General Insurance Overview: Assessing the Impact of Climate Change - UK - December 2007

Table of Contents

• Issues in the Market
• Mintel asks...
• Definitions
• Sector focus
• Abbreviations
• Insights and Opportunities
• Some scope for expansion in the motor and home sectors
• Rising premiums prompt more to shop around
• Premium match promise
• Brokers under pressure from aggregators
• A good reputation gets around
• Decent demand for eco-friendly products
• Report in Brief
• Best trading result in years, despite fall in income...
• ...across several personal and commercial lines
• Looking ahead
• Containing claims costs is the number one challenge
• Climate change tops both the political and corporate agenda
• The largest underwriters
• Distribution trends
• Advertising activity
• The key findings of Mintel' s consumer research
  • Figure 1: Penetration of the most common insurance products, October 2007
• Buying, claiming and switching behaviour
  • Figure 2: Buying, claiming and switching behaviour -- motor and household policyholders, October 2007
• Direct versus intermediary versus aggregator
  • Figure 3: Shopping around and channel preference -- motor and household policyholders, October 2007
• Product and provider selling points
  • Figure 4: What consumers look for in an insurance policy/provider, October 2007
• Industry Issues and Drivers
• What factors are driving change in the general insurance market?
  • Figure 5: Summary of the main challenges facing general insurers in the UK, 2007
• Changing demographics
• Environmental impact
• Techno revolution
  • Figure 6: Timeline of entry for direct writers of general insurance, 1985-2005
• Online aggregators: the good and the bad
  • Figure 7: Timeline of entry for financial/insurance price-comparison sites, 1999-2007
• Power to the people
• It' s all about price
• New rules push up costs
• FSA proposes a ' NEWICOB'
• A large and expanding car parc underpins demand for motor insurance
  • Figure 8: Private motor insurance -- market drivers and supressors, 2007
• Changing social and lifestyle trends shape the household sector
  • Figure 9: Domestic property insurance -- market drivers and supressors, 2007
• Annual travel policies a popular choice for frequent travellers
  • Figure 10: Travel insurance -- market drivers and supressors, 2007
• Health sector regains strength
  • Figure 11: Health insurance -- market drivers and supressors, 2007
• Market Size and Forecast
• Key points
• Motor and property are the largest sectors
  • Figure 12: Illustration of gross annual written general insurance business -- UK risks, by sector, 2002-06
• Only the accident and health sector sees premium growth in 2006...
  • Figure 13: Summary of annual general insurance business -- UK risks, by sector, 2002-06
• ...still, 2006 sees best trading result in years
  • Figure 14: UK outgo for annual general insurance business, 2002-06
• Hardening rates will underpin future growth in the motor and property sectors
  • Figure 15: Forecast of gross written annual general insurance business -- UK risks, by sector, at current and constant prices, 2007-12
• Factors incorporated
• Sector Performance
• Key points
• Sector analysis -- winners and losers
  • Figure 16: Detailed premium analysis -- UK, by selected class of business, 2006
  • Figure 17: Share of total premium income (UK annual business), by sector, 2006
• Private motor sector bows under pricing pressure
  • Figure 18: UK private motor -- underwriting result, 2002-07
• Domestic property market continues on an upward path
  • Figure 19: UK domestic property -- underwriting result, 2002-07
• A low claims ratio ensures solid performance from the accident sector
  • Figure 20: UK accident and health -- underwriting result, 2002-06
• Demand for annual policies gives fresh impetus to the travel sector
  • Figure 21: UK travel insurance -- volume and value of policies written, by type, 2004-06
• Claims Experience
• Key points
• Net cost of private motor claims stabilises in 2006
  • Figure 22: Net claims incurred -- UK annual general insurance business, by sector, 2002-06
  • Figure 23: Net claims incurred index -- UK annual general insurance business, by sector, 1997-2006
• Pecuniary loss has the lowest claims ratio, motor the highest
  • Figure 24: Claims ratio -- UK annual general insurance business, by sector, 1997-2006
• Fire and theft were the top perils for property insurers in 2006
  • Figure 25: Gross claims incurred -- UK domestic property, by type of claim, 2002-06
• Effective claims management is number one priority
• Two thirds of private motor claims related to accidental damage in 2006
  • Figure 26: Number of claims notified -- UK private motor, by type of claim, 2002-06
• Rejected claims more common in the non-comprehensive motor sector
  • Figure 27: Proportion of home and motor insurance policyholders who have made a claim within the past three years, by type of policy, October 2007
• Undetected fraud adds an extra £40 a year onto the average premium
  • Figure 28: Estimated value of undetected fraudulent general insurance claims, 2006
• Property sector has highest incidence of fraudulent claims
  • Figure 29: Estimated value of undetected retail opportunistic fraud and average claim size, by product category, 2006
• Rising costs push up premiums
  • Figure 30: AA British Insurance Premium Index -- market average trends, July 1994-October 2007
• Young drivers pay more because they cost more
  • Figure 31: Average market and shoparound motor and home insurance premiums, 1994 and 2007
• The Challenge of Climate Change
• Key points
• The costs stack up...
