Table of Contents
- Datamonitor View
- Add-on insurance strategies
- Insurance providers follow two main strategies for add-on insurance
products
- The main add-on insurance products are motor breakdown, home emergency
and legal expenses
- Add-ons are either used as revenue generators or value adders
- As value adders add-ons help differentiate an insurers' offering and
can be used in advertising
- Drawing attention to add-ons provided as standard allows companies
to avoid focusing on price
- When sold as optional extras, add-ons generate revenue and improve
expense ratios
- Add-ons also play the role of keeping customers happy by providing
them with extra services
- Add-ons are profitable, but up-sell rates depend on the product and the
sales platform
- Motor breakdown insurance, home emergency insurance and legal expenses
insurance are thought to all be profitable lines
- The three main add-ons have different average up-sell rates
- Up-sell rates also depend on the sales platform
- Motor breakdown cover
- Roadside assistance cover is common among consumers
- Roadside assistance cover offers help to stranded motorists whose car
has broken down
- Three quarters of car insurance policyholders have some form of
roadside assistance cover
- An estimated 18.1 million cars had breakdown cover in 2006
- The price of breakdown cover varies greatly relative to cover levels
and providers
- Insurance providers are not seeing strong growth in sales of motor
breakdown cover
- Cover levels increase with the age and income of consumers
- Older consumers are more likely to have roadside assistance than
younger consumers
- Consumers with high household incomes are most likely to have cover
- Insurance providers are an important distribution channel for breakdown
cover
- Over half of breakdown cover is sold by insurance providers, which
sell it as an add-on to motor policies
- Many motor insurers offer breakdown cover from their own subsidiaries
- The AA is the largest breakdown provider followed by RAC and Green Flag
- Insurance providers mainly sell cover as optional extras to their motor
policies
- Most of the top 10 motor insurers sell breakdown cover as an optional
extra
- Banks, brokers and affinities will also often offer breakdown cover
with motor policies
- Home emergency insurance
- Home emergency cover is sold by insurance providers with home insurance
- The cover sold by insurers pays for call out charges and repairs in
case of emergency
- Similar products are sold by utility companies, but these are
generally sold on a utility specific basis
- The home emergency and home services markets are substantial and thought
to be profitable
- Home emergency claims frequency and profitability is linked to
weather-related claims
- Home emergency insurance is believed to be profitable for providers
- Offering home emergency may improve the claims costs on home
insurance policies
- Claims frequency is linked to weather-related claims, which vary
between years
- Storm damage accounted for the largest part of the weather claims bill
for household in 2006
- Insurance providers are the main providers of home emergency cover
- Most of the top home insurers sell home emergency policies
- Brokers and some affinity partners also sell the cover
- Insurance providers face competition from utilities which sell
alternative policies focused on service
- The service policies offered by utilities provide competition to home
emergency policies sold by insurers
- British Gas Services is a key player in the home emergency insurance
market with 7.2 million service policies in force in 2006
- British Gas Services offer a range of home service policies
- In 2006, British Gas had 7.2 million service contracts in force
- Homeserve is a key player in the home service and home emergency
insurance marketplace
- Homeserve is comprised of two divisions: Policy Membership and
Emergency Services
- Homeserve offers a range of products
- Homeserve' s utility branded policies reached 5.8 million in March
2007
- Homeserve and British Gas' s offering are supported by large
advertising spends
- Home emergency providers mainly advertise via direct mail
- Legal expenses
- Introduction
- Legal expenses insurance is sold as an add-on to motor and household
insurance
- Motor legal expenses insurance is sold as an add-on to motor policies
- Family legal expenses insurance is also sold as an add-on to household
products
- The total UK legal expenses insurance market was estimated to be worth
£344 million in 2005 and is thought to be a profitable line overall
- The legal expenses market was worth £344 million in GWP in 2005
- Legal expenses is profitable but the market is not believed to be
growing
- The product is profitable as insurers can set their price according
to their claims experience
- Due to high up-sell rates the market is not believed to be growing
- Most insurers sell legal expenses insurance as an optional extra
- Most of the top 10 motor insurers sell motor legal expenses as an
optional extra
- Some brokers, affinities and banks also sell motor legal expenses
insurance with motor policies
- Most of the top 10 household insurers sell family legal protection as
an optional extra
- Many brokers, banks and affinities will also offer family legal
protection with household insurance policies
- Specialist providers DAS and Brit are among the top legal expenses
underwriters
- The Future Decoded
- Modest growth in the add-on insurance sector can be expected as a result
of the growth in the number of cars on the road and households and improved
up-sell rates
- The number of households in the UK is expected to grow
