UK Private Motor Insurance 2009: Industry Research Report

UK Private Motor Insurance 2009

Published Date: June 2009

Published By: Datamonitor

Page Count: 13

Order Code: R313-52348

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Overview: Catalyst; Summary; Executive Summary; Liverpool Victoria Group and Lloyds Banking Group have made significant progress; Liverpool Victoria Group has made a big step forward in the private motor market; Lloyds Banking Group has become the second biggest distributor of motor insurance; The market is starting to see growth and premium rate increases, spurred by unprofitability; The market is estimated to have grown by approximately 4% in 2008; Increasing premium rates were the primary reason for the expansion of the market, though rates have risen faster than GWP; Private motor insurance losses worsened in 2008; The direct channel is the primary route to market and aggregators are increasingly important; The direct channel continues to be the dominant route to market for private motor insurance; Motor insurance advertising expenditure rose as aggregators raised their marketing spend; Internet and telephone distribution are prerequisites for significant market share; Nearly half of consumers purchased their motor insurance over the internet; Many consumers continued to arrange their motor cover over the telephone; Price is the primary factor for consumers regardless of the platform they used to arrange their cover; AXA, Liverpool Victoria Group, Lloyds Banking Group and Zurich gained market share in 2008; Lloyds Banking Group recorded the largest growth in both GWP and market share in 2008; The market leading RBS group had a superior COR compared to the overall market; Lloyd's market insurers have significant exposure to the UK motor market, much of it accounted for by ERS; Losses in the market are expected to reduce as premiums increase; The UK private motor insurance market is predicted to be worth £12.5 billion in 2013; Losses are expected to reduce as premium rates rise; Table of Contents; Table of figures; Table of tables; Market Issues; Introduction; Liverpool Victoria Group and Lloyds Banking Group have made significant progress; Liverpool Victoria Group has made a big step forward in the private motor market; Lloyds Banking Group has become the second biggest distributor of motor insurance; All providers need a pricing strategy to deal with the large role aggregators have in motor distribution; Aggregators were estimated to have generated over 40% of new private motor business GWP in 2008; Over half of consumers that obtained quotes from an aggregator went on to buy one of the policies; 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; GoCompare.com became an associated member of BIBA in May 2008; Aggregators have reinforced the commoditization of motor insurance by focusing the consumer on price; Insurers that operate on aggregators must operate on a low cost model as most consumers will choose the cheapest quote; Younger consumers are more likely to seek motor insurance quotes from price comparison sites; Aggregators' role in the market is likely to increase as more consumers seek to economize on their motor insurance; Aggregators significantly increased their marketing efforts in 2008; A number of insurers feel that aggregators are holding down premium income growth; Insurers should look to drive down the cost of credit hire and fraud; Insurers need to speed up the claims settlement process to eliminate unnecessary bills from credit hire companies on third-party non-fault claimants; An increase in uninsured driving and fraudulent claims is placing increasing pressure on UK insurers; Market Context; Introduction; The market is starting to see stronger growth rates; The market is beginning to see an upward trend in the rate of growth; The market is estimated to have grown by approximately 4% in 2008; Lloyd's market insurers have a presence in the UK motor market; Comprehensive insurance policies accounts for the bulk of the GWP in the private motor insurance market; There was an average of 24.6 million private motor policies in force in 2008; Non-comprehensive policies saw a further decline in volume; Increases in premium rates fuelled market growth; Increasing premium rates were the primary reason for the expansion of the market, though rates have risen faster than GWP; The AA's British Premium Index showed significant premium rate inflation in both sectors of the UK private motor insurance market; Both the market and shoparound average price of comprehensive private motor insurance grew strongly in 2008 and early 2009; The shoparound average price of non-comprehensive private motor