[Report] UK Private Motor Insurance Market Research, Trends, Analysis TOC

Overview
- Catalyst
- Summary
Executive Summary
- The UK private motor insurance market started to harden at the end of 2006
  - Private motor insurance GWP contracted by 0.9% in 2006 as the market only hardened late in the year
  - Underwriting losses expanded in 2006, driven by high costs and lower net revenue
- Distribution of personal lines insurance shifted towards partnerships with banks and brands in 2006
  - The partnership channel gained market share from brokers in the motor insurance market in 2006
  - The telephone remained the largest platform for arranging a motor policy in 2007 but the internet platform is growing fast
- Conditions remained competitive in 2006, leading some to exit the market
  - The competitive nature of the private motor market caused some insurers to exit the market
  - Market leader RBSI maintained its grip on the private motor market in 2006
- The market is forecast to reach £12.5 billion by 2012 and regain profitability in 2009
  - The UK private motor insurance market is forecast to be worth £12.5 billion in 2012
  - The private motor insurance market is forecast to reach profitability in 2009
Table of Contents
Table of figures
Table of tables
Market Context
- Introduction
- The UK private motor insurance market started to harden at the end of 2006 and grew in 2007
  - The market hardened late in 2006, which led to strong gains in premium income for 2007
    - UK private motor insurance GWP increased to an estimated £10.1 billion in 2007 as the market hardened
    - Private motor insurance GWP contracted by 0.9% in 2006 as the market only hardened late in the year
  - The comprehensive and non-comprehensive segments both declined in 2006, but rebounded in 2007
    - Comprehensive motor GWP suffered the worst contraction of the three private lines in 2006
    - Non-comprehensive premium income suffered as fewer motorists chose this cover
    - The motorcycle market was the only part of private motor to increase in 2006, although it contracted in 2007
- Late rises in premium rates and low growth in private car numbers depressed GWP in 2006
  - Private motor insurance premium rates recovered late in 2006 and have climbed in 2007
    - Comprehensive premium rates grew towards the end of 2006 and continued to increase in 2007
    - Non-comprehensive premium rates increased significantly in 2006, but trailed the comprehensive market in 2007
  - The UK private vehicle parc continued to grow slowly in 2006
    - Private car numbers increased in 2006, although the rate of growth has slowed
    - New registrations for private cars declined in 2006
    - Although the private car parc is aging it remains mostly modern in composition
    - Motorcycle numbers continue to climb, although growth has slowed
- Underwriting losses expanded in 2006, driven by high costs and lower net revenue
  - The private motor underwriting result deteriorated in 2006
  - Increases in total outgoings were driven by higher commissions and reserving, despite lower claims costs
    - Commissions and expenses rose 3.1% in 2006, while insurers reserved more than they released
    - Net claims costs fell in 2006, moderating the increase in total outgoings
- Claims inflation continue to plague the market, but accident and theft rates have fallen
  - Overall claims inflation increased significantly in 2006
    - Bodily injury claims are more expensive than other claims
  - Falling road traffic accident rates will have given insurers some respite on their claims bills
    - Road traffic accident numbers have declined over the last nine years
    - Road traffic accidents have declined even as car numbers have increased, representing a fall in frequency
    - Casualty rates have fallen steadily, mirroring the decline in road traffic accidents in 2006
  - Theft rates continue to fall, representing a positive trend for private motor insurers
- A number of initiatives aimed at cost savings were undertaken in 2006 and 2007
  - The IFB has been very active in the investigation of professional fraud over the year it has been in operation
  - The tightening up of MID requirements should drive down uninsured driving leading to savings for insurers
  - Insurers remain divided over whether rehabilitation offers real savings on claims costs
  - With the arrival of Copart, recycled parts can assist insurers in curbing repair costs
  - Insurers have pushed online distribution of motor insurance certificates and could save up to £11m a year
- Commercial motor GWP declined in 2006, but the market increased its underwriting profit
  - The commercial motor market contracted slightly more than the private market in 2006
  - The total motor market' s underwriting loss increased marginally to £204m in 2006
  - Despite being in a soft market, commercial motor improved its profitability in 2006
Customer Focus
- Introduction
- Distribution of personal lines insurance shifted towards partnerships with banks and brands in 2006
