Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Liverpool Victoria Group and Lloyds Banking Group have made significant progress 2
Liverpool Victoria Group has made a big step forward in the private motor market 2
Lloyds Banking Group has become the second biggest distributor of motor insurance 2
The market is starting to see growth and premium rate increases, spurred by unprofitability 4
The market is estimated to have grown by approximately 4% in 2008 4
Increasing premium rates were the primary reason for the expansion of the market, though rates have risen faster than GWP 4
Private motor insurance losses worsened in 2008 4
The direct channel is the primary route to market and aggregators are increasingly important 4
The direct channel continues to be the dominant route to market for private motor insurance 4
Motor insurance advertising expenditure rose as aggregators raised their marketing spend 5
Internet and telephone distribution are prerequisites for significant market share 5
Nearly half of consumers purchased their motor insurance over the internet 5
Many consumers continued to arrange their motor cover over the telephone 5
Price is the primary factor for consumers regardless of the platform they used to arrange their cover 5
AXA, Liverpool Victoria Group, Lloyds Banking Group and Zurich gained market share in 2008 6
Lloyds Banking Group recorded the largest growth in both GWP and market share in 2008 6
The market leading RBS group had a superior COR compared to the overall market 6
Lloyd's market insurers have significant exposure to the UK motor market, much of it accounted for by ERS 6
Losses in the market are expected to reduce as premiums increase 6
The UK private motor insurance market is predicted to be worth £12.5 billion in 2013 6
Losses are expected to reduce as premium rates rise 7
Table of Contents 8
Table of figures 9
Table of tables 9
Market Issues 10
Introduction 10
Liverpool Victoria Group and Lloyds Banking Group have made significant progress 10
Liverpool Victoria Group has made a big step forward in the private motor market 10
Lloyds Banking Group has become the second biggest distributor of motor insurance 12
All providers need a pricing strategy to deal with the large role aggregators have in motor distribution 14
Aggregators were estimated to have generated over 40% of new private motor business GWP in 2008 14
Over half of consumers that obtained quotes from an aggregator went on to buy one of the policies 15
Brokers can compete more effectively with direct insurers and affinity brands through partnering with aggregators 16
Aggregators have taken steps to increase the number of brokers appearing on their sites 17
GoCompare.com became an associated member of BIBA in May 2008 17
Aggregators have reinforced the commoditization of motor insurance by focusing the consumer on price 17
Insurers that operate on aggregators must operate on a low cost model as most consumers will choose the cheapest quote 17
Younger consumers are more likely to seek motor insurance quotes from price comparison sites 19
Aggregators' role in the market is likely to increase as more consumers seek to economize on their motor insurance 20
Aggregators significantly increased their marketing efforts in 2008 21
A number of insurers feel that aggregators are holding down premium income growth 22
Insurers should look to drive down the cost of credit hire and fraud 22
Insurers need to speed up the claims settlement process to eliminate unnecessary bills from credit hire companies on third-party non-fault claimants 22
An increase in uninsured driving and fraudulent claims is placing increasing pressure on UK insurers 23
Market Context 25
Introduction 25
The market is starting to see stronger growth rates 25
The market is beginning to see an upward trend in the rate of growth 25
The market is estimated to have grown by approximately 4% in 2008 25
Lloyd's market insurers have a presence in the UK motor market 27
Comprehensive insurance policies accounts for the bulk of the GWP in the private motor insurance market 29
There was an average of 24.6 million private motor policies in force in 2008 30
Non-comprehensive policies saw a further decline in volume 31
Increases in premium rates fuelled market growth 33
Increasing premium rates were the primary reason for the expansion of the market, though rates have risen faster than GWP 33
The AA's British Premium Index showed significant premium rate inflation in both sectors of the UK private motor insurance market 34
Both the market and shoparound average price of comprehensive private motor insurance grew strongly in 2008 and early 2009 34
The shoparound average price of non-comprehensive private motor insurance has been growing continually since 2007 34
Gender and age are important risk factors for motor insurance pricing 37
Total cars are up but new registrations are down 38
Both commercial and private motor vehicles increased marginally in 2008 38
The number of private cars registered for the first time decreased significantly in 2008 39
More than half of the car parc in Great Britain was older than six years in 2008 41
The total number of motorcycles in Great Britain grew in 2008, though new registrations were lower 42
Multicar discounts tap into the large proportion of UK homes with more than one car 44
Claims costs continue to increase 45
Claims inflation continues to plague the market due to escalated bodily injury claims and credit hire costs 45
Insurers are benefiting from falling claims frequencies 47
In recent years, claims frequency has fallen 47
Falling road traffic accident rates mean fewer opportunities for expensive personal injury claims to arise 47
Road traffic accident numbers fell in 2008, continuing a trend from previous years 47
Road traffic accidents declined even as car numbers increased, signifying a fall in frequency 49
Casualty rates have fallen steadily, mirroring the continuous decline in road traffic accidents 51
The combined ratio for the private motor market appears to be peaking 53
Private motor insurance losses worsened in 2008 53
The total motor insurance and private motor insurance COR should start reducing in the coming years 54
The market continued to make significant reserve releases in 2008 55
The industry made substantial reserve releases in 2008, though they were at a lower level than in 2007 55
Distribution Dynamics 57
Introduction 57
The direct channel is the primary route to market 57
The direct channel continues to be the dominant route to market for private motor insurance 57