insurance has been growing continually since 2007; Gender and age are important risk factors for motor insurance pricing; Total cars are up but new registrations are down; Both commercial and private motor vehicles increased marginally in 2008; The number of private cars registered for the first time decreased significantly in 2008; More than half of the car parc in Great Britain was older than six years in 2008; The total number of motorcycles in Great Britain grew in 2008, though new registrations were lower; Multicar discounts tap into the large proportion of UK homes with more than one car; Claims costs continue to increase; Claims inflation continues to plague the market due to escalated bodily injury claims and credit hire costs; Insurers are benefiting from falling claims frequencies; In recent years, claims frequency has fallen; Falling road traffic accident rates mean fewer opportunities for expensive personal injury claims to arise; Road traffic accident numbers fell in 2008, continuing a trend from previous years; Road traffic accidents declined even as car numbers increased, signifying a fall in frequency; Casualty rates have fallen steadily, mirroring the continuous decline in road traffic accidents; The combined ratio for the private motor market appears to be peaking; Private motor insurance losses worsened in 2008; The total motor insurance and private motor insurance COR should start reducing in the coming years; The market continued to make significant reserve releases in 2008; The industry made substantial reserve releases in 2008, though they were at a lower level than in 2007; Distribution Dynamics; Introduction; The direct channel is the primary route to market; 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%; Direct Line was the top provider of private motor insurance policies and has a particularly strong hold of younger consumers; Large insurers dominate the male private motor insurance market, though some brands appeal to this market more than others; Direct insurers and aggregators have fueled increases in motor insurance advertising; Motor insurance advertising expenditure increased to £205.3m as aggregators raised their marketing spend; The top 10 motor advertisers were dominated by direct insurers and aggregators in 2008; Plans suggest that both aggregators and direct insurers will continue to invest in motor insurance advertising; The top 10 motor advertisers focused on television advertising, reflecting the need for direct insurers and aggregators in particular to build up brand awareness; Most of the top 10 motor advertisers spent the majority of their budgets on television advertising in 2008; Direct mail advertising was used by all of the top 10 motor insurance advertisers; Press, outdoor and radio advertising were used sparingly by the top 10 motor insurance advertisers in 2008; Motor insurance advertisers ranked 11-20 spent more of their marketing budget on direct mail; Direct mail was the largest element of the motor insurance campaigns for advertisers ranked 11-20; Television advertising was also very important to advertisers ranked 11-20 in 2008; The largest direct mail and TV advertisers pursued differing strategies with their marketing spend; Direct insurers and aggregators constituted all of the top 10 largest television advertisers in 2008; Brokers featured much more prominently among the direct mail top 10 motor insurance advertisers; Customer Focus; Introduction; 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; Consumers in the DE social grade are the least likely to have motor insurance; Internet and telephone distribution are prerequisites for significant market share; Nearly half of consumers purchased their motor insurance over the internet; Many consumers continued to arrange their motor cover over the telephone; Few consumers arranged their motor insurance through the post or face-to-face; Consumers aged over 60 were the least likely to use the internet to arrange their motor cover; The internet was the most popular platform for arranging motor insurance across all social grades; It is easier to grow market share among consumers that are young or use the internet; Younger consumers are more likely to change their provider, presenting an opportunity to gain new customers; Half of consumers who arranged their motor insurance via the internet switched their insurance provider; Internet shoppers were least loyal to their motor insurance providers; Insurers need low prices to appeal to the greatest number of motor insurance consumers; Price was cited most often by consumers as a factor in their choice of motor insurance provider; Price is the primary factor for consumers