  - The partnership channel gained market share from brokers in the motor insurance market in 2006
    - Aggregators have become important to motor insurance distribution
- The telephone remained the largest platform for arranging a motor policy in 2007 but the internet platform is growing fast
  - The telephone and face-to-face platforms have been declining steadily
    - More consumers are turning to the internet to arrange their motor policies
- Retention rates vary by age of consumer and platform used to arrange insurance
  - The majority of motor consumers will stay with the same provider at the time of renewal
  - More than a third of consumers who purchased their motor insurance online switched provider at renewal
    - Consumers purchasing their motor policies face-to-face, by phone or via post are unlikely to change provider
  - Switching providers is more prevalent among younger consumers
- Price remained the main reason for taking out a motor policy across platforms and ages
  - Consumers purchasing a policy via the internet are more likely to be motivated by cheaper quotes than others
    - Consumers over the age of 55 are less sensitive to price than younger consumers
- The way in which consumers seek information about motor insurance varies relative to age
  - Previous experience is the most popular source of information and is used more as a consumer gets older
  - Younger consumers are more likely to use web sources
  - Television advertisements are used by 14% of consumers overall
  - Mailshots, brochures and broker advice are mainly used by older people
- Advertising for motor insurance products remained dominated by the television campaigns of direct insurers in 2006
  - Motor insurance advertising increased by 2.3% in 2006 to almost £200 million
  - Advertising is dominated by insurers, but brokers narrowed the gap in 2006
  - Most of the top 10 motor advertisers in 2006 are direct insurers
  - The spend of the top 10 grew slightly in 2006, driven mainly by the substantial increases of four motor insurance advertisers
  - The top 10 motor advertisers focus on television advertising, reflecting the need for direct insurers in particular to build up brand awareness
    - Most of the largest motor advertisers spent the majority of their budgets on television advertising in 2006
    - Direct mail advertising is used by most of the top 10 to complement their television campaigns
    - Press, outdoor and radio advertising were used sparingly by the top 10 motor insurance advertisers in 2006
  - The smaller advertising budgets of advertisers ranked 11-20 were more evenly split between television and direct mail
    - The list of advertisers ranked 11-20 contains a more varied mix of providers
    - Direct mail was the most favored medium among advertisers ranked 11-20
    - Television advertising was also very important to competitors ranked 11-20 in 2006
    - Advertisers ranked 11-20 spent smaller amounts on marketing in radio, the press and outdoor
  - Television remains the most important medium for motor insurance providers
  - Direct mail remains an important advertising medium, having increased as a proportion of motor insurers budgets
  - Direct Line remains the leader in brand awareness in 2007
Competitive Dynamics
- Introduction
- Legal & General ceased writing private motor insurance
  - Legal & General ceased underwriting new private motor policies in 2006
- The top 10 private motor insurers lost market share in 2006, although the market remained highly consolidated
  - Market leader RBSI maintained its grip on the private motor market in 2006
  - The top 10 private motor insurers lost market share in 2006
  - A number of the largest private motor insurers grew market share in 2006, despite competitive conditions
    - Direct Line' s GWP remained stable in 2006
    - Royal & SunAlliance raised its market share and increased premium income in 2006
    - Fortis grew its private motor insurance market share in 2006 due to an increase in policy numbers
    - NIG grew its presence in the motor insurance market, gaining market share and GWP in 2006
  - Competitive conditions resulted in some top 10 players losing market share in 2006
    - The market leader, Norwich Union, lost the most market share of the top 10 in 2006
    - Churchill lost market share in 2006 as its non-comprehensive book contracted severely
    - Zurich' s private motor GWP declined in 2006, leading to a contraction in market share
    - CIS' s market share contracted in 2006 due to lower premium income
  - Two players, UKI and esure, saw no change in market share between 2005 and 2006
    - esure joined the top 10 private motor insurers despite decreasing private motor premium income
    - UKI saw its market share increase in 2006, though premium income declined
- Mid-tier private motor insurers retained market share overall in 2006
  - Only a few private motor insurers in the 11-20 bracket managed to increase market share in 2006
