legal firms to offer a complete one-stop shop of legal insurance services for consumers.
Drawing on a comprehensive range of information sources, this report seeks to analyse these trends. The report additionally offers an investigation into the internal and broader social, legal and economic factors impacting on the market, an overview of the market’s competitive context, its strengths and weaknesses, insights and opportunities, the views of leading experts, and the results of Mintel’s independently commissioned consumer research, which offers insight into the leading characteristics, attitudes and behaviours of policyholders.
Key themes of the report:- In an increasingly risk-averse society, how are consumers’ perceptions of dangers changing? How will this impact on the demand for LEI?
- What has been the impact of changing distribution patterns in the wider insurance market?
- How can insurers head off the threat posed by aggregator sites, and the fact that their price-conscious customers appear to be less likely to purchase add-on legal expenses cover?
- How is the changing legal structure in the UK affecting the take-up and underwriting of LEI?
- What is the best way of convincing consumers to purchase cover? How many are actually in the market for a legal expenses policy?
Table of Contents - ISSUES IN THE MARKET
- Key issues:
- Definitions
- Abbreviations
- MARKET IN BRIEF
- A growing market
- Figure 1: LEI market size, by GWP, 2000-07
- A concentrated market at the underwriting level
- Figure 2: LEI market share, by GWP, 2006
- Key drivers encourage market growth
- A market lacking innovation
- Sold, rather than bought…
- …but the purchasing decision is growing in importance
- Figure 3: Changing penetration and purchasing decision, 2006 and 2008
- Standalone policies need a higher priority
- Emphasise protection to maintain penetration levels
- Expanding the market: hitting the new targets
- Main target audience is young and working class
- More effective advertising/sales needed
- The motivation for holding an LEI policy
- Figure 4: The targeting pyramid for expanding the target market, January 2007
- INTERNAL MARKET ENVIRONMENT
- Key points
- Rising tide of court proceedings
- Figure 5: Legal proceedings, claims defended and claims allocated to track in England and Wales, 2000-06
- Market potential for add-on policies
- Figure 6: Penetration of domestic motor and home insurance, by type, October 2007
- An insurance freebie?
- Purchased or sold?
- So is it a conscious purchasing decision?
- Low awareness of LEI: but it is rising
- Figure 7: Awareness of LEI, July 2007
- Implications
- Peace of mind effect
- Implications
- An indication of the number of personal injury cases
- Figure 8: Number of cases registered to CRU, 2001/02-2006/07
- Road traffic accidents dominate CRU cases, and are the fastest growing
- Figure 9: Number of cases registered to CRU, by type, 2001/02-2006/07
- County Court cases indicate demand for LEI
- Figure 10: The number of claims issued at County Courts in England and Wales, 2000-06
- BROADER MARKET ENVIRONMENT
- Key points
- LITIGATION AND CONSUMER DEMAND
- Catching a cold from Uncle Sam
- Implications
- The cost of personal injury claims
- Figure 11: Possible claim amounts for common injuries, lower and higher amounts, 2007
- Safer roads but more fear of accidents
- Figure 12: Road accident casualties, 2000-06
- Stricter health and safety rules
- Implications
- Consumer disputes
- Implications
- Medical negligence
- Figure 13: Amounts paid out by the NHS Litigation Authority (£m), 1998/99-2006/07
- Legal framework
- Those with strong cases find it easier to litigate
- Implications
- Reducing the cost of litigation and the time it takes
- Implications
- Claims management companies have to clean up their act
- Legal aid eligibility rules
- Implications
- The Legal Services Act 2007
- Legal disciplinary practices
- Implications
- Search for stability
- Threat to ATE cover?
- Implications
- More consumer information
- Treating Customers Fairly (TCF)
- Implications
- COMPETITIVE CONTEXT
- Key points
- Mediation and ADR
- Figure 14: The number of cases in which ADR has been used and estimated cost savings, 2001/02-2006/07
- Ombudsmania?