- The number of cars in Britain is expected to grow, albeit at a slow
rate
- Growth in up-sell rates could be achieved in some lines
- The predicted rise of Internet sales and aggregators is likely to have a
negative impact on the add-on insurance market
- The predicted rise in Internet sales will prove a challenge to add-on
sales
- The rise of aggregators and increased price sensitivity will have a
negative effect on the penetration of add-on insurance policies
- More insurers may incorporate add-ons as standard, however, it is likely
that the majority will continue to sell add-ons as an optional extra
- More insurers may incorporate add-ons to appeal to customers who want
extensive cover but in a simple policy
- The majority of insurers are expected to continue to sell add-ons as
optional extras to appeal to the price-conscious
- APPENDIX
- Definitions
- Banks/Building societies
- Brokers
- Brandassurers
- Direct writers
- Gross premiums
- Written premiums
- Definitions of terms specific to this report
- Home emergency insurance
- Single utility emergency insurance
- Home service
- Methodology
- Ipsos MORI methodology and contacts
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Tables
- Table 1: Penetration of roadside assistance, H2 2006
- Table 2: Insurers are estimated to have sold breakdown cover to around
10 million cars in 2006
- Table 3: Penetration of roadside assistance by age, 2006
- Table 4: Penetration of roadside assistance, by household income, 2006
- Table 5: Distribution of roadside assistance cover by channel, H2 2006
- Table 6: Partnerships between breakdown companies and top 10 private
motor insurers
- Table 7: Ranking of the top roadside assistance companies, H2 2006
- Table 8: The top 10 private motor insurers' offering of motor
breakdown insurance
- Table 9: Examples of brokers, bank and affinities that offer breakdown
cover motor insurance policies, H1 2007
- Table 10: Domestic property insurance claims by peril, 2002-6
- Table 11: Gross claims incurred for domestic property weather claims,
2002-6
- Table 12: Home emergency insurance offering of the top 10 household
insurers
- Table 13: Examples of brokers, banks and affinities that offer home
emergency insurance with home insurance policies, 2007
- Table 14: British Gas Services turnover and operating profit, 2005-6
- Table 15: British Gas Services contracts in force, 2005-6
- Table 16: Homeserve' s revenue and operating profit, 2006-7
- Table 17: Homeserve' s UK utility policies-in-force, 2006-7
- Table 18: Home emergency advertising spend by competitor, 2006
- Table 19: Home emergency advertising send, by medium, 2006
- Table 20: Legal expenses insurance offering of the top 10 private
motor insurers
- Table 21: Examples of brokers, banks and affinities that offer motor
legal expenses insurance with motor insurance policies, 2007
- Table 22: Legal expenses insurance offering of the top 10 private
motor insurers
- Table 23: Examples of brokers, banks and affinities that offer family
legal expenses insurance with household insurance policies, 2007
- Table 24: Legal expenses premium income by competitor, 2001-5
- Table 25: Registered cars by body type in the UK, 2002-6
- Table 26: Homeserve' s utility partners, 2007
- Table 27: The size of UK households by the number of people, 1971-2005
- Table 28: Trends in household tenure for England, 1995-2005
- List of Figures
- Figure 1: More Th>n offers free breakdown cover as standard on its
motor policies
- Figure 2: More Th>n draws attention to the fact that home emergency
insurance is included as standard when outlining its home insurance
offering to potential Internet customers
- Figure 3: Three quarters of consumers are covered by roadside
assistance
- Figure 4: Insurers are estimated to have sold breakdown cover to
around 10 million cars in 2006
- Figure 5: The proportion of consumers with roadside assistance cover
increases with age
- Figure 6: The proportion of consumers with roadside assistance cover
is highest among higher income groups
- Figure 7: Over half of consumers with roadside assistance cover
arranged cover through an insurance provider
- Figure 8: Most of the top 10 private motor insurers sell breakdown
cover as an optional extra
- Figure 9: Home emergency policies cover a variety of emergencies that
can befall house owners
- Figure 10: The total cost of domestic property claims fell slightly in
2006, as a result of a reduction in weather-related claims
- Figure 11: The cost of weather insurance claims fell in 2006 for
domestic property
- Figure 12: The top 10 household insurers offer home emergency in
different ways
- Figure 13: Revenue from central heating services products accounted
for the majority of British Gas Service' s total revenue in 2006
- Figure 14: The most popular British Gas policy is the Central heating
service contract
- Figure 15: Homeserve offers a range of insurance policies which are
sold direct and by utility companies
- Figure 16: Homeserve had 5.8 million utility branded policies in force
in the UK in March 2007
- Figure 17: Homeserve was the largest advertiser of home emergency
insurance in 2006
- Figure 18: Direct mail is the most popular medium for advertising home
emergency insurance
- Figure 19: Most of the top 10 private motor insurers sell legal
expenses insurance as an optional extra on motor policies
- Figure 20: Most of the top 10 household insurers sell legal expenses
insurance as an optional extra on home insurance policies
- Figure 21: Das, Direct Line and Brit were the largest legal expenses
underwriters in 2005
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