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

Overview
- Catalyst
- Summary
Executive Summary
- The commercial motor market declined in 2006, before growing marginally in 2007
  - Commercial motor GWP contracted to £3.37 billion in 2006 before a modest recovery in 2007
  - GWP was influenced by declines in premium rates and slow growth in vehicle numbers in 2006 and 2007
    - The commercial motor parc grew in 2006, though the number of company cars fell
    - Competitive pressures have forced down premium rates in both segments of the commercial motor market
  - Commercial motor underwriting profits unexpectedly rose in 2006 as outgoings fell
- Brokers continued to dominate the distribution of commercial insurance
  - National brokers have lost distribution market share to the direct channel, chain brokers and telebrokers
  - The direct channel increased its share of commercial insurance GWP by 1% in 2006
- Many top 10 commercial motor insurers experienced shrinking books in 2006
  - The market remained highly concentrated despite the top 10 losing market share
  - The average combined ratio of the top 10 motor insurers declined by four percentage points in 2006
- The commercial motor market is forecast to harden in 2008 and reach £4.1 billion by 2012
  - The commercial motor market is forecast to harden in 2008 and reach £4.1 billion by 2012
  - Commercial motor underwriting profits are forecast to reach a height of £327 million in 2010
Table of Contents
Table of figures
Table of tables
Market Context
- Introduction
- The commercial motor market declined in 2006, before growing marginally in 2007
  - Commercial motor GWP contracted to £3.37 billion in 2006 before a modest recovery in 2007
    - Commercial motor premium income contracted by 1% in 2006, driven by premium rate decreases
    - The commercial motor insurance market grew slightly in 2007 and was worth an estimated £3.4 billion
  - Fleet premium income contracted in 2006 but rebounded slightly in 2007
  - The commercial vehicle market declined slightly in 2006 before increasing by an estimated 1.3% in 2007
- GWP was influenced by declines in premium rates and slow growth in vehicle numbers in 2006 and 2007
  - The commercial motor parc grew in 2006, though the number of company cars fell
  - Company cars declined as a proportion of the commercial motor parc
    - Company cars fell as a proportion of the total car parc
  - New registrations were down in 2006 as fewer new goods vehicles, buses and coaches were registered
    - New company car registrations also declined as a proportion of car registrations in 2006
  - Competitive pressures have forced down premium rates in both segments of the commercial motor market
    - Fleet premium rates saw declines in 2006 and 2007 due to competitive pressure
    - Commercial vehicle premium rates have come under pressure from insurers targeting SME business
- Commercial motor underwriting profits unexpectedly rose in 2006 as outgoings fell
  - Underwriting profits increased to £244 million in 2006, despite the soft market
  - The drop in total outgoing was caused by a decrease in claims incurred, as commissions and expenses grew
    - Claims incurred dropped as a proportion of total outgoings in 2006
    - Growth in commissions and expenses constrained the growth in profits
- Claims inflation remains dominated by rising personal injury costs, though falling accident rates have given insurers some respite
  - 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
  - Insurers have tried a variety of solutions to limit the cost and volume claims caused by traffic accidents
    - Some early adopters have begun using telematics to control fleet claims costs
    - Smart Drive and online training have also been used to correct bad driving behavior
  - Insurers remain divided over whether rehabilitation offers real savings on claims costs
- The commercial and private motor market both contracted in 2006 but diverged in terms of profits
  - The private motor market contracted along with the commercial market in 2006
  - The total motor market' s underwriting loss increased marginally to £204 million in 2006
  - Despite both being in a soft market, the private and commercial markets record very different underwriting results
Distribution Dynamics
- Introduction
- Brokers continued to dominate the distribution of commercial insurance
  - National brokers have lost distribution market share to the direct channel, chain brokers and telebrokers
  - The direct channel increased its share of commercial insurance GWP by 1% in 2006