regardless of the platform they used to arrange their cover; Insurance providers from all distribution channels need to have low price strategies; Competitive Dynamics; Introduction; AXA, Liverpool Victoria Group, Lloyds Banking Group and Zurich gained market share in 2008; Lloyds Banking Group recorded the largest growth in both GWP and market share in 2008; Zurich's private motor GWP increased in 2008, leading to a rise in market share; Liverpool Victoria's market share increased substantially in 2008 due to organic growth and acquisition; Swiftcover boosted AXA's private motor book; RBS, Aviva, RSA and Fortis all remained in the top five private motor insurance groups; RBS remained the largest private motor insurance group by a significant margin; Direct Line and Churchill saw their GWP contract; UK Insurance's and NIG's contractions were the result of decreases in both their comprehensive and non-comprehensive books in 2008; Aviva comfortably retained its position as the second largest group; RSA was the fourth largest private motor insurance group; Fortis was the fifth biggest private motor insurance group; NFU Mutual increased its GWP in 2008 to £203.3m; Munich Re's private motor market share declined to 3.6% in 2008; FIM Holdings, Admiral and Brit all took on a sizable amount of premiums in 2008; FIM Holdings boosted its market share to 1.9%; Admiral Insurance Company Ltd's GWP increased substantially; Brit Insurance more than doubled its private motor insurance premium income in 2008; The Binomial Group experienced marginal growth in market share in 2008 despite robust growth in premium income; Groupama's private motor insurance GWP increased by 3.6% in 2008, though its market share remained unchanged; The Co-operative's market share contracted in 2008 to 2.1% due to lower premium income; Allianz's GWP declined by 8.0% resulting in a lower private motor market share; HSBC's private motor book declined by 2.6%; MMA's market share declined as GWP fell by 0.7% in 2008; QBE's 2008 market share declined by 0.1 percentage points due to lower premium income; Most of the top 10 insurers write some non-comprehensive and commercial business; Comprehensive premium income dominated the largest private motor insurers' books; RBS Group had over 6.7 million private comprehensive policies in force in 2008; A number of Gibraltar-based insurers write a large amount of UK private motor insurance business; The Acromas Group writes significant volumes of private motor insurance through Acromas Insurance Company; Zenith writes both commercial and private motor insurance from Gibraltar; Gibraltar-based Advantage writes insurance for the Hastings group; Quinn Direct is one of the largest foreign insurers in the UK motor insurance market with large private and commercial books; Lloyd's syndicates also have a strong presence in the UK motor sector; Lloyd's market insurers have significant exposure to the UK motor market; Equity Red Star has the largest UK motor insurance book at Lloyd's; Chaucer has expanded its UK motor presence; Amlin acquired the book of HCC, increasing its exposure to the UK motor insurance market; KGM Motor Insurance increased its UK motor insurance exposure the most of any Lloyd's insurer; RBS, Zurich, Fortis and RSA beat the market average COR; The RBS group had a superior COR compared to the overall market; Zurich, Fortis and RSA recorded CORs which were below the market average; The top 10 groups all made reserve releases to lower their reported year CORs; The top 10 private motor insurers relied on reserve releases to lower their reported CORs; Future Decoded; Introduction; Losses in the market are expected to reduce as premiums increase; Conditions in the private market are forecast to allow for further increases in premium rates; The UK private motor insurance market is predicted to be worth £12.5 billion in 2013; Losses are expected to reduce as premium rates rise
Appendix: Definitions; ABI members; Accident year combined ratio; Bancassurers; Brokers; Brandassurers; Channel; Direct insurer/writer; Earned premiums; Gross premium; Net premium; Platform; Reported year combined ratio; Reserve development; Written premiums; Methodology; Datamonitor's Home and Motor Insurance Survey; Further reading; Ask the analyst; Datamonitor consulting; Disclaimer