    - AXA' s private motor book rebounded in 2006 increasing by a substantial 43.5% in GWP terms
    - The NFU Mutual experienced modest premium income growth in 2006
    - Aioi Motor & General increased market share and premium income in 2006
  - Five mid-tier insurers lost market share in 2006
    - LV' s market share declined by 0.3 percentage points in 2006 as it allowed premium income to contract
    - Provident Insurance' s book continued to contract in 2006
    - Groupama' s private motor insurance book declined in 2006
    - HSBC experienced a decline in its private motor account in 2006
    - Allianz' s GWP declined by more than 10% in 2006
  - Two mid-tier insurers saw minor declines in premium income but maintained market share in 2006
    - Highway' s private motor book experienced a contraction in 2006, but maintained market share
    - MMA' s market share remained stable although GWP reduced by 3.3% in 2006
- Most of the top 10 insurers write some non-comprehensive and commercial business
  - Comprehensive premium income dominated the books of the largest private motor insurers
  - Six of the top 10 private motor insurers also write commercial motor insurance
  - The largest private motor insurers also tend to be the largest total motor insurers
- The average loss ratio among the top 10 UK motor insurance providers declined in 2006 with AXA, Norwich Union and Churchill recording the biggest improvements
  - In 2006, the average loss ratio of the top 10 UK motor insurers fell by 3.3 percentage points to 71.1%
    - AXA, Norwich Union and Churchill recorded the strongest loss ratio reductions
    - Four insurers recorded loss ratio deterioration
- The average expense ratio of the top 10 UK motor insurers declined by 0.7 percentage points in 2006, with Churchill, AXA, NIG and Royal & SunAlliance recording above-average reductions
  - The average expense ratio of the top 10 UK motor insurers declined by 0.7 percentage points in 2006
  - Churchill, AXA, NIG and Royal & SunAlliance recorded above-average expense ratio decline
  - Norwich Union, Zurich and NFU Mutual recorded the highest increases in their expense ratios
- The average combined ratio of the top 10 motor insurers fell by four percentage points in 2006, with AXA and Churchill seeing significant declines
  - The average combined ratio of the top 10 motor insurers declined by four percentage points in 2006
  - AXA and Churchill recorded significant reductions in combined ratio in 2006
  - NIG, Direct Line and Zurich recorded combined ratio increases
Future Decoded
- Introduction
- Private motor GWP is forecast to reach £12.5 billion by 2012 under neutral market conditions
  - A hardening market in 2008 and 2009 should result in significant premium rate growth
  - The UK private motor insurance market is predicted to be worth £12.5 billion in 2012
  - The private motor insurance market is forecast to reach profitability in 2009
- Under optimal conditions the private motor market will reach £12.9 billion by 2012
  - Less competition could allow for greater price increases in 2008 and 2009
  - The market will grow by over 10% in 2008 allowing it to reach a value of £12.9 billion in 2012
  - With less competitive pricing the market will produce three years of profits
- In the pessimistic scenario GWP will only reach £12.4 billion in 2012 as competition keeps premium inflation down in 2008
  - More intense competition will keep premium rate increases low according to the pessimistic scenario
  - The private motor insurance market will only reach a value of £12.4 billion in 2012 in the pessimistic scenario
  - Underwriting losses will continue throughout the forecast period in the pessimistic scenario
- The total motor market, under neutral conditions, will reach a value of £16.6 billion in 2012
  - The total motor market is forecast to grow at 4.3% a year in the forecast period
  - The total market is forecast to return an underwriting profit in 2008
APPENDIX
- Supplementary data
  - New registrations of cars and light goods vehicles by taxation class
- Definitions
  - Premium income measures
    - Earned premiums
    - Gross Premium
    - Net Premium
    - Written premiums
  - Other definitions
    - Channel
    - Direct insurer/writer
    - Brokers
    - Bancassurers
    - Brandassurers
    - Platform
  - 2005-06 definitions for line of business
    - Motor
    - Total private motor
    - Total commercial motor
    - Private motor comprehensive
    - Private motor non-comprehensive
    - Motorcycle
    - Fleets
    - Commercial vehicles (non-fleet)
  - Pre-2005 definitions for lines of business
    - Motor
- Methodology
  - Primary and secondary research
  - Market size
    - Changes in market size information
    - Market size methodology
    - Lloyd' s players and underwriting result figures
  - Competitor data
    - CIS
    - GWP versus GEP reporting
    - Home-Foreign, overseas and facultative reinsurance business
  - Advertising statistics
  - Isis MORI methodology and contacts
    - Sample design
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Tables
