Legal Expenses Insurance - UK - April 2008

Table of Contents

• Issues in the Market
• Key issues:
• Definitions
• Abbreviations
• Market in Brief
• A growing market
  • Figure 1: LEI market size, by GWP, 2000-07
• A concentrated market at the underwriting level
  • Figure 2: LEI market share, by GWP, 2006
• Key drivers encourage market growth
• A market lacking innovation
• Sold, rather than bought...
• ...but the purchasing decision is growing in importance
  • Figure 3: Changing penetration and purchasing decision, 2006 and 2008
• Standalone policies need a higher priority
• Emphasise protection to maintain penetration levels
• Expanding the market: hitting the new targets
• Main target audience is young and working class
• More effective advertising/sales needed
• The motivation for holding an LEI policy
  • Figure 4: The targeting pyramid for expanding the target market, January 2007
• Internal Market Environment
• Key points
• Rising tide of court proceedings
  • Figure 5: Legal proceedings, claims defended and claims allocated to track in England and Wales, 2000-06
• Market potential for add-on policies
  • Figure 6: Penetration of domestic motor and home insurance, by type, October 2007
• An insurance freebie?
• Purchased or sold?
• So is it a conscious purchasing decision?
• Low awareness of LEI: but it is rising
  • Figure 7: Awareness of LEI, July 2007
• Implications
• Peace of mind effect
• Implications
• An indication of the number of personal injury cases
  • Figure 8: Number of cases registered to CRU, 2001/02-2006/07
• Road traffic accidents dominate CRU cases, and are the fastest growing
  • Figure 9: Number of cases registered to CRU, by type, 2001/02-2006/07
• County Court cases indicate demand for LEI
  • Figure 10: The number of claims issued at County Courts in England and Wales, 2000-06
• Broader Market Environment
• Key points
• Litigation and consumer demand
• Catching a cold from Uncle Sam
• Implications
• The cost of personal injury claims
  • Figure 11: Possible claim amounts for common injuries, lower and higher amounts, 2007
• Safer roads but more fear of accidents
  • Figure 12: Road accident casualties, 2000-06
• Stricter health and safety rules
• Implications
• Consumer disputes
• Implications
• Medical negligence
  • Figure 13: Amounts paid out by the NHS Litigation Authority (£m), 1998/99-2006/07
• Legal framework
• Those with strong cases find it easier to litigate
• Implications
• Reducing the cost of litigation and the time it takes
• Implications
• Claims management companies have to clean up their act
• Legal aid eligibility rules
• Implications
• The Legal Services Act 2007
• Legal disciplinary practices
• Implications
• Search for stability
• Threat to ATE cover?
• Implications
• More consumer information
• Treating Customers Fairly (TCF)
• Implications
• Competitive Context
• Key points
• Mediation and ADR
  • Figure 14: The number of cases in which ADR has been used and estimated cost savings, 2001/02-2006/07
• Ombudsmania?
• Opportunity to capitalise on changing market conditions
• Strengths and Weaknesses in the Market
  • Figure 15: LEI -- SWOT analysis, 2008
• Market Size and Forecast
• Key points
• Rapid growth in LEI GWP in 2006
  • Figure 16: LEI market size, by GWP, 2000-07
• Cyclical growth since 2000
• ABI vs Lloyd' s
  • Figure 17: LEI GWP generated by ABI members -- Lloyd' s of London and non-ABI members, 2003-07
• BTE dominates the market
  • Figure 18: Breakdown of ABI (gwp) data, by BTE and ATE policy sales, 2005-07
• LEI penetration reaches a peak...
