Motor Insurance - UK - May 2009

Abstract

About this report

The motor insurance market has been suffering from an underwriting loss for a number of years now. Fuelled by the growth of price comparison sites, the market is highly price sensitive and suffers from a distinct lack of customer loyalty. On the plus side, however, the motor insurance sector is well-insulated against the economic downturn due to the fact that motor insurance is a legal requirement. As the number of cars in the UK continues to grow, the sector should prosper, giving motor insurers time to focus on of the issues of pricing, customer retention and distribution.

Some 19% of motorists used an aggregator to arrange their last car insurance policy (compared to 12% in 2008). Clearly, price comparison sites present a big challenge for providers. Either a new pricing structure is needed in relation to the aggregator model, or a longer-term focus is required in their relationship. In addition, the rising cost of personal injury claims is a big issue for insurers, adding to the need to increase premiums. The problem is that while big premium rises are needed to increase profitability, in such a fiercely competitive and price-led industry, no one wants to be the first mover for fear of the business they will lose as a result.

This report explores the many issues that are at work in the motor insurance sector, its strengths and weaknesses are assessed, and its size defined in terms of gross written premiums and underwriting profit. Distribution channels are explored (in particular the role of intermediaries) before taking a look at the key players in the market, both in terms of their market share and brand perceptions. The report concludes with a detailed analysis of the consumer' s view of the market, compiled from the research Mintel has conducted on the private motor insurance market.

Key report issues:

• The sector lacks profitability - large premium increases are needed to resolve this
• A highly competitive and price sensitive market with...
• ...a distinct lack of customer loyalty (ie low retention, high switching)
• Aggregators are becoming an increasingly dominant force and encourage switching
• The rising costs of personal injury claims add to the pressure on premium inflation
• But the sector is recession-resistant as motor insurance is a legal requirement