Table of Contents
OVERVIEW
EXECUTIVE SUMMARY
- The commercial motor insurance market is under pressure from the recession
and claims inflation
- The recession is likely to have a depressing impact on commercial motor
insurance GWP
- The market continued to contract in size in 2008 as GWP declined in both
market segments
- The market is estimated to have contracted by approximately 3.1% in 2008
- Average premium rates across both fleet and commercial vehicle have
declined
- Fleet policies decreased while other commercial motor insurance vehicle
years increased in 2008
- Large national brokers continue to dominate commercial motor insurance
distribution
- Commercial motor insurance distribution is considered to be most at risk
from the direct channel
- Brokers remained the dominant distribution channel targeting SMEs in 2008
- Only 40.9% of SMEs would buy their motor insurance over the telephone or
internet
- RSA and Aviva remained the leading commercial motor insurers in 2008
- (Untitled sub-section)
- Allianz, RSA and Zurich beat the market average COR
- Allianz, Tradex, Aviva Zurich, RSA, and NFU recorded reported year CORs
below 100% in 2008
- The commercial motor market is forecast to reach £3.7 billion by
2013 as premium rates rise
- The UK commercial motor insurance market is forecast to reach a value of
£3.7 billion in 2013
- The commercial motor insurance market is forecast to improve its
underwriting performance throughout the forecast period
MARKET ISSUES
- Introduction
- The acquisition of Westminster by Tradex has created a new top 10 player
- The new combined commercial motor insurer is a black cab market
powerhouse
- Tradex is adept at using multiple channels to deliver its specialist
commercial motor insurance policies
- Westminster was a specialist in the competitive London taxi market
- The recession is likely to have a depressing impact on commercial motor
insurance GWP
- Lower turnover and GDP will mean that few companies will be looking to
expand their motor fleets
- Insurers exposed to the motor trade are likely to suffer, as this sector
faces falling sales
- More company insolvencies will mean premium growth will not be generated
by increases in volume
- An increase in crime brought on by unemployment could increase claims
costs for motor insurers
- The commercial motor parc is likely to experience slower growth due to
the recession
- High claims costs and inflation have been reducing commercial motor
insurers' margins
- Bodily injury claims are typically more expensive than the average claim
- Legal costs inflation has been identified as a key driver of claims
inflation, particularly for smaller personal injury motor claims
- Medical inflation is a major driver for larger personal injury claims
costs
- 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 continued to contract in size in 2008 as GWP declined in both
market segments
- The market is still highly competitive and experiencing soft premium
rates
- The market is estimated to have contracted by approximately 3.1% in 2008
- Lloyd' s market insurers have a significant presence in the UK motor
market
- Fleet insurance policies account for the bulk of the GWP in the
commercial motor insurance market
- Policies in force and premium rates have led to a contraction in GWP in
the market
- Average premium rates across both fleet and commercial vehicle have
declined
- There were a total of 4.4 million commercial motor policies in force in
2008
- Fleet policies decreased while other commercial motor insurance vehicle
years increased in 2008
- The commercial motor parc grew by 2.7% in 2008
- The total number of vehicles in the commercial motor parc continued to
grow in 2008
- There has been only a marginal shift in segmentation as the proportion
of other vehicles increased
- The company car parc remained broadly stable as a proportion of both the
total car parc and overall vehicles
- Claims costs continue to increase keeping pressure on margins
- Gross claims costs for commercial motor insurers were estimated to have
increased by 2.7% in 2008
- Claims inflation continues to plague the market due to escalating bodily
injury claims and credit hire costs
- Claims frequency deteriorated in 2008, although the overall trend in
recent years has been positive
- Insurers are benefiting from improving accident rates
- Falling road traffic accident rates mean fewer opportunities for
expensive personal injury claims to arise
- The combined ratio for the commercial motor market peaked in 2007 but has
started to improve
- The total motor insurance and commercial motor insurance COR should
continue reducing in the coming years
- The industry made substantial reserve releases in 2008
DISTRIBUTION DYNAMICS
- Introduction
- Large national brokers continue to dominate commercial insurance
distribution
- Independent insurance intermediaries of all types retain their leading
market share in 2008
- Direct players account for a small but growing portion of the commercial
general insurance market
- Corporate partnerships have maintained only a small presence in the
commercial insurance market
- Banks and building societies distribute negligible amounts of commercial
general insurance
- Commercial motor insurance distribution is considered to be most at risk
from the direct channel
- The broker channel continues to dominate the SME market with retention