• ...but there are opportunities too
• Cover for flood-risk households under threat
• Greater investment in flood defences needed
• Climate change driving new innovation
• Eco-friendly home insurance
• Green motor cover
• Carbon-neutral companies
• Insurers get ClimateWise
• Consumers prepared to pay more for eco-friendly products
  • Figure 32: Proportion of people who are influenced by ethical/environmental factors in their choice of financial provider, November 2007
• Implication and opportunity
• Two thirds of adults make an effort to be eco-friendly
  • Figure 33: Agreement with statements about environmental issues, by gender, October 2007
• Implication and opportunity
• Those aged 25-44 are the ' greenest' consumers
  • Figure 34: Agreement with statements about environmental issues, by age group, October 2007
• Scope to improve the South' s eco credentials
  • Figure 35: Agreement with statements about environmental issues, by region, October 2007
• Implication and opportunity
• Insurance policyholders even more eco-conscious
  • Figure 36: Agreement with statements about environmental issues, by ownership of selected general insurance products, October 2007
• Implication and opportunity
• Dividing the population into five clusters
  • Figure 37: Segmenting the population based on attitudes towards the environment, October 2007
  • Figure 38: Cluster composition based on attitudes towards environmental issues, October 2007
• Super Green
• Eco-friendly
• Flood-sensitive
• Pragmatist
• Apathetic
• Trade Perspective
• About the respondents
• Providers support proposals for a two-tier regulatory system
• Aggregators: an aggravation or an invaluable tool?
• Understand, educate and adapt to climate change
• The debate over flood cover
• Aggressive pricing and shifting distribution power are also issues of concern
• Underwriter Share
• Key points
• Aviva tops the general insurance rankings
  • Figure 39: Largest general (re)insurers -- total market (direct and faculative business), 2005 and 2006
• Several of the largest players specialise in the commercial sector
• Positions vary across different sectors
  • Figure 40: Top ten general insurers, by sector (personal lines only), based on share of total gross earned premiums, 2006
• Two brands dominate the health sector...
• ...ditto, the pet insurance market
• RBS claims top spot in the car market
• Tesco makes its mark
• Several banking groups have diversified into the insurance market
• Norwich Union puts greater focus on customer retention
• Brand Promotion and Advertising
• Key points
• Motor and home insurance attract heavy ad investment
• Advertising trends
  • Figure 41: Total advertising expenditure on general insurance, by product category, 2004/05-2006/07
• Direct mail is the medium of choice
  • Figure 42: Proportional distribution of general insurance adspend, by main media type, 2006/07
• The value of direct mail
• Direct Line spent the most on advertising in 2006/07
  • Figure 43: Top 20 general insurance advertisers, by advertising expenditure, 2004/05-06/07
• Confused.com is the only aggregator to make the top 20
• Three bank brands feature
• BUPA uses animation to get a simple message across
• Several brands specialise in the over-50s market
• Others
• Distribution Developments
• Key points
• Intermediaries under pressure from direct players, bancassurers and affinity brands
  • Figure 44: Proportional distribution of UK personal lines general insurance, by channel, 2002-06
• Direct sales channel dominates the motor market...
  • Figure 45: Proportional distribution of UK private motor insurance, by channel, 2006
• ...while intermediaries continue to lead the way in the household sector
  • Figure 46: Proportional distribution of UK domestic property insurance, by channel, 2006
• The rise of the retailers
  • Figure 47: Selected non-traditional providers' insurance ranges and their partners, December 2007
• The Internet has created cost-saving opportunities...
  • Figure 48: Proportion of motor and home insurance policyholders who have bought a policy or searched online for a quote, October 2007
• ...but is less effective at upselling extras
• Admin costs may have lowered, but acquisition costs have risen
• Weighing up offshoring
  • Figure 49: Selected insurers split according to location of call centre roles, February 2007
• The Consumer -- Insurance Product Ownership
• Key points
• About Mintel' s consumer survey
• Motor and household insurance are the most common types held
  • Figure 50: Ownership of insurance products, October 2007
• Implication and opportunity
• Still much confusion over legal cover
• Super Greens and Pragmatists record highest take-up rates
  • Figure 51: Ownership of insurance products, by environmental clusters, October 2007
• Product synergies abound
  • Figure 52: Cross-analysis -- ownership of insurance products, October 2007
• Implication and opportunity
• Wealth is a major determiner of insurance take-up
  • Figure 53: Target groups identified for selected general insurance products, October 2007
• One in seven have no insurance provision
  • Figure 54: Number of insurance products owned, October 2007
  • Figure 55: Type of policy held, by number of insurance products owned, October 2007
• Low income groups face greatest risks but are least likely to have cover
  • Figure 56: Number of insurance products owned, by gender, age, socio-economic group, lifestage, working status and gross annual household income, October 2007
• Implication and opportunity
• Many in the Apathetic group lack adequate insurance protection
  • Figure 57: Number of insurance products owned, by environmental clusters, October 2007
• The Consumer -- Home Insurance
• Key points
• One in eight household policyholders arranged cover online
  • Figure 58: Buying home insurance, claims experience and switching behaviour, by type of policy, October 2007
• Implication and opportunity
• Less than two fifths say they' ve never made a claim...