  - Affinity groups remain a small channel for the distribution of commercial insurance
  - Banks and building societies continue to play a small role in the distribution of commercial insurance
  - Commercial motor is the line of business most at risk to the direct channel
- The SME market is dominated by brokers but direct players have grown
  - Most SMEs buy insurance via brokers, but direct insurers also distribute a significant part of the market
  - Brokers remain the top choice for SMEs to approach if they had to switch provider
  - Many SMEs are willing to consider alternative channels when prompted
    - Up to 44% of SMEs would consider using a bank as an insurance provider
    - Almost three quarters of SMEs would be willing to consider direct insurers, in the hope of cost savings
- Buying insurance via the internet and telephone is becoming more popular with SMEs
  - Many SMEs are open to purchasing insurance by telephone
  - Even more SMEs are willing to buy their insurance via the internet, showing the potential of this platform
  - Commercial motor and property insurance are most likely to be purchased through alternative platforms
- Only a small group of SMEs are willing to switch provider, usually for a lower price
  - Almost 90% of SMEs are not considering a change of provider in the next year
  - Only 16% of SMEs have changed insurance provider in the last two years
  - One in 10 SMEs are considering switching their insurance provider in the next 12 months
Competitor Focus
- Introduction
- A few new competitors entered the market in 2007
  - Direct Line entered the commercial market with an SME targeted proposition in 2007
  - LV' s broker arm ABC Insurance launched its first products in 2007 with commercial motor policies to follow
  - Underwriting agency Arista rolled out multiple products for the commercial motor market in 2007
- Many top 10 commercial motor insurers experienced shrinking books in 2006
  - The market remained highly concentrated despite the top 10 losing market share
  - The soft market led to a reduction in market share for four of the top 10 commercial motor insurers in 2006
    - Norwich Union continued to lose market share in 2006
    - Zurich experienced a contracting book in 2006, leading to a decline in its commercial motor market share
    - Allianz suffered a decline in its commercial motor market share in 2006 due to the competitive market
    - Brit' s market share declined marginally as premium income fell by 3.4%
  - Four top 10 commercial motor insurers increased market share in 2006
    - NFU Mutual expanded its commercial motor book in 2006, leading to an increase of market share to 5.5%
    - QBE increased market share in 2006 by maintaining its premium income despite soft market conditions
    - AXA increased market share in 2006 by rebuilding its commercial motor book
    - NIG grew its market share by 0.4 percentage points in 2006 and achieved growth of 10.9% in GWP
  - Two competitors saw no change in market share in 2006
    - The market leader Royal & SunAlliance maintained its market share in 2006 at 18.2%
    - Highway pursued a more selective commercial motor strategy in 2006 that led to a decline in premium income
- Mid-sized commercial motor insurers gained market share in 2006
  - The majority of insurers ranked 11-20 gained market share in 2006
  - Tradex and CIS lost market share in 2006, while St Paul and Ecclesiastical saw no changes
    - Tradex declined to 1.5% of the commercial motor market in 2006
    - CIS' s market share in commercial motor declined in 2006
    - St Paul and Ecclesiastical' s market share was unchanged in 2006
- A majority of the top 10 have mixed motor insurance portfolios
  - Fleet premium income dominated the commercial motor books of the largest insurers in 2006
  - The top 10 commercial motor insurers are also active in the private motor market
  - Private motor dominates the books of the top 10 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
- The commercial motor market is forecast to harden in 2008 and reach £4.1 billion by 2012
  - Premium rate increases are expected to lead to an improvement in the commercial motor market
  - The UK commercial motor insurance market is forecast to reach a value of £4.1 billion in 2012
  - Commercial motor underwriting profits are forecast to reach a height of £327 million in 2010
- More competitive pricing will depress future commercial motor market performance
  - In the pessimistic scenario, competitive pricing will depress premium income growth
