UK Personal General Insurance 2010

Introduction

This unique report provides a detailed analysis of the UK general insurance market with a specific focus on the personal lines sector. It segments the market by line of business and assesses underwriting profits and investment income. The research also includes an in-depth analysis of the distribution and competitive landscape and forecasts the personal lines market size to 2014.

Features and benefits

Data on the size, structure and profitability of the total non-life market and the personal lines sector.
Insight into the different methods of distributing personal lines insurance products and the changes in the landscape.
Analysis of the total premiums and market share for the largest personal lines insurance groups.

Highlights

Over the next few years, there will be an increasing number of motor insurers and other distributors seeking to enter the household market due to its higher profitability and lower market saturation. The new entrants to the market will increase competition and exert downward pressure on premium rates.

Underwriting cycles are visible in the insurance industry, and take place over the course of several years. The progression of these cycles is visible in the CORs shown in Figure 1 below, between 1988 and 1994 and 1994 and 2004, as well as in the total market underwriting profit/loss progressions.

In 2009, the market share held by bancassurers dropped by 4 percentage points to 13%, after remaining at around 16–17% since 2005. While banks and building societies have largely held onto their share of the private motor insurance market, in 2009, their combined share of the household market saw a drop of 2 points.

Your key questions answered

How have the various forms of personal insurance been performing in terms of GWP and profitability?
Which insurers hold the highest GWP and advertising spend in 2009?
How should my insurance company be structuring their personal lines policy book?

TABLE OF CONTENTS

Overview 1
Catalyst 1
Summary 1
Executive Summary 2
The personal insurance market contracted in 2009 2
The change in the top 10 personal insurance competitors is predicted to continue due to strategy and sizeable corporate partnerships 2
Total personal lines premiums are expected to grow between 2010 and 2014 3
Market Context 10
Introduction 10
Overall market deterioration was less pronounced during 2009 10
The total market COR remained steady 16
Trading results continued to fall for the total market 21
Lower reserves were released during 2009 24
Total personal insurance GWP continued to decline 25
All lines of personal insurance saw an increase in COR in 2009 27
Distribution 32
Introduction 32
Direct insurers and brokers gained market share 32
Direct Line remains the highest personal insurance advertiser 35
Just over 80% of advertising spending is channeled via TV and direct mail 37
Motor insurance continues to be the focus of the majority of advertising campaigns 40
Competitive Dynamics 42
Introduction 42
The top six personal insurers retained their positions in the market 42
The top 6-10th personal general insurers make up 15% of the personal lines market 44
Future Decoded 48
Total personal lines GWP will increase over the next five years 48
Private motor GWP is predicted to see strong growth 49
The household sector will show modest growth 52
The personal pecuniary loss market will decline further before improving 55
Accident and health GWP will see growth in the corporate healthcare space 58
Appendix 62
Definitions 62
Additional data 64
Further reading 69
Ask the analyst 69
Datamonitor consulting 69
Disclaimer 69

LIST OF FIGURES

Figure 1: The total market returned a better COR despite a slight fall in total premiums 11
Figure 2: Only general liability insurance grew in terms of premiums in 2009 13
Figure 3: ABI members make up 84% of the UK general insurance market 15
Figure 4: Profit margins improved slightly for the total general insurance market 17
Figure 5: The commercial insurance combined ratio noticeably improved 18
Figure 6: The property, pecuniary loss and liability insurance markets all returned lower CORs 19
Figure 7: Underwriting losses took a turn for the worse for the motor insurance market 20
Figure 8: Investment income improved during 2009 22
Figure 9: Reserve releases were lower than the levels recorded in 2008 24
Figure 10: Insurers in the pecuniary loss market bolstered their reserves 25
Figure 11: Personal motor and household control nearly two-thirds of the personal insurance market 26
Figure 12: Worsening CORs in 2009 overall signify tightened margins for personal insurers 27
Figure 13: Underwriting result by line of personal business, 1998–2009 (£m) 29
Figure 14: The household, and accident and health insurance lines made a combined reserve release of over £215m 31
Figure 15: The direct channel has been growing steadily overall since 2000 33
Figure 16: RBSI brands dominated advertising spend in H1 2010 36
Figure 17: TV advertising spend comprised two-fifths of personal insurers' total marketing budget 38
Figure 18: Motor insurance advertising accounted for nearly half the budget of the top 10 personal general insurance advertisers 40
Figure 19: GWP and market share of the top 10 UK personal general insurance groups, 2007–09 46
Figure 20: After two years of contraction, the personal general insurance market is set to expand in 2010 48
Figure 21: The private motor market is predicted to reach £10.8bn by 2014 51
Figure 22: The household insurance market is predicted to grow to a GWP of £7.9bn by 2014 54
Figure 23: The personal pecuniary loss market is predicted to reach £4.7bn by 2014 57
Figure 24: Claims inflation will help drive the accident and health GWP to a forecasted £5.9bn by 2014 60

LIST OF TABLES

Table 1: Annual GWP growth and COR for the UK general insurance market, 2000–09 12
Table 2: Total market GWP by line of business (£m), 1990–2009 14
Table 3: UK insurance market, split by proportion of ABI members and Lloyd's of London 16
Table 4: Total market COR (%), 2005–09 17
Table 5: Total market accident year CORs by line of business, 2005-09 (%) 19
Table 6: Underwriting result by line of business (£m), 1998–2009 21
Table 7: Underwriting result, investment income and trading result as a percentage of NWP, worldwide business of UK insurers, 2000–09 23
Table 8: UK personal general insurance GWP, 2006-09 (£m) 26
Table 9: Accident year CORs by line of personal business, 2005–09 (%) 28
Table 10: Underwriting result by line of personal business, 1998–2009 (£m) 30
Table 11: Personal general insurance GWP distribution, by channel, 1999–2009 34
Table 12: Top 10 personal general insurance advertisers 2008–H1 2010 (£) 37
Table 13: Total personal general insurance advertisers' spend by media, 2008–H1 2010 (£) 39
Table 14: Top 10 personal general insurance advertisers' spend by media, 2008–H1 2010 (£) 39
Table 15: Total personal general insurance advertisers' spend by line of business, 2008–H1 2010 (£000s) 41
Table 16: GWP and market share of the top 10 UK personal general insurance groups, 2008–09 47
Table 17: Forecast of personal general insurance GWP, 2006–14f (£m) 49
Table 18: Key variables affecting private motor insurance GWP, 2010–14f 50
Table 19: Forecast of private motor insurance GWP, 2006–14f (£m) 52
Table 20: Key variables affecting household insurance GWP, 2010–14 53
Table 21: Forecast of household insurance GWP, 2006–14f (£m) 55
Table 22: Key variables affecting personal pecuniary loss insurance GWP, 2010–14 56
Table 23: Forecast of personal pecuniary loss insurance GWP, 2006–14f (£m) 58
Table 24: Key variables affecting accident and health insurance GWP, 2010–14 59
Table 25: Forecast of personal pecuniary loss insurance GWP, 2010-14 (£m) 61
Table 26: Total UK pecuniary loss underwriting account, 1998–2009 64
Table 27: Total UK property underwriting account, 1998–2009 65
Table 28: Total UK household underwriting account, 1998–2009 65
Table 29: Total UK commercial property underwriting account, 1998–2009 66
Table 30: Total UK motor underwriting account, 1998–2009 66
Table 31: Total UK personal motor underwriting account, 1998–2009 67
Table 32: Total UK commercial motor underwriting account, 1998–2009 67
Table 33: Total UK liability underwriting account, 1998–2009 68
Table 34: Total UK accident and health underwriting account, 1998–2009 68