• ...while a quarter have switched providers within the past three years
• Implication and opportunity
• 7% of recent claimants have had their claim rejected
  • Figure 59: Cross-analysis -- buying home insurance online, claims experience and switching behaviour, October 2007
• The loyal Eco-friendly are least likely to make a claim
  • Figure 60: Buying home insurance online, claims experience and switching behaviour, by environmental clusters, October 2007
• A third of policyholders will habitually shop around
  • Figure 61: Home insurance-buying behaviour, channel preference and influences, October 2007
• Implication and opportunity
• A fifth find online comparison sites ' useful'
• Implication and opportunity
• Aggregators encourage shoparound mentality
  • Figure 62: Cross-analysis -- home insurance-buying behaviour, channel preference and influences, October 2007
• Implication and opportunity
• The rise of the Internet has encouraged consumers to shop around
  • Figure 63: Home insurance-buying behaviour, channel preference and influences, by buying online, claims experience and switching behaviour, October 2007
• Super Greens take note of consumer advice
  • Figure 64: Home insurance-buying behaviour, channel preference and influences, by environmental clusters, October 2007
• Implication and opportunity
• The Consumer -- Motor Insurance
• Key points
• One in four bought their motor policy online
  • Figure 65: Buying motor insurance, claims experience and switching behaviour, by type of policy, October 2007
• Implication and opportunity
• Those aged 55-64 are most likely to switch
  • Figure 66: Buying motor insurance online, claims experience and switching behaviour, by gender and age, October 2007
• Proportion of rejected motor claims is on par with the household sector
  • Figure 67: Cross-analysis -- buying motor insurance online, claims experience and switching behaviour, October 2007
• Super Greens are most likely to switch, buy online and make a claim
  • Figure 68: Buying motor insurance online, claims experience and switching behaviour, by environmental clusters, October 2007
• Many policyholders appreciate the ' driving other cars' provision
  • Figure 69: Motor insurance-buying behaviour and channel preference, by type of policy, October 2007
• Implication and opportunity
• Four in five users of online aggregators find them ' useful'
  • Figure 70: Cross-analysis -- motor insurance-buying behaviour and channel preference, October 2007
• Encouraging consumers to shop around creates more churn
  • Figure 71: Motor insurance-buying behaviour and channel preference, by buying online, claims experience and switching behaviour, October 2007
• Super Greens like to shop around
  • Figure 72: Motor insurance-buying behaviour and channel preference, by environmental clusters, October 2007
• The Consumer -- Policy Selling Points
• Key points
• Comprehensive cover is more important than price, say home and motor policyholders
  • Figure 73: What people most want from an insurance policy, October 2007
• Those looking for clearly explained terms also want efficient claims handling
  • Figure 74: Cross-analysis -- what people most want from an insurance policy, October 2007
• Recent and potential switchers have high expectations
  • Figure 75: What people most want from an insurance policy, by recent and potential home and motor insurance switchers, October 2007
• The Flood-sensitive look for a well-known brand
  • Figure 76: What people most want from an insurance policy, by environmental clusters, October 2007
• Further analysis
• Product Penetration -- Detailed Demographics (1)
  • Figure 77: Ownership of general insurance products (1), by gender, age, socio-economic group, marital status, lifestage, Mintel' s Special Groups and working status, October 2007
  • Figure 78: Ownership of general insurance products (1), by tenure, gross annual household income, region and ACORN category, October 2007
  • Figure 79: Ownership of general insurance products (1), by new technology usage, newspaper readership, commercial TV viewing and supermarket usage, October 2007
• Product Penetration -- Detailed Demographics (2)
  • Figure 80: Ownership of general insurance products (2), by gender, age, socio-economic group, marital status, lifestage, Mintel' s Special Groups and working status, October 2007
  • Figure 81: Ownership of general insurance products (2), by tenure, gross annual household income, region and ACORN category, October 2007
  • Figure 82: Ownership of general insurance products (2), by new technology usage, newspaper readership, commercial TV viewing and supermarket usage, October 2007
• Profile of Clusters -- Detailed Demographics
  • Figure 83: Cluster profile, by gender, age, socio-economic group, marital status, lifestage and working status, October 2007
  • Figure 84: Cluster profile, by tenure, gross annual household income, region and ACORN category, October 2007
  • Figure 85: Cluster profile, by new technology usage, newspaper readership, commercial TV viewing and supermarket usage, October 2007