UK Personal General Insurance 2006

Content

• Chapter 1 Introduction
  • What is this report about?
  • Who is the target reader?
  • How to use this report
• Chapter 2 Competitive Dynamics
  • Introduction
  • 2006 saw strong interest in mergers and acquisitions among insurers, but only one significant new entrant to the market
  • M&A activity was muted among insurers, though failed bids and speculation show insurers' continued interest
  • Only one significant new insurer attempted to enter the personal insurance market in 2006, but was bought up by an existing insurer prior to launch
  • Start-up ABC Insurance was bought by Liverpool Victoria
  • A continued focus on cost reductions led to job cuts and offshoring in 2006
  • 2006 saw a number of high profile UK job cuts as insurers continued to move jobs abroad
  • Brokers are also showing interest in offshoring
  • For many of the top 10 personal insurers in 2005 motor and household insurance performance pulled in different directions
  • Norwich Union achieved substantial growth in both private motor and household
  • RBSI subsidiaries broke with their strong growth traditions
  • Direct Line saw modest growth, outperforming its sister companies
  • UKI's private motor book decreased in size following rapid growth in recent years
  • Churchill saw reductions in private motor, and an improvement in profitability
  • A number of companies experienced very varied results in their private motor and household books, influencing their total personal premium income in opposite directions
  • Royal & Sunalliance achieved growth in private motor, while household premiums continued to fall
  • AXA experienced an increase in household and accident and health business
  • Zurich saw growth in household, but a decline in private motor was combined with a deterioration in profitability
  • Allianz's household book grew, while private motor declined
  • St Andrew's and BUPA focus on just a few personal lines
  • St Andrew's focuses on pecuniary loss and household insurance, and saw a significant increase in its household book in 2005
  • BUPA focuses on private medical insurance
  • A few personal insurers outside the top 10 are growing rapidly, heightening competition for the top players in the market
  • Of the top 10 personal lines insurers, five have large commercial books, while four are purely personal lines insurers
  • The RBSI subsidiaries and St Andrew's focus exclusively on personal business
  • Norwich Union writes more personal than commercial business
  • For the remaining companies, commercial books outstripped personal books in 2005
  • Profitability declined in the accident and health market, driven by increases in loss ratios in particular
  • Changes in FSA reporting categories have affected accident and health ratio comparisons
  • Many accident and health insurers saw loss ratios increase in 2005, but a clear divide is emerging between PMI and accident insurance specialists
  • Norwich Union, BCWA and Legal & General all recorded double digit loss ratio growth
  • Stonebridge, SimplyHealth and Fortis achieved impressive loss ratio reductions
  • Expense ratios rose by 3.0 per cent in 2005, with accident specialists driving this increase
  • While PMI providers succeeded in reducing their expense ratios, accident and travel insurance specialists more often suffered an increase
  • PMI providers BUPA and WPA had the best expense ratios in 2005
  • Norwich Union, Legal & General and New Hampshire achieved the best expense ratio reductions
  • BCWA and Stonebridge recorded large expense ratio increases
  • The combined ratio of the top A&H providers rose by 5.3 per cent in 2005, with the majority of PMI and accident providers contributing to this performance
  • The companies with the best ratio metrics were from the accident and travel sectors, not the PMI market
  • New Hampshire, Fortis and SimplyHealth all made impressive combined ratio improvements in 2005
  • BCWA had a terrible year in 2005, however GEFI, Clinicare and Groupama all suffered big combined ratio increases as well
  • Soft market conditions led to both falling premiums and reductions in profitability for many of the top 20 motor insurers
  • The loss ratio of the top 20 motor insurers increased in 2005 and soft market conditions were evident as many companies suffered declining premium income
  • Many insurers saw worsening loss ratios and reductions in income, suggesting that some have accepted reduced premiums
  • Three companies saw a decline in premium income but improved loss ratio
  • Six companies managed to improve their loss ratios while growing their motor books
  • First Alternative was the only top 20 company that combined an increase in premium income with a growing loss ratio
  • The expense ratio of the top 20 motor insurers saw a small deterioration in 2005
  • Only a few insurers saw substantial changes to their expense ratios in 2005
  • Soft market conditions led many insurers with a combined ratio already over 100 per cent to suffer further reductions in profitability
  • 11 of the top 20 motor insurers failed to return an underwriting profit in 2005
  • Many companies combined increasing unprofitability with falling premium income, suggesting that some players have cut their premiums to maintain market share
  • 11 of the top 20 returned an underwriting loss and seven of these further increased their combined ratios in 2005
  • Nine companies recorded underwriting profits in 2005, with five of these seeing improvements on their 2004 results
  • Several players have dealt well with the soft cycle so far and are set to continue riding the cycle in the future
  • Pecuniary loss is a profitable line with an average combined ratio below 100 per cent however, high expense ratios are a problem for a sub-group of insurer
  • Changes in FSA reporting categories have affected pecuniary loss ratio comparisons
  • In general the loss ratio for pecuniary loss is lower than other lines
  • The influence of the expense ratio or the loss ratio on pecuniary loss insurers' profitability varies depending on their main line of business
  • Insurers that mainly write personal creditor business have low loss ratios and high expense ratios