  - Table 1: UK private motor insurance premium income, 2002-06, (£m)
  - Table 2: Comprehensive/non-comprehensive split of the UK private car parc, 1996-2006e
  - Table 3: UK private motor insurance premium income by line of business 2002-07e, (£m)
  - Table 4: Average quarterly premiums for UK comprehensive and non-comprehensive insurance, 2002-07
  - Table 5: Cars licensed in Great Britain by body type, 1996-2006
  - Table 6: New private car registrations in Great Britain by body type as a percentage of the total private car parc, 2002−06
  - Table 7: Age composition of 2006 car parc, 2006
  - Table 8: Number of motorcycles and new registrations in Great Britain, 2002-06, (000s)
  - Table 9: UK private motor underwriting result, 1996-2006, (£m)
  - Table 10: Detailed private motor underwriting account in the UK, 2002-06, (£m)
  - Table 11: UK net claims as a proportion of total outgoings, 2002-06, (£m)
  - Table 12: Average motor claims costs, 2002-06, (£)
  - Table 13: UK Average claims cost of bodily injury claims notified two years previous, 2002-06, (£)
  - Table 14: Total number of road accidents in the UK, 1996-2006, (000s)
  - Table 15: Road traffic accidents relative to registered vehicles in Great Britain 1996-2006, (000s)
  - Table 16: Deaths, seriously and slightly injured casualties resulting from UK road traffic accidents, 2002-06
  - Table 17: Theft of and from motor vehicles in the UK, 1996-2006/7
  - Table 18: UK motor insurance premium income, 2002-06, (£m)
  - Table 19: UK motor insurance underwriting account 1996-2006, (£m)
  - Table 20: UK private and commercial motor underwriting results, 1996-2006, (£m)
  - Table 21: Motor insurance GWP distribution by channel, 2002-06
  - Table 22: Distribution of private motor insurance, by platform, 2003-07
  - Table 23: Private motor retention rates, 2003-07
  - Table 24: Propensity to switch motor provider and likelihood of getting other quotes, by distribution platform, 2007
  - Table 25: Private motor retention rates by age, 2003-07
  - Table 26: Motivations for taking out a motor insurance policy, by distribution platform, 2007
  - Table 27: Reasons for choosing current motor insurance policy by age, 2007
  - Table 28: Sources of information for motor policy, by age, 2007
  - Table 29: Advertisement spending by type of insurance provider, 2006
  - Table 30: Top 10 motor insurance advertisers, 2004-06
  - Table 31: Top 10 motor insurance advertisers' spend by media, 2006
  - Table 32: Motor insurance advertisers' spending by media, 2006
  - Table 33: Top 10 TV advertisers, 2006
  - Table 34: Top 10 direct mail advertisers, 2005-6
  - Table 35: Top 10 motor insurers by advertising spend and brand awareness of motor insurers, 2007
  - Table 36: Top 10 insurance providers by spontaneous recognition, 2007
  - Table 37: Top 10 UK private motor insurers' market share in 1996, 2005 and 2006
  - Table 38: Top 10 UK private motor insurers by market share, 2002-06
  - Table 39: Top 10 UK private motor insurers by premium income, 2002-06, (£000s)
  - Table 40: UK private motor insurers ranked 11-20 by market share, 2002-06
  - Table 41: UK private motor insurers ranked 11-20 by premium income, 2002-06, (£000s)
  - Table 42: Top 10 UK private motor insurers' comprehensive and non-comprehensive shares of total GWP, 2005-06, (£000s)
  - Table 43: Top 10 UK private motor insurers' GWP split by private and commercial, 2006, (£000s)
  - Table 44: Top 10 UK motor insurers' GWP split by private and commercial, 2006, (£000s)
  - Table 45: Change in premium income compared to change in loss ratio, top 10 UK motor insurers, 2005−06
  - Table 46: Change in premium income compared to change in expense ratio, top 10 UK motor insurers, 2005−06
  - Table 47: Change in premium income compared to change in combined ratio, top 10 UK motor insurers, 2005−06
  - Table 48: Key variables affecting private motor insurance GWP, neutral scenario, 2002-12f
  - Table 49: UK private motor insurance GWP forecast, neutral scenario, 2002-12f
  - Table 50: UK private motor insurance underwriting account forecast, neutral scenario, 2002-12f, (£m)
  - Table 51: Key variables affecting private motor insurance GWP, optimistic scenario, 2002-12f
  - Table 52: UK private motor insurance GWP forecast, optimistic scenario, 2002-12f
  - Table 53: UK private motor insurance underwriting account forecast, optimistic scenario, 2002 -12f, (£m)
  - Table 54: Key variables affecting private motor insurance GWP, pessimistic scenario, 2002-12f
  - Table 55: UK private motor insurance GWP, pessimistic scenario, 2002-12f
  - Table 56: UK private motor insurance underwriting account forecast, pessimistic scenario, 2002-12f, (£m)
  - Table 57: Total UK motor insurance GWP 2002−12f, neutral scenario, 2002-12f
  - Table 58: UK total motor insurance underwriting account, 2002-12f (£m)
  - Table 59: Cars and light goods vehicles registered by taxation class, 1996-2006, (000s)
- List of Figures
