UK Private Motor Insurance 2010

  • OVERVIEW
    • Catalyst
    • Summary
  • EXECUTIVE SUMMARY
    • The private motor market shrunk slightly in 2009
      • The total market declined by 1% to £9.2 billion GWP
      • Over the past decade, the proportion of non-comprehensive policies has fallen
    • Claims costs are continuing to escalate
      • Claims inflation has been driven by personal injury claims and credit hire costs
      • Although claims frequency fell slightly to 16.7% in 2009
    • RBS Group is the largest provider of car insurance in the UK
    • There were a number of exits and sales within the market
      • Lloyds Banking Group is no longer in the market
      • GMAC Financial Services is looking to sell Provident
      • HSBC has placed its motor insurance business into run-off
      • QBE has also exited that market
      • KGM Motor had a difficult 2009 and it is currently up for sale
      • Quinn Direct will write considerably less UK business as a result of being in administration
      • Markerstudy is looking to shed private motor business from Zenith following its acquisition in late 2009
    • Market growth will be stunted in 2010 followed by successive increases from 2011 onwards
      • Rate increases will drive market growth
  • MARKET CONTEXT
    • Introduction
    • The private motor market shrunk slightly in 2009
      • The total market declined by 1% to £9.2 billion GWP
      • Lloyd’s of London insurers have a significant presence in the UK motor market
    • The number of motor insurance policies remained static
      • There were 24.8 million private motor policies in force during 2009
      • Over the past decade, the proportion of non-comprehensive policies has fallen
    • The combined ratio took a turn for the worse in 2009
      • Private motor insurance losses pushed the 2009 accident year combined operating ratio up to 122.9%
      • The rate of increase in the COR was 8.2 percentage points in 2009
      • Reserve releases were considerably lower in 2009
      • The loss ratio increased in 2009, while the expense ratio fell
    • Claims costs are continuing to escalate
      • Claims inflation has been driven by personal injury claims and credit hire costs
      • On average, motor bodily injury claims are the most expensive to settle
      • Fraudulent claims rose during the recession and are believed to have cost £1.9 billion in 2009
      • Continuous enforcement insurance should help lower the levels of uninsured driving
      • Credit hire organizations have come under greater scrutiny over the past year
    • The new low value personal injury claims process should help lower claims costs
      • The new process applies to road traffic accident personal injury clams of between £1,000 and £10,000
      • There are three stages for a low value personal injury RTA claim
      • Electronic motor certificates will also save on postal and administration costs
    • Claims frequency remained at similar levels to 2008
      • Claims frequency fell slightly to 16.7% in 2009
      • RTA casualties are now thought to number 800,000 per annum
      • The number of road traffic accidents reported to the police fell by 4.1% in 2009
    • Premium rates hardened throughout the second half of the year
      • Insurers are responding to poor profitability by making rate corrections
      • The AA British Insurance Premium Index recorded a large increase in premiums in Q4 2009
      • Car drivers in the North West of England pay the highest premiums
      • Rates differ considerably between gender and age
    • The number of new private car registrations increased during 2009
      • The scrappage scheme provided a much needed boosted for the new car market
      • The vast majority of cars on the road are aged between six and 13 years
      • Growth in the total motorcycle parc was stagnant in 2009
      • The number of multicar households has been static since 2005
  • DISTRIBUTION
    • Introduction
    • Private motor insurance is mostly sold direct
      • The direct channel continues to be the dominant route to market
      • Brokered private motor insurance accounts for 31% of the market
      • Corporate partnerships are an important way to distribute private motor products
      • Banks and building societies have a market share of 6%
    • RBSI brands have a prominent presence in the private motor market
      • Direct Line is the number one private motor insurance brand
      • The AA was the market leader for broker-distributed private motor insurance
      • Bancassurers have a relatively small market presence
      • The top five brandassurers hold a lower market share than in 2008
    • Aggregator-instigated sales have increased
      • Half of new motor business sales are initiated through a price comparison site
      • The OFT is currently investigating aggregators as to whether they are misleading customer
    • Total advertising expenditure in the motor market fell in 2009
      • Direct insurers and aggregators have toned down their advertising spend
      • Brandassurers and bancassurers increased their marketing spends significantly in 2009
      • Of the top 10 advertisers, GoCompare.com, Aviva and CompareTheMarket.com increased their spending