  • Insurers that specialize in commercial pecuniary loss generally have low expense ratios
  • The remainder of the top 20, with expense ratios around 40-60 per cent, underwrite a variety of pecuniary loss lines
  • Just over half of the top 20 pecuniary loss insurers recorded underwriting profits in 2005, making it a profitable business overall
  • Pecuniary loss is a profitable business for many insurers
  • However, a group of companies struggled to secure a profit
  • Property insurance operating conditions improved slightly in 2005, although many players saw their combined ratios increase
  • The loss ratio of the top 20 property insurers improved in 2005
  • Nine of the top 20 actually recorded an increase in loss ratio, with significant increases from several players
  • Ecclesiastical, Direct Line and Allianz all recorded large loss ratio increases
  • St. Andrew's and Norwich Union all achieved big reductions in loss ratio, going against the market trend of rising claims costs
  • Liverpool Victoria's loss ratio was the worst of the property sector's top 20 players
  • The expense ratio of the top 20 property insurers increased by 1.8 percentage points in 2005
  • Direct writers and mutual insurance companies had the best expense ratios
  • CIS, Royal & Sunalliance and Zurich all saw significant increases in expense ratios
  • Lloyds TSB and NIG achieved large reductions in their expense ratios
  • The combined ratio of the top 20 property insurers fell marginally by 0.4 per cent in 2005, driven by the performance of just under half of this peer group
  • 11 of the top 20 property insurers recorded an increase in combined ratio
  • Reflecting softer market conditions, Legal & General moved into an underwriting loss
  • Direct Line, Allianz and Ecclesiastical saw the biggest increase in combined ratio
  • Lloyds TSB, St. Andrew's and Norwich Union all achieved double digit figure combined ratio reductions
• Chapter 3 Appendix
  • Methodology
  • Competitor data
  • GWP versus GEP reporting
  • Major changes in FSA Return categories and their impact
  • Total personal and total commercial business
  • Home-Foreign, overseas and facultative reinsurance business
  • Market size
  • Changes in market size information
  • 2005 definitions for lines of business
  • Accident & health
  • Medical expenses
  • HealthCare cash plan
  • Travel
  • Personal accident or sickness
  • Motor
  • Total private motor
  • Total commercial motor
  • Private motor comprehensive
  • Private motor non-comprehensive
  • Motorcycle
  • Fleets
  • Commercial vehicles (non-fleet)
  • Property
  • Total commercial property
  • Household and domestic all risks.
  • Consequential loss (i.e. business interruption)
  • Financial/Pecuniary loss business
  • Total personal financial loss business
  • Total commercial financial loss business
  • Legal expenses
  • Fidelity and contract guarantee
  • Liability business
  • Employers liability (including the employers liability part of mixed liability packages but excluding mixed commercial packages)
  • Professional indemnity (including directors' and officers' liability and errors and omissions liability)
  • Public and products liability
  • Mixed commercial package
  • Total personal
  • Total commercial
  • Pre-2005 definitions for lines of business
  • Accident and health
  • Individual accident and health
  • Group accident and health
  • General liability
  • Motor
  • Pecuniary loss
  • Total pecuniary loss figures
  • Property
  • Ratio analysis by competitor
  • Premium income measures
  • Earned premiums
  • Gross Premium
  • Net Premium
  • Written premiums
  • Current readings
  • Future readings
  • Do you need more information?
  • Datamonitor Financial Services Consulting
  • SPP writing team
• List of Tables
  • Table 1: Top 10 personal insurance competitors by GWP and market share, 2005
  • Table 2: GWP of selected fast growing personal insurance players ranked 11-20
  • Table 3: Split between personal and commercial business for the top 10 personal insurers, 2005
  • Table 4: Premium income compared to loss ratio, top 20 A&H insurers, 2004-5
  • Table 5: Expense ratio of the top 20 A&H insurers, 2004-5
  • Table 6: Premium income compared to combined ratio, top 20 A&H insurers, 2004-5
  • Table 7: Loss ratio compared to premium income for the top 20 motor insurers, 2004-5
  • Table 8: Expense ratio compared to premium income for the top 20 motor insurers, 2004-5
  • Table 9: Premium income compared to combined ratio for the top 20 motor insurers, 2004-5
  • Table 10: Loss and expense ratios compared to GWP for the top 20 pecuniary loss insurers, 2005
  • Table 11: Combined ratio compared to GWP for the top 20 pecuniary loss insurers, 2005
  • Table 12: Premium income compared to loss ratio, top 20 property insurers, 2004-5
  • Table 13: Expense ratio of the top 20 property insurers, 2004-5
  • Table 14: Premium income compared to combined ratio, top 20 property insurers, 2004-5
• List of Figures
  • Figure 1: The top 10 personal lines insurers accounted for 54.5 per cent of the market in 2005
  • Figure 2: Four of the companies ranked 11-20 experienced fast growth in personal lines in 2005
  • Figure 3: Six of the top personal lines insurers in 2005 also had large commercial books, while four of the 10 were purely personal insurers
  • Figure 4: Many PMI players in the accident and health sector recorded an increase in their loss ratio
  • Figure 5: Expense ratio changes varied in the accident and health sector in 2005, but many PMI providers' ratios deteriorated slightly
  • Figure 6: Softening market conditions clearly affected the loss ratio of the top motor insurers
  • Figure 7: Most motor insurers saw only relatively small changes to their expense ratios in 2005
  • Figure 8: The four largest motor insurers have combined ratios below the top 20 average
  • Figure 9: Pecuniary loss insurers generally have low loss ratios, but expense ratios vary by line of business
  • Figure 10: On average property insurers increased premium income in 2005, but also saw their loss ratios rise
  • Figure 11: With the exception of a few companies like Lloyds TSB, NIG and Ecclesiastical, most property insurance providers saw expense ratios rise in 2005