levels high
- Brokers remained the dominant distribution channel targeting SMEs in 2008
- The internet is the least common platform for SMEs purchasing commercial
insurance
- The majority of SMEs remain satisfied with their insurance provider
- Long-standing relationships are important to SMEs purchasing commercial
insurance
- SMEs purchasing their insurance through a bank or a broker value advice
from their insurance providers the most
- Price is important to many SMEs choosing an insurance provider
- A significant proportion of SMEs are open to purchasing their insurance
via the internet or phone
- The convenience factor of the phone is appealing to many SMEs
considering a telephone purchase
- Over a third of SMEs would consider a purchase online
- Only 40.9% of SMEs would buy their motor insurance over the telephone or
internet
COMPETITOR FOCUS
- Introduction
- RSA and Aviva remained the leading commercial motor insurers in 2008
- Aviva retained its position as the market leader in 2008
- RSA' s market share increased by 0.5 percentage points
- Zurich, Allianz, NFU, AXA and QBE gained market share in 2008
- Zurich recorded a large increase in market share in 2008
- Allianz' s market share grew in 2008
- NFU Mutual grew its market share by 0.4 percentage points in 2008 and
achieved growth of 3.3% in GWP
- AXA continued to grow, increasing its market share by 0.2 percentage
points in 2008
- RBS' market share remained at 4.1% in 2008
- QBE achieved growth and possesses the largest commercial vehicle book
among the top 10 commercial motor insurers
- Two insurers, Tradex and Liverpool Victoria, gained market share through
acquisitions in 2008
- Liverpool Victoria Group gained a significant presence in the commercial
motor market after its acquisition of Highway in 2008
- Tradex' s commercial motor insurance book experienced significant gains
in 2008 due to organic and inorganic growth
- Mid-sized commercial motor insurers gained 2.0 percentage points of market
share in 2008
- Brit, Groupama, HSBC and Fortis all increased their exposure to the
commercial motor insurance market in 2008
- AIG, CIS and FIM Holding' s market shares were reduced in 2008
- MMA and Allchurches had relatively stable market shares in 2008
- All of the top 10 commercial motor insurance groups have mixed motor
insurance portfolios
- Most of the top 10 commercial motor insurers' books were dominated by
fleet business in 2008
- Allianz, RSA and Zurich recorded accident year CORs much lower than the
market average
- All of the leading commercial motor insurance groups had an unprofitable
year on an accident year basis
- Allianz, RSA and Zurich beat the market average COR
- Allianz, Tradex, Aviva, Zurich, RSA and NFU Mutual achieved an
underwriting profit on a reported year basis
- The top 10 commercial motor insurers have relied on reserve releases in
recent years to lower their CORs
- Allianz, Tradex, Aviva Zurich, RSA, and NFU recorded reported year CORs
below 100% in 2008
FUTURE DECODED
- Introduction
- The commercial motor market is forecast to reach £3.7 billion by
2013 as premium rates rise
- Premium rate increases will be the primary factor driving growth in the
commercial motor insurance market
- The UK commercial motor insurance market is forecast to reach a value of
£3.7 billion in 2013
- The commercial motor insurance market is forecast to improve its
underwriting performance throughout the forecast period
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 Commercial Broker Survey H1 2009
- Datamonitor' s SME Insurance Survey Q1 2008
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
TABLES
- Table: New car registrations in the UK, 2000 - 09f
- Table: UK company liquidations, 2003 - 08p
- Table: Commercial motor theft claims cost and number
- Table: UK unemployment, Q4 2004 to Q4 2008
- Table: New commercial vehicle registrations in Great Britain by body type,
2004 - 08 (000s)
- Table: UK average cost of bodily injury claims notified two years
previously, 2003 - 07 (£)
- Table: Change in average premium rates and total commercial motor market
size, 1996 - 2008e*
- Table: UK motor insurance NWP split between ABI members and Lloyd' s, 2007
(£m)
- Table: Commercial motor GWP by line of business, 2005 - 08e (£m)
- Table: Fleet and commercial vehicle average per vehicle premium rate
changes, 2005 - 08e
- Table: Motor policies in force, 1998 - 2008 (000s)
- Table: Commercial motor parc in Great Britain by body type, 2004 - 08
(000s)
- Table: Commercial motor parc in Great Britain by body type, 2007 - 08
- Table: Company car parc' s share of total car parc, 2004 - 08 (000s)
- Table: Commercial motor gross claims costs, 2002 - 08e (£000)
- Table: Average motor claim costs, 2003 - 07 (£)
- Table: Commercial motor claims volume and frequency, 1998 - 2008
- Table: Total number of road accidents in the UK, 1998 - 2008* (000s)
- Table: Road traffic accidents relative to registered vehicles in Great
Britain, 1998 - 2008 (000s)
- Table: Deaths, seriously and slightly injured casualties resulting from UK
road traffic accidents, 2004 - 08*
- Table: Accident and reported year COR, commercial motor market, 2005 - 08
(%)
- Table: Market share of distribution channels in the commercial general
insurance market, 2004 - 08e
- Table: Q: "How important is it to receive advice on an ongoing basis from
your insurance provider?"
