Abstract
The private motor insurance market continues to suffer an underwriting loss, due to rising claims costs and intense competition placing a downward pressure on premiums. Speculation that the sector would witness significant premium hikes in 2007 failed to materialise, although premiums have risen steadily over the last year. However, these increases have been insufficient to help the industry achieve an underwriting profit, in the face of growing claims inflation.
Over recent years, the sector has seen a dramatic shift in distribution away from intermediated channels towards direct insurer sales. At the same time, online channels have grown in importance and popularity, with around three in ten policies now arranged online. The move online has enabled insurers to reduce costs and thereby provide more competitive policies, however it has also led to higher levels of customer churn and reduced loyalty. Against this intensely competitive backdrop, it continues to be challenging for insurers to pass on significant premium increases and thereby to improve the underwriting performance.
This report examines the key issues facing the motor insurance industry. It considers the current economic climate, and trends in the wider motoring industry. Data provided by the ABI are used to establish the market size and also an evaluation of the claims experience. Analysis of market share and changes in distribution are included, while the report also identifies key trends relating to distribution, brand perception and innovation. Mintel' s consumer research provides an insight into product ownership and purchasing, quotation and switching behaviour, as well as the wider attitudes of car owners.
Main themes of the report:
- The sector continues to suffer an underwriting loss, due to rising claims and intense competition.
- Over the last 12 months, premiums have risen gradually; the AA estimates that average quoted premiums have increased by around 6% over this period.
- There has been a downward trend in claims frequency in recent years, although the overall cost of claims continues to increase, due to substantial increases in personal injury costs.
- Distribution changes continue to impact the market for motor insurance, with intermediated sales suffering to the benefit of direct providers.
- An increase in online sales and the growing importance of price comparison sites maintain the pressure on providers to keep premiums low.
- The shift towards direct sales has seen a substantial increase in adspend as providers seek to compete in a price-led market.
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