List of Tables: Table 1: Market share of Liverpool Victoria Group, 2008; Table 2: Once you had obtained quotes from the price comparison site, did you buy one of the policies or were you just using the site for research purposes?; Table 3: What made you decide to buy from this comparison site?; Table 4: When your car insurance policy last came up for renewal, did you visit any price comparison sites to obtain quotations?; Table 5: Would you use a price comparison site in the future to obtain quotations for car insurance?; Table 6: Change in average premium rates and total private motor market size, 1996-2008; Table 7: UK motor insurance NWP split between ABI members and Lloyd's, 2007 (£m); Table 8: Private motor GWP by line of business, 2005-08e (£m); Table 9: Motor policies in force, 1998-2008; Table 10: Average private motor insurance premium rates, Apr 2007-Apr 2009 (£); Table 11: Example of average premiums quoted by sex and age; Table 12: Cars licensed in Great Britain by body type, 1998-2008 (000s); Table 13: New private cars registrations in Great Britain by body type as a percentage of the total private car parc, 2004-08 (000s); Table 14: Age composition of car parc, 2008 (000s); Table 15: Number of motorcycles and new registrations in Great Britain, 2004-08 (000s); Table 16: UK households with a private car, 2001-06; Table 17: Average motor claim costs, 2003-07 (£); Table 18: Total number of road accidents in the UK, 1998-2008* (000s); Table 19: Road traffic accidents relative to registered vehicles in Great Britain, 1998-2008 (000s); Table 20: Deaths, seriously and slightly injured casualties resulting from UK road traffic accidents, 2004-08*; Table 21: Accident and reported year COR, private motor market, 2005-08 (%); Table 22: Private motor insurance GWP distribution by channel (all business), 2004-08e; Table 23: With which of these insurance providers are you insured for your motor insurance?; Table 24: Advertising expenditure spent, by channel of top insurance providers, 2007-08 (£); Table 25: Advertising expenditure spent by channel of top motor insurance advertisers, 2008 (£); Table 26: Top 10 motor insurance advertisers, 2007-08 (£); Table 27: Top 10 motor insurance advertisers' advertising expenditure by medium, 2008; Table 28: Top 11-20 motor insurance advertisers' expenditure by medium, 2008 (£); Table 29: Top 10 motor insurance TV advertisers, 2007-08 (£); Table 30: Top 10 motor insurance direct mail advertisers, 2007-08 (£); Table 31: How did you arrange the motor insurance policy you currently have?; Table 32: Distribution of private motor insurance, by age and platform, 2008; Table 33: Distribution of private motor insurance, by socio-economic group, 2008; Table 34: Propensity to switch motor insurance provider and likelihood of getting other quotes by age, 2008; Table 35: Propensity to switch motor insurance provider and likelihood of getting other quotes by distribution platform, 2008; Table 36: Why did you take out your motor insurance with your current provider? (%); Table 37: Why did you take out your motor insurance with current provider? (%); Table 38: GWP and market share of the top 10 UK private motor insurance groups, 2007-08; Table 39: GWP and market share of the top 11-20 UK private motor insurers, 2007-08; Table 40: Top 10 private motor insures' comprehensive and non-comprehensive book, 2007-08 (%); Table 41: Private comprehensive vehicle years for the top 10 private motor insurance groups, 2008 (000s); Table 42: UK motor insurance NWP split between ABI members and Lloyd's, 2007 (£m); Table 43: Motor insurance GWP of selected Lloyd's insurers with large UK motor exposure, 2007-08; Table 44: Accident year combined ratio and underwriting profit/loss for private motor business, top 10 motor insurance groups, 2008; Table 45: Reported year combined ratio and underwriting profit/loss for private motor business, top 10 motor insurance groups, 2008; Table 46: Key variables affecting private motor insurance GWP, 2009e-13f; Table 47: Forecast of UK private motor insurance GWP,2009-2013 (£m); Table 48: Private motor GWP by line of business, 2005-13f (£m); Table 49: Forecast of accident year COR, private motor market, 2009-2013f (%); Table 50: Consumer survey sample sizes by age and income
List of Figures: Figure 1: Lloyds Banking Group has become the second biggest distributor of private motor insurance; Figure 2: Liverpool Victoria Group's market share has been catapulted to 4.5% following the acquisition of Highway Insurance; Figure 3: Lloyds Banking Group has became the second biggest distributor of private motor insurance; Figure 4: Aggregator-instigated private motor sales grew significantly in 2008; Figure 5: Over half of consumers that obtained car insurance quotes went on to buy one of the policies; Figure 6: It is essential that insurers on aggregators can offer the cheapest price to consumers; Figure 7: Higher risk younger consumers are more likely to use an aggregator to arrange their motor cover; Figure 8: A large proportion of consumers were willing to visit a price comparison