      • Most of the top 10 motor advertisers focus their resources on advertising via television
      • Direct mail advertising was a more popular strategy with the top 11–20 motor insurance advertisers
    • The top four price comparison sites accounted for almost half of total TV advertising spend
      • Price comparison sites invest heavily in TV advertisement
      • GoCompare.com was the number one motor insurance TV advertiser in 2009
    • Brokers channel most of their advertising spend through direct mail promotion
      • Brokers tend to favor direct mail as a means to advertise motor insurance
  • CUSTOMER FOCUS
    • Introduction
    • Private motor penetration rates have increased to 80.1%
      • Penetration is lowest among people aged between 18 and 34
      • Penetration rises with income level
      • Social grade of consumers has less influence on penetration rates
    • Internet- and telephone-based sales account for most transactions
      • Private motor insurance is mostly sold via the internet
      • Elder consumers prefer buying their insurance over the telephone
      • Low income households tend to buy cover over the phone
      • Apart from for social grades A and E, the internet is the most used platform for arranging motor insurance
    • Older customers are less likely to switch car insurance provider
      • Retention rates are around 55% in the private motor market
      • Customers aged between 25–34 were most likely to shop around for alternative quotations
      • Retention rates appear to be highest for the lowest and highest earners
    • Price has to be the primary focus in marketing campaigns
      • Price was the most commonly cited reason for selecting a motor insurance provider
      • In contrast to older customers, those aged between 25–34 years of age are the most price-sensitive
    • Over 60% of all consumers visit price comparison websites at renewal
      • Price comparison websites appeal particularly to those aged between 25 and 34 years
      • Low income households are less likely to use aggregators at renewal
      • Only 41.8% actually go on to buy policy via a price comparison website
  • COMPETITIVE DYNAMICS
    • Introduction
    • Most of the top 10 private motor insurers grew their market share slightly
      • RBS Insurance increased its GWP and market share in 2009
      • Aviva saw its total GWP contract but remained the second largest private motor insurance group
      • RSA achieved a 5% increase in GWP
      • LV= increased its market share significantly
      • Lloyds Banking Group is no longer in the market
      • Fortis insurance is soon to benefit from its new partnership with Tesco Bank
      • Munich Re will continue to write the largest share of Admiral’s book
      • AXA increased its car insurance proposition to cater for older, more experienced customers
    • There were a few exits from the market out of the top 11–20 private motor insurers
      • GMAC Financial Services is looking to sell Provident
      • Groupama plans to raise rates by 10% for its private car policies in 2010
      • Allianz also increased its private motor rates
      • Binomial, which underwrites via Sabre Insurance, increased its total motor book
      • Admiral Group had a strong 2009
      • HSBC has placed its motor insurance business into run-off
      • QBE has also exited that market
    • The largest insurers focus mainly on comprehensive car insurance
      • Comprehensive business accounts for the majority of the top insurers’ books
      • RBS has the most policies in force
    • RBS, Aviva, RSA and Fortis performed better than the market average COR
      • The accident year COR of the total motor market deteriorated further in 2009
      • Fortis’ and RSA’s CORs were well below the market average in 2009
      • RBS and Aviva had a more testing year, but both managed to perform better than the market average
    • Most of the top 10 made a slight reserve release to lower their reported year COR
      • The lack of reserves left in the market was evident in 2009
      • The commission ratio increased for most of the top 10 private motor insurance groups
    • Non-UK domiciled insurers such as Zurich and Acromas are significant players
      • Zurich has transferred its UK book to Ireland
      • The Acromas Group underwrites all of its private motor policies sold via the Saga brand
      • Quinn Direct will write considerably less UK business as a result of being in administration
      • Markerstudy is looking to shed private motor business from Zenith following its acquisition in late 2009
    • A number of Lloyds of London Syndicates increased their exposure in 2009
      • Lloyd’s market insurers have a significant presence in the UK motor market
      • Equity Red Star is the largest UK motor insurer in the Lloyd’s of London market
      • Chaucer plans to up its motor rates by 14% throughout 2010
      • Amlin grew its motor fleet business during 2009
      • KGM Motor had a difficult 2009 and it is currently up for sale
  • FUTURE DECODED
    • Introduction
    • Market growth will be stunted in 2010 followed by successive increases from 2011 onwards
