Motor Insurance - UK - May 2009

Table of Contents

• Issues in the Market
• Key issues
• Abbreviations
• Market in Brief
• Underwriting profitability is a major issue...
  • Figure 1: Size of the UK domestic motor insurance market by NWP, outgoing payments and underwriting result, 2000-09
• ...which is not helped by rising claims costs...
• ...but the motor insurance industry is recession-resistant
• The number of cars in the UK continues to rise
  • Figure 2: UK car parc, 2000-08
• RBS is the market leader
  • Figure 3: Top 15 personal motor insurance providers, by GWP, 2006-08
• The sector lacks differentiation -- price is key
• Direct sales are rising, but so too are aggregators
  • Figure 4: Personal lines motor insurance distribution trends, 2000-07
• Car insurance is a high-ownership product
  • Figure 5: Car insurance ownership, February 2009
• Drivers go direct
• Internal Market Environment
• Key points
• The number of cars in the UK continues to grow...
  • Figure 6: UK car parc, 2000-08
• ...although new car registrations have fallen
  • Figure 7: Trends in private, business and fleet new car registrations, 2001-08
• Used car sales are also down
  • Figure 8: Sales of used cars, 2002-07
• The number of driving licence holders has increased
  • Figure 9: Full GB driving licence holders, by gender 1975/76-2007
• Multiple car ownership has also increased
  • Figure 10: Household ownership of cars, 2003-08
• The impact of rising personal injury claims
• Fraudulent claims are also up...
  • Figure 11: Percentage of personal motor claims repudiated due to detected fraud and total general insurance fraud savings, 2004-08
• ...with the recession leading to yet more fraud?
• Premiums set to rise in 2009 as a result
• Issues around age discrimination
• Broader Market Environment
• Key points
• Disposable incomes are being squeezed
  • Figure 12: Trends in PDI, consumer expenditure and savings, 2002-12
• Changing economic circumstances changing motoring habits?
• Consumer spending falling as a result
  • Figure 13: Spending and savings intentions, Mar 2000-Mar 2009
• Internet penetration has increased
  • Figure 14: Internet penetration at home/work/place of study or elsewhere in GB, by gender, age, and socio-economic group, 2003-08
• Petrol prices have increased significantly
  • Figure 15: UK petrol price growth*, 2002-08
• The average cost of motoring increased in 2008
  • Figure 16: Average cost of motoring in the UK, 2003-08
• Low base rate may increase appeal of car finance
• Anti-car policies and public transport improvements
• Car tax changes will hit two thirds of motorists
• Competitive Context
• Key points
• Motor insurance is compulsory...
• ...but uninsured drivers are a problem...
  • Figure 17: New claims submitted to the MIB for accidents involving uninsured vehicles (by year of reporting), 2005-08
• ...but the police are taking a tougher stance
• SWOT Analysis
  • Figure 18: Motor insurance market SWOT analysis, 2009
• Market Size and Forecast
• Key points
• The overall market continues to run at a loss
  • Figure 19: Size of the UK domestic motor insurance market by NWP, outgoing payments and underwriting result, 2000-09
• GWP increased by 4% in 2007
  • Figure 20: Domestic motor insurance exposure, GWP and average premium rates, at current prices, 2000-08
• Premiums are increasing more rapidly now
  • Figure 21: Motor insurance market average premium, by type of cover, January 2003-December 2008
• Comprehensive cover continues to dominate
  • Figure 22: Proportion of cars with comprehensive and non-comprehensive cover, based on exposure (vehicle years), 2000-08
• Forecast
• A gradual return to underwriting profitability
  • Figure 23: Forecast size of the UK domestic motor insurance market by NWP, outgoing payments and underwriting result, 2004-14
• Factors used in the forecast
• Claims Experience
• Key points
• The total number of private motor claims fell by 7% in 2008
  • Figure 24: Total number of private motor insurance claims and claims frequency, 2000-08
• The value of claims incurred has steadily increased
  • Figure 25: Value of claims in the domestic motor insurance sector, 2000-07