  • Figure 19: Ownership of LEI, by type, 2004-08
• ...although after-the-event cover could benefit
• Motor-related coverage falls by a million
  • Figure 20: The number of adults with LEI, by type of policy, 2006 and 2008
• The market softens at the edges
  • Figure 21: Ownership of LEI, by type of holder, population equivalent, 2006 and 2008
• Forecast
  • Figure 22: Forecast for LEI, by GWP, at current and constant 2008 prices, 2003-2013
• Factors used in the forecast
• Market Share
• Key points
• The Royal Bank of Scotland Group leads the market
  • Figure 23: LEI market share, by GWP, 2006
• Lloyd' s Underwriters
  • Figure 24: Lloyd' s managing agents and underwriters providing legal expense cover, 2008
• Companies and Products
• The Royal Bank of Scotland Group (Insurance Division)
• Munich Re
• DAS Legal Expenses Insurance Company
• Brit Insurance
• Allianz Legal Protection
• Automobile Association Underwriting Services Ltd
• Others
• Brand Communication and Promotion
• Key points
• Low media activity helps explain low consumer awareness
  • Figure 25: Advertising expenditure on LEI, 2003-07
• B2B advertising dominates the adspend
  • Figure 26: Advertising expenditure on LEI, by media, 2007
• DAS Legal Expense is the main underwriting advertiser
  • Figure 27: Advertising expenditure on LEI, by advertiser, 2003-07
• The marketing messages
• Channels to Market
• Key points
• The distribution model
  • Figure 28: The distribution structure of personal lines motor, property and other policies, 2006
• Delegated authority scheme arrangements dominate
  • Figure 29: LEI distribution model, March 2008
• Changing distribution could increase costs
• The value chain
  • Figure 30: Breakdown of the cost of a typical LEI add-on policy, 2008
• The Consumer: Ownership
• Key points
• Aggregator sites a real threat to the market
  • Figure 31: Ownership of LEI, 2004-08
• BTE penetration peaks but ATE more popular
• Those with most to lose take out LEI
  • Figure 32: Ownership of LEI, by age, socio-economic group, Mintel' s Special Groups, working status, household income, ACORN category, age/socio-economic group and education level, January 2008
• Implications and opportunities
• The family factor is strong
  • Figure 33: Ownership of LEI, by gender, marital status, lifestage, presence of children and household tenure, January 2008
• Implications and opportunities
• Aggregator sites target the core LEI market
  • Figure 34: Ownership of LEI, by region, technology usage, Internet usage, daily newspaper readership, commercial TV viewing, TV reception and supermarket usage, January 2008
• Implications and opportunities
• To widen the market traditional media channels are best
• The Consumer: The Buy Factors
• Key points
• The buy factors
• External buy factors: the risks
  • Figure 35: Areas causing most concern, 2006 and 2008
• Implications and opportunities
• Young, gifted and wealthy fear RTAs
  • Figure 36: The prime factors causing most concern, by gender, age, socio-economic group, marital status, lifestage and education level, January 2008
• Implications and opportunities
• Children and relationships raise the risk factors
  • Figure 37: The prime factors causing most concern, by presence of children, Mintel' s Special Groups and detailed lifestage groups, January 2008
• Marketing channels: must be tailored to the risk
  • Figure 38: The main risk factors, by region, technology usage, Internet usage, daily newspaper readership, commercial TV viewing, TV reception and supermarket usage, January 2008
• Fear factor: involvement in legal disputes
  • Figure 39: Involvement in a legal dispute, January 2008
  • Figure 40: The number of adults involved in a legal dispute, January 2008
• The Buy Factor: it' s almost a freebie...
  • Figure 41: Agreement with the statement that ' Legal expenses cover costs so little you might as well get it' , by ownership, January 2008
• ...but the freebie factor is waning
  • Figure 42: Agreement with the statement that ' Legal expenses cover costs so little you might as well get it' , 2006 and 2008
• Implications and opportunities
• Insurers must target poorer adults and women to sell standalone policies
  • Figure 43: Agreement with the statement that ' Legal expenses cover costs so little you might as well get it' , by gender, age, socio-economic group, marital status, lifestage, presence of children, tenure and car ownership, January 2008
• Popular tabloids, The Guardian and terrestrial TV are important media for standalone policies
  • Figure 44: Agreement with the statement that ' Legal expenses cover costs so little you might as well get it' , by region, technology usage, Internet usage, daily newspaper readership, commercial TV viewing, TV reception and supermarkets usage, January 2008
• Public transport, landlords and women' s magazines are also important routes to the market