  - The market will reach a value of £3.9 million in 2012 under more competitive conditions
  - The market will make a loss of £17m in 2012, the last year of the forecast period
  - The pessimistic scenario results in £44 million less profit for insurers
- 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
  - Motor vehicles registered by taxation class
- Definitions
  - Premium income measures
    - Earned premiums
    - Gross Premium
    - Net Premium
    - Written premiums
  - Definitions of ABI terms
    - Brokers
    - National brokers
    - Other intermediaries & brokers
    - Chain brokers & telebrokers
    - Direct
    - Other company agents
    - Utilities/retailers/affinity groups
    - Company staff
    - Banks/building societies
  - SME
  - 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
    - Home-foreign, overseas and facultative reinsurance business
  - UK commercial broker survey H2 2007
  - Datamonitor' s SME Insurance Survey Q1 2007
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Tables
  - Table 1: Commercial motor GWP, 2002-07e (£m)
  - Table 2: Commercial motor GWP, by line of business, 2002-07e (£m)
  - Table 3: Commercial motor parc in Great Britain by body type, 2002-06 (000s)
  - Table 4: Commercial motor parc in Great Britain by body type, 2005-06 (000s)
  - Table 5: Company car parc' s share of total car parc, 2002-06 (000s)
  - Table 6: New commercial vehicle registrations in Great Britain by body type, 2002−06 (000s)
  - Table 7: Company cars new registrations in Great Britain, 2002-06 (000s)
  - Table 8: Commercial motor underwriting account, 1996-2006 (£m)
  - Table 9: Net claims as proportion of total outgoings, 2002-06 (£m)
  - Table 10: Total commercial motor gross claims costs, 2002-06 (£m)
  - Table 11: Detailed commercial motor underwriting account, 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 road traffic accidents, 2002-06
  - Table 17: Theft of and from motor vehicles, 1996-2006/7
  - Table 18: UK motor insurance GWP, 2002-06 (£m)
  - Table 19: UK motor insurance underwriting account 1996-2006 (£m)
  - Table 20: Private and commercial motor underwriting results, 1996-2006 (£m)
  - Table 21: Market share of distribution channels in the commercial general insurance market, 2003-6
  - Table 22: Market share of the market leader, the rest of the top 10 and the remainder, 1996, 2005, 2006
  - Table 23: Top 10 commercial motor insurers by market share, 2002-06 (%)
  - Table 24: Top 10 commercial motor insurers by premium income, 2002-06 (£000s)
  - Table 25: Commercial motor insurers ranked 11-20 by market share, 2002-06 (%)
  - Table 26: Premium income of commercial motor competitors ranked 11-20, 2002-06 (£000s)
  - Table 27: Top 10 commercial motor insurers' fleet and commercial vehicle shares of total GWP, 2006 (£000s)
  - Table 28: Split between commercial and private markets for the top 10 commercial motor insurers, 2006 (£000s)
  - Table 29: Top 10 motor insurers' GWP split by private and commercial, 2006 (£000s)
  - Table 30: Change in premium income compared to change in loss ratio, top 10 UK motor insurers, 2005−06
  - Table 31: Change in premium income compared to change in expense ratio, top 10 UK motor insurers, 2005−06
  - Table 32: Change in premium income compared to change in combined ratio, top 10 UK motor insurers, 2005−06
  - Table 33: Key variables affecting commercial motor insurance GWP, neutral scenario, 2002-12f
  - Table 34: UK commercial motor insurance GWP forecast, neutral scenario, 2002-12f (£m)
  - Table 35: UK commercial motor insurance underwriting account forecast, neutral scenario, 2002-12f (£m)
  - Table 36: Key variables affecting commercial motor insurance GWP, pessimistic scenario, 2002-12f
  - Table 37: UK commercial motor insurance GWP forecast, pessimistic scenario, 2002-12f (£m)
  - Table 38: UK commercial motor insurance underwriting account forecast, pessimistic scenario, 2002-12f (£m)
  - Table 39: UK commercial motor underwriting result forecast, neutral and pessimistic scenarios, 2002-12f (£m)
  - Table 40: Total motor insurance GWP forecast, neutral scenario, 2002-12f (£m)
  - Table 41: UK total motor insurance underwriting account, 2002-12f (£m)
  - Table 42: Motor vehicles registered by taxation class, 2002−06 (000s)
  - Table 43: New motor vehicle registrations by taxation class, 2002-06 (000s)
  - Table 44: Q: "What business sector are you involved in?"
  - Table 45: Q: "How large is your company in terms of number of employees?"
  - Table 46: Q: "How large is your company in terms of turnover?"