• The number and value of theft claims continues to fall
  • Figure 26: Private car theft claims, by volume, cost and average claim, 2000-08
• Personal injury claims are still costing
  • Figure 27: Number and average cost of personal injury claims, 2000-07
• A more collaborative approach to claims management
• Market Share
• Key points
• RBS leads the market by a long way
  • Figure 28: Top 15 personal motor insurance providers, by GWP, 2006-08
• A highly fragmented marketplace
• Companies and Products
• A diverse range of products and options available
• Factors that determine the cost of the policy
• Company profiles
• The AA
• Fortis Insurance
• Norwich Union (Aviva from June 2009)
• RBS Insurance
• RSA (formerly Royal Sun Alliance)
• Zurich Insurance
• Brand Communication and Promotion
• Key points
• Motor insurance adspend remains flat in 2008
  • Figure 29: Total general and motor insurance adspend, 2004-08
• Car insurance makes up the vast majority of advertising
  • Figure 30: Motor insurance adspend, by sub-category (percentage splits*), 2004-08
• Direct Line was the biggest advertiser in 2008
  • Figure 31: Motor insurance adspend, by company (percentage splits*), 2004-08
• When it comes to advertising motor insurance, the TV is king
  • Figure 32: Motor insurance adspend, by media type (percentage splits*), 2004-08
• Channels to Market
• Key points
• Direct sales have grown significantly since 2000
  • Figure 43: Personal lines motor insurance distribution trends, 2000-07
• Aggregators have taken a more commanding position...
  • Figure 44: Distribution channels used to buy car insurance, 2001-09
• ...though this does not necessarily benefit insurers
• The telephone is still crucial
  • Figure 45: Methods of arranging car insurance, February 2009
• The Consumer -- Product Ownership
• Key points
• Half the population have comprehensive insurance
  • Figure 46: Car insurance ownership, February 2009
• Ownership of comprehensive cover continues to rise
  • Figure 47: Car insurance ownership, 2004-09
• Men are more likely to have a policy in their own name
  • Figure 48: Car insurance ownership, by gender, age, socio-economic group, lifestage, residential status, ACORN group, and car ownership, February 2009
• Younger drivers more likely to be ' fronted' or have third party cover
• ABs are more likely to have comprehensive cover
• Homeowners and multi-car households valuable targets
• The Consumer -- Distribution Trends
• Key points
• Most people buy direct from an insurance company...
  • Figure 49: Distribution channels used to buy car insurance, February 2009
• ...but aggregators have become increasingly influential
  • Figure 50: Distribution channels used to buy car insurance, 2001-09
• Aggregators are used more by younger people...
  • Figure 51: Distribution channels used to buy car insurance, by demographic variables, February 2009
• ...and high earners
• The type of policy makes no difference
  • Figure 52: Distribution channels used to buy car insurance, by type of cover, February 2009
• The telephone is still king in motor insurance
  • Figure 53: Methods of arranging car insurance, February 2009
• Rapid growth in online sales
  • Figure 54: Methods of arranging car insurance, 2001-09
• Younger people more likely to use the internet
  • Figure 55: Methods of arranging car insurance, by gender, age, socio-economic group, children in household, car ownership and newspaper readership, February 2009
• Aggregators should target households with children...
• ...and avoid advertising in popular tabloids
• Most people that arrange direct with an insurer use the telephone
  • Figure 56: Distribution channel used to purchase motor insurance, by method used to arrange policy, February 2009
• Appendix -- Product Ownership
• Figure 67: Car insurance ownership, by demographic variables, February 2009
• Appendix -- Distribution Trends
  • Figure 68: Distribution channels used to buy car insurance, by demographic variables, February 2009
  • Figure 69: Methods of arranging car insurance, by type of cover held, February 2009
  • Figure 70: Methods of arranging car insurance, by demographic variables, February 2009