      • Rate increases will drive market growth
      • The total UK private motor market will be worth £10.8 billion in GWP in 2014
    • The COR will see some improvements as rate corrections feed into results
      • Premium rate increases will improving underwriting results and help lower the COR
  • APPENDIX
    • Further data
    • Definitions
      • ABI members
      • Bancassurers
      • Brokers
      • Brandassurers
      • Combined ratio
      • Commission expenses
      • Comprehensive motor insurance
      • Channel
      • Direct insurer/writer
      • Earned premiums
      • Gross premium
      • Net premium
      • Non-comprehensive motor insurance
      • Platform
      • Reserve development
      • Written premiums
    • Methodology
      • Datamonitor’s Insurance Consumer Survey
    • Further reading
    • Ask the analyst
    • Datamonitor consulting
    • Disclaimer
  • TABLES
    • Table: Private motor GWP by line of business, 2006–09p (£000s)
    • Table: UK motor insurance NWP split between ABI members and Lloyd’s (£m), 2008
    • Table: Motor policies in force, 1999–2009 (000s)
    • Table: Accident and reported year COR, private motor market (%), 2005–09
    • Table: Average motor claim cost and claims inflation (£), 2003–08
    • Table: Number of claims settled, costs and average claim value for private motor theft claims, 2005–09
    • Table: Average motor claims payout and percentage of total claims by type (£), 2008
    • Table: Comprehensive and non-comprehensive claims and exposure, UK private motor (000s), 2005–09
    • Table: Total number of reported road traffic accidents in Great Britain (000s), 1998–2009
    • Table: Road traffic accidents relative to registered vehicles in Great Britain (000s), 1998–2009
    • Table: Reported deaths, seriously and slightly injured casualties from Great Britain RTAs, 2003–Q3 2009
    • Table: Average and shoparound private motor insurance prices (£), Q2 2007–Q1 2010
    • Table: Average car insurance premiums split by region (£), Q4 2009–Q1 2010
    • Table: Example of average premiums quotes by gender and age (£), Q1 2010
    • Table: New private car registrations in Great Britain by body type (000s), 2005–09
    • Table: Cars licensed by years since first registration in Great Britain (000s), 2000–09
    • Table: Total motorcycle car parc and new registrations in Great Britain (000s), 2004–09
    • Table: Great Britain households with a private car (%), 2002–08
    • Table: Private motor insurance GWP distribution by channel (all business) (%), 2005–09e
    • Table: Top 10 insurance companies distribution share, by age group (%), 2010
    • Table: Estimated aggregator-instigated private motor sales (%), 2007e –2009e
    • Table: Advertising expenditure, by channel of top insurance providers (£), 2008–09
    • Table: Advertising expenditure spent by channel of top motor insurance advertisers (£), 2009
    • Table: Top 10 motor insurance advertisers (£), 2008–09
    • Table: Top 10 motor insurance advertisers’ advertising expenditure by channel (%), 2009
    • Table: Top 11–20 motor insurance advertisers’ advertising expenditure by channel (%), 2009
    • Table: Top 10 motor insurance television advertisers, 2008 –09 (£)
    • Table: Top 10 motor insurance direct mail advertisers (£), 2008–09
    • Table: Distribution of private motor insurance by age group and platform (%), 2010
    • Table: Distribution of private motor insurance by household income and platform (%), 2010
    • Table: Distribution of private motor insurance by social grade and platform (%), 2010
    • Table: Propensity to switch provider and likelihood of getting other quotes by age (%), 2010
    • Table: Propensity to switch motor insurance provider by household income (%), 2010
    • Table: Commonly cited reasons for selecting a car insurance provider, by age group (%), 2010
    • Table: Reasons for visiting a price comparison site, by age and household income (%), 2010
    • Table: GWP and market share of the top 10 UK private motor insurance groups, 2008–09
    • Table: GWP and market share of the top 11–20 UK private motor insurance groups, 2008–09
    • Table: Top 10 private motor insurers’ comprehensive and non-comprehensive books (000s), 2008–09
    • Table: Private comprehensive and non-comprehensive vehicle years for the top 10 insurers (000s), 2009
    • Table: Top 10 motor insurance groups accident year combined ratio and underwriting results, 2009
    • Table: Top 10 motor insurance groups reported year combined ratio and underwriting results, 2009
    • Table: Commission ratios for the top 10 private motor insurers (%), 2008–09
    • Table: UK motor insurance NWP split between ABI members and Lloyd’s (£m), 2008
    • Table: Motor insurance GWP for selected Lloyd’s insurers with large UK motor exposure (£000s), 2008–09
    • Table: Key variables affecting private motor insurance GWP, 2010f–14f
    • Table: Private motor GWP by line of business (£m), 2006–14f
    • Table: Forecast for the accident year combined ratio, UK private motor market (%), 2005–14f
    • Table: Advertising expenditure spent by channel of top motor insurance advertisers (£), 2008
    • Table: Datamonitor’s consumer survey sample size by age and income, 2010