- Table: Gross written premium and market share of the top 10 UK commercial
motor insurance groups, 2007 - 08
- Table: Gross written premium and market share of the top 11 - 20 UK
commercial motor insurance groups, 2007 - 08
- Table: Top 10 commercial motor insurers' fleet and commercial vehicle
books, 2007 - 08
- Table: Accident year combined ratio and underwriting profit/loss for
commercial motor business, top 10 motor insurance groups, 2008
- Table: Reported year combined ratio and underwriting profit/loss for
commercial motor business, top 10 commercial motor insurance groups, 2008
- Table: Key variables affecting commercial motor insurance GWP, 2008e - 13f
- Table: UK commercial motor insurance GWP forecast, 1996 - 2013f (£m)
- Table: Commercial motor GWP by line of business, 2005 - 13f (£m)
- Table: Commercial motor accident year profitability ratio, 2005 - 2013f (%)
- Table: Q: "What business sector are you involved in?"
- Table: Q: "How large is your company in terms of number of employees?"
- Table: Q: "How large is your company in terms of turnover?"
FIGURES
- Figure: The 2007 average UK motor claim cost for bodily injury was notably
higher than in previous years
- Figure: SMEs are equally likely to buy motor cover over the internet or
telephone
- Figure: The combined commercial motor insurance books of Tradex and
Westminster gave them a market share of 2.7%
- Figure: The British economy has been contracting since mid-2008
- Figure: UK company liquidations have already begun increasing
- Figure: New commercial vehicle registrations slowed in 2008 and are
expected to contract further in 2009
- Figure: The 2007 average UK motor claim cost for bodily injury was notably
higher than in previous years
- Figure: The commercial motor insurance market continued to contract due to
lower premium rates
- Figure: Lloyd' s syndicates underwrote £1 billion of motor insurance
business in 2007
- Figure: Premium income from both commercial motor lines was expected to
have contracted in 2008
- Figure: Premium rate growth in the commercial motor insurance market
remained negative in 2008
- Figure: Fleet policies make up the majority of the commercial motor market
- Figure: The share of policies for commercial vehicles is much reduced from
even five years ago
- Figure: Commercial motor vehicles continued to increase in 2008 although
at a lower rate
- Figure: Light goods vehicles and company cars account for most of the
commercial motor parc
- Figure: The company car parc remained broadly stable while the total car
parc grew gradually
- Figure: The average motor claim cost continued to rise rapidly in 2007 at
14.1%
- Figure: Commercial motor claims volume and frequency increased in 2008
- Figure: The number of UK road accidents has continued to fall since 1998
- Figure: Accidents in the UK have fallen despite a steady increase in the
number of vehicles
- Figure: Casualties continued to decline across all categories in 2008
- Figure: The commercial motor insurance accident year COR appears to be
recovering
- Figure: The combined ratio for commercial motor has begun to improve
- Figure: Commercial motor insurers continued to make reserve releases in
2008 to improve their reported year COR
- Figure: Brokers are the dominant route to market for commercial insurers
in the UK
- Figure: Commercial motor is considered to be at most risk from the direct
channel
- Figure: Most SMEs purchase their commercial insurance through the broker
channel
- Figure: Most SMEs purchase their insurance through face-to-face contact
with their insurance provider
- Figure: Most SMEs are satisfied with the service they have received from
their insurance providers
- Figure: A large proportion of SMEs have been with their insurance provider
for more than 10 years
- Figure: Receiving ongoing advice from their insurance provider is
important to most SMEs
- Figure: Many SMEs consider the price of an insurance premium to be the
most important factor when choosing a commercial insurance provider
- Figure: The convenience factor appeals to many SMEs prepared to purchase
insurance over the phone
- Figure: A significant proportion of SMEs would not consider a telephone
purchase because they simply prefer face-to-face
- Figure: A significant proportion of SMEs who would consider a purchase
online think price is an important factor
- Figure: SMEs show only a moderate inclination to purchase motor insurance
via the telephone or internet
- Figure: Most top 10 commercial insurers gained market share in 2008
- Figure: Most of the 11 - 20 commercial motor insurers gained market share
in 2008
- Figure: Most of the top 10 commercial motor insurers underwrite primarily
in the fleet market
- Figure: Allianz, RSA and Zurich recorded CORs that were lower than the
market average
- Figure: Allianz, Tradex, Aviva, Zurich, RSA and NFU Mutual recorded CORs
below 100% in 2008 after reserve releases
- Figure: Growth in premium income is forecast to turn around in 2009
- Figure: The market will continue to be based primarily on fleet policy
income and will turn to growth
- Figure: Underwriting losses are forecast to decline
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