  - Figure 1: The percentage of consumers arranging their motor insurance online in the UK has been increasing steadily since 2003
  - Figure 2: The top 10 UK insurers controlled more of the market in 2006 than in 1996
  - Figure 3: The UK private motor insurance market grew in 2007 as premium rates hardened
  - Figure 4: Fewer vehicles had non-comprehensive cover in the UK in 2006
  - Figure 5: The main UK private motor lines once again declined in 2006 before recovering in 2007
  - Figure 6: Both sectors of the UK private motor market experienced significant premium rate inflation in 2007
  - Figure 7: UK comprehensive premium rates increased significantly in 2007
  - Figure 8: New private cars in Great Britain have declined in number since 2002
  - Figure 9: Less than a third of the UK car parc was older than 12 years old in 2006
  - Figure 10: In Great Britain, growth in motorcycle numbers has been slowing since 2005
  - Figure 11: The UK underwriting result deteriorated sharply in 2006
  - Figure 12: Average motor claims costs have risen every year since 2002 in the UK
  - Figure 13: The average UK claims cost for bodily injury claims was higher than for other claim types in 2006
  - Figure 14: UK road accidents peaked in 1997 and have fallen ever since
  - Figure 15: Accidents in the UK have fallen despite a steady increase in the number of vehicles
  - Figure 16: Casualties continued to decline across all categories in 2006
  - Figure 17: Theft of and from motor vehicles continued to decline in 2006/7
  - Figure 18: Commercial motor was the weaker market in 2006 declining more than private motor
  - Figure 19: The UK motor insurance market reported a loss of £204m in 2006
  - Figure 20: The UK private and commercial motor underwriting results diverged after 2001
  - Figure 21: The partnership channel has increased its share of the private motor market in recent years
  - Figure 22: The percentage of consumers arranging their motor insurance online has been increasing steadily since 2003
  - Figure 23: Around three quarters of motor insurance consumers stay with the same company at renewal
  - Figure 24: Consumers purchasing their motor insurance online were more likely to change their insurance provider in 2007
  - Figure 25: Older consumers were more likely to stay with their current providers in 2007
  - Figure 26: Obtaining a cheaper quote was the most common reason for choosing a provider across all distribution platforms in 2007
  - Figure 27: Reputation was a factor more valued by older consumers than younger ones in 2007
  - Figure 28: Use of web-based materials was most common among young consumers in 2007
  - Figure 29: Most older consumers value previous experiences with providers in 2007
  - Figure 30: Insurers dominate advertising spend for motor insurance, but brokers' spend grew in 2006
  - Figure 31: Television remained the medium of choice for most of the top 10 advertisers in 2006
  - Figure 32: Television and direct mail account for almost 90% of spending by advertisers ranked 11-20
  - Figure 33: Spontaneous consumer awareness of motor insurers against advertising expenditure, 2006
  - Figure 34: The top 10 insurers controlled more of the market in 2006 than in 1996
  - Figure 35: Norwich Union remained the single largest insurer in the UK market in 2006
  - Figure 36: Insurers in the 11-20 segment showed very little difference in market share in 2006
  - Figure 37: None of the top 10 insurers wrote a substantial part of their business in the non-comprehensive market
  - Figure 38: Most of the top 10 UK private motor insurers also maintain a presence in the commercial market
  - Figure 39: The top 10 UK private insurers dominate the top motor rankings due to the size of their private books
  - Figure 40: While the average loss ratio of the top 10 UK motor insurers fell in 2006, NIG and Direct Line saw increases in their ratios
  - Figure 41: Norwich Union saw the biggest increase in private motor expense ratio in 2006
  - Figure 42: NIG saw the biggest increase in combined ratio in 2006
  - Figure 43: Private motor GWP is forecast to grow significantly in 2008 and 2009
  - Figure 44: Private motor is forecast to make a small profit in 2009
  - Figure 45: Less competition allows for a stronger rally in comprehensive premium income and higher private motor GWP in the optimistic scenario
  - Figure 46: In the optimistic scenario stronger premium growth results in three years of underwriting profits
  - Figure 47: In the pessimistic scenario, GWP growth is expected to be subdued from 2008 onwards
  - Figure 48: In the pessimistic scenario, the market fails to reach a profit in the forecast period
  - Figure 49: After four years of declines, the total motor market is expected to begin growing again in 2008
  - Figure 50: The UK motor market is forecast to be profitable for a total of four years starting in 2008
  - Figure 51: New cars and light goods have declined again as a proportion of the total parc

UK Private Motor Insurance 2007

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