- Opportunity to capitalise on changing market conditions
- STRENGTHS AND WEAKNESSES IN THE MARKET
- Figure 15: LEI - SWOT analysis, 2008
- MARKET SIZE AND FORECAST
- Key points
- Rapid growth in LEI GWP in 2006
- Figure 16: LEI market size, by GWP, 2000-07
- Cyclical growth since 2000
- ABI vs Lloyd’s
- Figure 17: LEI GWP generated by ABI members - Lloyd’s of London and non-ABI members, 2003-07
- BTE dominates the market
- Figure 18: Breakdown of ABI (gwp) data, by BTE and ATE policy sales, 2005-07
- LEI penetration reaches a peak…
- Figure 19: Ownership of LEI, by type, 2004-08
- …although after-the-event cover could benefit
- Motor-related coverage falls by a million
- Figure 20: The number of adults with LEI, by type of policy, 2006 and 2008
- The market softens at the edges
- Figure 21: Ownership of LEI, by type of holder, population equivalent, 2006 and 2008
- Forecast
- Figure 22: Forecast for LEI, by GWP, at current and constant 2008 prices, 2003-2013
- Factors used in the forecast
- MARKET SHARE
- Key points
- The Royal Bank of Scotland Group leads the market
- Figure 23: LEI market share, by GWP, 2006
- Lloyd’s Underwriters
- Figure 24: Lloyd’s managing agents and underwriters providing legal expense cover, 2008
- COMPANIES AND PRODUCTS
- The Royal Bank of Scotland Group (Insurance Division)
- Munich Re
- DAS Legal Expenses Insurance Company
- Brit Insurance
- Allianz Legal Protection
- Automobile Association Underwriting Services Ltd
- Others
- BRAND COMMUNICATION AND PROMOTION
- Key points
- Low media activity helps explain low consumer awareness
- Figure 25: Advertising expenditure on LEI, 2003-07
- B2B advertising dominates the adspend
- Figure 26: Advertising expenditure on LEI, by media, 2007
- DAS Legal Expense is the main underwriting advertiser
- Figure 27: Advertising expenditure on LEI, by advertiser, 2003-07
- The marketing messages
- CHANNELS TO MARKET
- Key points
- The distribution model
- Figure 28: The distribution structure of personal lines motor, property and other policies, 2006
- Delegated authority scheme arrangements dominate
- Figure 29: LEI distribution model, March 2008
- Changing distribution could increase costs
- The value chain
- Figure 30: Breakdown of the cost of a typical LEI add-on policy, 2008
- THE CONSUMER: OWNERSHIP
- Key points
- Aggregator sites a real threat to the market
- Figure 31: Ownership of LEI, 2004-08
- BTE penetration peaks but ATE more popular
- Those with most to lose take out LEI
- Figure 32: Ownership of LEI, by age, socio-economic group, Mintel’s Special Groups, working status, household income, ACORN category, age/socio-economic group and education level, January 2008
- Implications and opportunities
- The family factor is strong
- Figure 33: Ownership of LEI, by gender, marital status, lifestage, presence of children and household tenure, January 2008
- Implications and opportunities
- Aggregator sites target the core LEI market
- Figure 34: Ownership of LEI, by region, technology usage, Internet usage, daily newspaper readership, commercial TV viewing, TV reception and supermarket usage, January 2008
- Implications and opportunities
- To widen the market traditional media channels are best
- THE CONSUMER: THE BUY FACTORS
- Key points
- The buy factors
- External buy factors: the risks
- Figure 35: Areas causing most concern, 2006 and 2008
- Implications and opportunities
- Young, gifted and wealthy fear RTAs
- Figure 36: The prime factors causing most concern, by gender, age, socio-economic group, marital status, lifestage and education level, January 2008
- Implications and opportunities
- Children and relationships raise the risk factors
- Figure 37: The prime factors causing most concern, by presence of children, Mintel’s Special Groups and detailed lifestage groups, January 2008
- Marketing channels: must be tailored to the risk
- Figure 38: The main risk factors, by region, technology usage, Internet usage, daily newspaper readership, commercial TV viewing, TV reception and supermarket usage, January 2008
- Fear factor: involvement in legal disputes
- Figure 39: Involvement in a legal dispute, January 2008
- Figure 40: The number of adults involved in a legal dispute, January 2008
- The Buy Factor: it’s almost a freebie…
- Figure 41: Agreement with the statement that ‘Legal expenses cover costs so little you might as well get it’, by ownership, January 2008
- …but the freebie factor is waning
- Figure 42: Agreement with the statement that ‘Legal expenses cover costs so little you might as well get it’, 2006 and 2008
- Implications and opportunities
- Insurers must target poorer adults and women to sell standalone policies
- Figure 43: Agreement with the statement that ‘Legal expenses cover costs so little you might as well get it’, by gender, age, socio-economic group, marital status, lifestage, presence of children, tenure and car ownership, January 2008
- Popular tabloids, The Guardian and terrestrial TV are important media for standalone policies
- Figure 44: Agreement with the statement that ‘Legal expenses cover costs so little you might as well get it’, by region, technology usage, Internet usage, daily newspaper readership, commercial TV viewing, TV reception and supermarkets usage, January 2008
- Public transport, landlords and women’s magazines are also important routes to the market
- APPENDIX: RESEARCH METHODOLOGY
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