  • FIGURES
    • Figure: The RBS group maintains dominance over the motor market
    • Figure: Comprehensive private motor insurance now accounts for 88% of total premiums
    • Figure: Lloyd’s of London players underwrote £781m of motor business in 2008
    • Figure: Almost 90% of all policies in force are for comprehensive cover
    • Figure: The private motor market has been moving away from non-comprehensive cover
    • Figure: Soaring claims costs forced the private motor COR up to 122.9% in 2009
    • Figure: Both the total and private motor market saw the COR jump significantly in 2009
    • Figure: There were little reserve releases to bolster the reported year COR in 2009
    • Figure: The accident year loss ratio increased by 7.5 points in 2009
    • Figure: Meanwhile, the reported year loss ratio increased by a staggering 15.8 points in 2009
    • Figure: The average claim cost is just under £2,200
    • Figure: Bodily injury claims are the most expensive for insurers to settle
    • Figure: The claims frequency for comprehensive policies have fallen over the past 10 years
    • Figure: The DfT now estimates that the number of road traffic accident casualties is around 800,000 per annum
    • Figure: Fewer road traffic accidents are lowering the frequency of claims
    • Figure: The number of road traffic accidents has steadily fallen since 1998
    • Figure: 2009 looks to have been another year of declining road casualties
    • Figure: Comprehensive rates grew strongly in Q4 2009
    • Figure: Rate increases were far more pronounced for non-comprehensive policies during 2009
    • Figure: Premium prices fall considerably for buyers older than 22 years of age
    • Figure: Private car sales picked up in 2009
    • Figure: Over half of the total car parc was older than six years in 2009
    • Figure: The total motorcycle car parc stalled in 2009, with historically low levels of new registrations
    • Figure: There are on average 1.14 cars per household in Great Britain
    • Figure: Direct insurers and brokers account for just under 75% of all private motor sales
    • Figure: Direct Line is the market leader for private motor insurance
    • Figure: RBSI-owned Direct Line and Churchill are the largest direct private motor insurers
    • Figure: The AA is by far the largest private motor insurance broker
    • Figure: Lloyds TSB’s market dominance among bancassurers is retained, albeit by a reduced margin
    • Figure: Tesco shows a formidable lead above brandassurers
    • Figure: More than half of new private motor GWP was generated through an aggregator
    • Figure: Direct insurers, aggregators and brokers spent less on advertising during 2009
    • Figure: TV advertising was most popular among the top 10 largest motor advertisers in 2009
    • Figure: Direct mail and TV were popular advertising media for the top 11–20 motor advertisers in 2009
    • Figure: GoCompare.com’s opera singer, Gio Compario, has significantly raised the profile of the website
    • Figure: Private motor penetration is highest among over-65 year olds
    • Figure: Penetration rates increase for those households earning £30,000 and above
    • Figure: Penetration rates are slightly higher for those in the A and B social economic groups
    • Figure: The majority of customers buy their car insurance over the internet or by telephone
    • Figure: Internet-based providers should target consumers aged between 25–34 years of age
    • Figure: Telephone-based sales are most popular for the lowest and highest household incomes
    • Figure: Most social grades preferred to use the internet to arrange a car insurance policy
    • Figure: Retention rates improve significantly as age increases
    • Figure: Switching car insurance provider is most pronounced for middle income earners
    • Figure: Competitive prices will ensure new business and customer retention
    • Figure: Non-price factors appeal more to older customers when choosing a car insurance provider
    • Figure: Price comparison websites are most popular among those in their 20s and 30s
    • Figure: Low earners tend to use price comparison sites the least
    • Figure: Conversion rates on aggregators differ across age groups
    • Figure: Sales via aggregators are highest for those earning less than £75,000
    • Figure: RBS consolidated its position as the number one UK private motor insurance group
    • Figure: The top 11–20 insurers found maintaining their market share more difficult in 2009
    • Figure: Comprehensive business is the main source of income for most of the top private motor insurers
    • Figure: RBS had 7.9 million private motor policies in-force in 2009
    • Figure: All of the top 10 private motor insurers were running a loss ratio of above 90% in 2009
    • Figure: CORs after reserve releases ranged from 111.7% to 135.5% in 2009
    • Figure: Lloyd’s of London players underwrote £781m of motor business in 2008
    • Figure: The UK private motor market will experience strong growth during 2011 and 2012
    • Figure: The COR will drop considerably from 2011 onwards

Report

Published by
Datamonitor
Published on
29 Jul 2010
Product code
DMFS2495
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