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UK Private Motor Insurance 2009

Publication Date June 2009
Publisher Datamonitor
Product Type Report
Pages 124
ISBN Number not applicable
Product Code DAT07267
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Summary

The report is an invaluable guide to the UK private motor insurance market, providing insight into competitor strategies, profitability and performance as well as overall market growth and trends. It examines trends in distribution, such as the growing role of aggregators, identifies the key providers and provides unique market share estimates.

Scope

  • Private motor insurance distribution trends analyzed by channel, platform and provider.
  • Analysis of the effects aggregators are having on the distribution and underwriting of private motor insurance.
  • Detailed market growth and profitability forecasts based on Datamonitor's in-house model and expertise.

Highlights

Many insurers feel that aggregators have resulted in business generally being written by those with the lowest rates. This has meant that insurers that have raised rates have had to, at least temporarily; accept a loss of market share for the affected risks, depressing premium income growth.

Of the top 10 groups, Lloyds Banking Group, through its underwriting vehicle esure, achieved the largest growth in GWP in 2008. According to the HBOS 2008 annual report, this growth was supported by the additional spending on marketing and new business acquisition activities.

Reasons to Purchase

  • Understand what motivates consumers to buy motor insurance and which consumers are most likely to switch provider at renewal.
  • Benchmark your company against your competitors based on market share data and profitability ratios.
  • Develop your future business plans from an informed viewpoint with Datamonitor's market forecast.

Content

  • 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 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
  • 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
  • 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
  • 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
  • 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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