site in the future; Figure 9: Aggregators were focused on building their brand in 2008 through large marketing outlays; Figure 10: The private motor insurance market is starting to see stronger growth rates; Figure 11: Lloyd's syndicates underwrote £1 billion of motor insurance business in 2007; Figure 12: Comprehensive motor insurance premium income has driven the increase in overall GWP; Figure 13: Comprehensive policies make up the vast majority of the private motor market; Figure 14: Comprehensive policies are taking a greater share of policies in force; Figure 15: Both the market and shoparound average price of comprehensive private motor insurance grew strongly in 2008 and early 2009; Figure 16: The shoparound average price of non-comprehensive private motor insurance has been continually growing since the beginning of 2007; Figure 17: The number of new private cars has been declining in Great Britain over the last five years; Figure 18: Half of the UK car parc was older than six years in 2008; Figure 19: Great Britain witnessed a decline in new motorcycle numbers while total numbers grew in 2008; Figure 20: Multicar households have become more popular; Figure 21: The average motor claim cost continued to rise rapidly in 2007 at 14.1%; Figure 22: Insurers have benefitted from falling claims frequency; Figure 23: The number of UK road accidents has continued to fall since 1998; Figure 24: Accidents in the UK have fallen despite a steady increase in the number of vehicles; Figure 25: Casualties continued to decline across all categories in 2008; Figure 26: The private motor insurance COR appears to be peaking; Figure 27: The rate of increase in the private motor COR is slowing; Figure 28: Private motor insurers continued to make reserve releases in 2008 to improve their reported year COR; Figure 29: The direct channel continues to be the number one route to market for private motor insurance; Figure 30: Direct Line is the number one private motor insurance brand while Saga clearly scores well with the over 60s; Figure 31: Direct Line and Saga are the two most popular brands for male private motor insurance policyholders; Figure 32: Sheilas' Wheels and the Post Office enter the top 10 in the female private motor insurance market; Figure 33: Aggregators' advertising expenditure increased substantially in 2008; Figure 34: More Th>n offered gifts to help motorists through the cold snap; Figure 35: Swiftcover.com launched a £25m advertising campaign-Get a Life -in January 2009; Figure 36: Television remained the most popular medium choice for the top 10 advertisers in 2008; Figure 37: Television and direct mail remained the dominant form of advertising media among motor insurance advertisers ranked 11-20; Figure 38: Consumers aged over 60 possess the highest penetration rate for private motor insurance cover; Figure 39: Consumers with higher incomes have higher penetration rates; Figure 40: Consumers with higher socio-economic group have higher penetration rates; Figure 41: Most consumers purchase their car insurance policy on the internet or by phone; Figure 42: Internet distribution is most popular among 18-29 year olds; Figure 43: Internet was the most popular platform to arrange the motor insurance across different social grades; Figure 44: Private motor insurance retention rates improve significantly as age increases; Figure 45: Private motor insurance retention rates were lowest for internet consumers; Figure 46: Internet shoppers were least loyal to their motor insurance providers; Figure 47: Price was a factor in provider choice for most motor insurance consumers in 2008; Figure 48: Price is the primary factor for consumers across all platforms; Figure 49: 94% of consumers who arranged their motor insurance with aggregators were seeking a cheaper quote; Figure 50: Lloyds Banking Group, AXA, Liverpool Victoria and Zurich gained market share in 2008; Figure 51: FIM Holdings achieved significant growth in market share; Figure 52: All of the top 10 private motor insurers underwrite primarily in the comprehensive market; Figure 53: RBS had over 6.7 million private comprehensive policies in force in 2008; Figure 54: Lloyd's syndicates underwrote £1 billion of motor insurance business in 2007; Figure 55: RBS, RSA, Fortis and Zurich recorded below average CORs; Figure 56: CORs after reserve releases ranged from 100% to 114.1%; Figure 57: Growth in premium income is forecast to be strong as unprofitability spurs rate increases; Figure 58: The market will continue to be based primarily on comprehensive policy income; Figure 59: The COR for the private motor sector will gradually improve

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