- List of Figures
  - Figure 1: Commercial motor vehicles continued to increase in number in 2006
  - Figure 2: The top 10 commercial motor insurers have grown their share of the market since 1996
  - Figure 3: Commercial motor premium income grew slightly in 2007 after three years of declines
  - Figure 4: The commercial motor market declined in 2006 but saw a small increase in 2007
  - Figure 5: Commercial motor vehicles continued to increase in number in 2006
  - Figure 6: Light goods vehicles and company cars account for most of the commercial motor parc
  - Figure 7: The company car parc has remained largely stable as a proportion of the overall car parc
  - Figure 8: New registrations of commercial motor vehicles fell in 2006
  - Figure 9: New registrations for company cars declined after a rally in 2005
  - Figure 10: Despite falling NWP, the market attained its highest underwriting profit in 2006
  - Figure 11: Average motor claims costs have risen every year since 2002 in the UK
  - Figure 12: The average UK claims cost for bodily injury claims was higher than for other claim types in 2006
  - Figure 13: Road accidents peaked in 1997 and have fallen ever since
  - Figure 14: Accidents in the UK have fallen despite a steady increase in the number of vehicles
  - Figure 15: Casualties continued to decline across all categories in 2006
  - Figure 16: Theft of and from motor vehicles continued to decline in 2006/7
  - Figure 17: Commercial motor GWP declined slightly more than private motor in 2006
  - Figure 18: The UK motor insurance market reported a loss of £204 million in 2006
  - Figure 19: The private and commercial motor underwriting results diverged after 2001
  - Figure 20: National brokers dominate the distribution of commercial general insurance in the UK in terms of GWP
  - Figure 21: Commercial motor is the line of business most at risk to the direct channel
  - Figure 22: The distribution of insurance to SMEs remained largely under the control of brokers in 2007
  - Figure 23: SMEs have become more likely to consider direct insurers if they were to change provider
  - Figure 24: The prospect of cheaper premiums is the primary reason given for being willing to consider using a bank as an insurance provider
  - Figure 25: Price is the top reason given by SMEs that would consider switching to a direct insurer
  - Figure 26: Speed of concluding their insurance purchase is the primary reason given by SMEs willing to consider buying via the telephone
  - Figure 27: SMEs are willing to consider buying via the internet if it is quicker and cheaper than other platforms
  - Figure 28: Over half of SMEs would consider buying commercial motor online or via the telephone
  - Figure 29: Most SMEs do not consider dropping their current insurance provider
  - Figure 30: The number of SMEs staying with their provider for more than five years has increased since 2005
  - Figure 31: The price of insurance premiums is the most important reason why some SMEs plan to change insurance provider in the next year
  - Figure 32: The top 10 commercial motor insurers have grown their share of the market since 1996
  - Figure 33: The top insurers retained a firm grip on the market in 2006 with a 76.3% market share
  - Figure 34: Mid-tier competitors accounted for 10.5% of the commercial motor market in 2006
  - Figure 35: Most of the top 10 commercial motor insurers' books are dominated by fleet business
  - Figure 36: Most of the top 10 commercial motor insurers also have a large presence in the private market
  - Figure 37: The top private insurers dominate the top motor rankings due to the size of their private books
  - Figure 38: 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 39: Norwich Union saw the biggest increase in private motor expense ratio in 2006
  - Figure 40: NIG saw the biggest increase in combined ratio in 2006
  - Figure 41: The commercial motor market is predicted to harden in 2008, resulting in an increase in GWP
  - Figure 42: The market is forecast to return underwriting profits between 2008 and 2012
  - Figure 43: Future market size is constrained by more competitive pricing in the pessimistic scenario
  - Figure 44: Underwriting profits are forecast to decline quickly after 2009 in the pessimistic scenario
  - Figure 45: The forecast underwriting results of the two scenarios diverge after 2009
  - Figure 46: After four years of declines, the total motor market is expected to begin growing again in 2008
  - Figure 47: The motor market is forecast to be profitable for a total of four years starting in 2008

UK Commercial Motor Insurance 2007

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