The broker channel is the second largest distribution channel for private motor insurance 57
Corporate partnerships also play a strong role in the distribution of private motor insurance 57
Banks and building societies have a market share of 7% 57
Direct Line was the top provider of private motor insurance policies and has a particularly strong hold of younger consumers 59
Large insurers dominate the male private motor insurance market, though some brands appeal to this market more than others 61
Direct insurers and aggregators have fueled increases in motor insurance advertising 62
Motor insurance advertising expenditure increased to £205.3m as aggregators raised their marketing spend 62
The top 10 motor advertisers were dominated by direct insurers and aggregators in 2008 65
Plans suggest that both aggregators and direct insurers will continue to invest in motor insurance advertising 66
The top 10 motor advertisers focused on television advertising, reflecting the need for direct insurers and aggregators in particular to build up brand awareness 68
Most of the top 10 motor advertisers spent the majority of their budgets on television advertising in 2008 68
Direct mail advertising was used by all of the top 10 motor insurance advertisers 68
Press, outdoor and radio advertising were used sparingly by the top 10 motor insurance advertisers in 2008 69
Motor insurance advertisers ranked 11-20 spent more of their marketing budget on direct mail 70
Direct mail was the largest element of the motor insurance campaigns for advertisers ranked 11-20 70
Television advertising was also very important to advertisers ranked 11-20 in 2008 70
The largest direct mail and TV advertisers pursued differing strategies with their marketing spend 72
Direct insurers and aggregators constituted all of the top 10 largest television advertisers in 2008 72
Brokers featured much more prominently among the direct mail top 10 motor insurance advertisers 73
Customer Focus 75
Introduction 75
The market for private motor insurance is large, with penetration highest among older and more affluent consumers 75
Older consumers are more likely to have motor cover, validating the strategy of those catering to over 50s 75
Consumers in the DE social grade are the least likely to have motor insurance 77
Internet and telephone distribution are prerequisites for significant market share 78
Nearly half of consumers purchased their motor insurance over the internet 78
Many consumers continued to arrange their motor cover over the telephone 78
Few consumers arranged their motor insurance through the post or face-to-face 79
Consumers aged over 60 were the least likely to use the internet to arrange their motor cover 80
The internet was the most popular platform for arranging motor insurance across all social grades 82
It is easier to grow market share among consumers that are young or use the internet 83
Younger consumers are more likely to change their provider, presenting an opportunity to gain new customers 83
Half of consumers who arranged their motor insurance via the internet switched their insurance provider 85
Internet shoppers were least loyal to their motor insurance providers 87
Insurers need low prices to appeal to the greatest number of motor insurance consumers 88
Price was cited most often by consumers as a factor in their choice of motor insurance provider 88
Price is the primary factor for consumers regardless of the platform they used to arrange their cover 89
Insurance providers from all distribution channels need to have low price strategies 90
Competitive Dynamics 93
Introduction 93
AXA, Liverpool Victoria Group, Lloyds Banking Group and Zurich gained market share in 2008 93
Lloyds Banking Group recorded the largest growth in both GWP and market share in 2008 93
Zurich's private motor GWP increased in 2008, leading to a rise in market share 93
Liverpool Victoria's market share increased substantially in 2008 due to organic growth and acquisition 93
Swiftcover boosted AXA's private motor book 94
RBS, Aviva, RSA and Fortis all remained in the top five private motor insurance groups 94
RBS remained the largest private motor insurance group by a significant margin 94
Direct Line and Churchill saw their GWP contract 94
UK Insurance's and NIG's contractions were the result of decreases in both their comprehensive and non-comprehensive books in 2008 95
Aviva comfortably retained its position as the second largest group 95
RSA was the fourth largest private motor insurance group 95
Fortis was the fifth biggest private motor insurance group 96
NFU Mutual increased its GWP in 2008 to £203.3m 96
Munich Re's private motor market share declined to 3.6% in 2008 96
FIM Holdings, Admiral and Brit all took on a sizable amount of premiums in 2008 99
FIM Holdings boosted its market share to 1.9% 99
Admiral Insurance Company Ltd's GWP increased substantially 99
Brit Insurance more than doubled its private motor insurance premium income in 2008 99
The Binomial Group experienced marginal growth in market share in 2008 despite robust growth in premium income 99
Groupama's private motor insurance GWP increased by 3.6% in 2008, though its market share remained unchanged 99
The Co-operative's market share contracted in 2008 to 2.1% due to lower premium income 100
Allianz's GWP declined by 8.0% resulting in a lower private motor market share 100
HSBC's private motor book declined by 2.6% 100
MMA's market share declined as GWP fell by 0.7% in 2008 100
QBE's 2008 market share declined by 0.1 percentage points due to lower premium income 101
Most of the top 10 insurers write some non-comprehensive and commercial business 102
Comprehensive premium income dominated the largest private motor insurers' books 102
RBS Group had over 6.7 million private comprehensive policies in force in 2008 104
A number of Gibraltar-based insurers write a large amount of UK private motor insurance business 106
The Acromas Group writes significant volumes of private motor insurance through Acromas Insurance Company 106
Zenith writes both commercial and private motor insurance from Gibraltar 107
Gibraltar-based Advantage writes insurance for the Hastings group 107
Quinn Direct is one of the largest foreign insurers in the UK motor insurance market with large private and commercial books 107
Lloyd's syndicates also have a strong presence in the UK motor sector 107
Lloyd's market insurers have significant exposure to the UK motor market 107
Equity Red Star has the largest UK motor insurance book at Lloyd's 109
Chaucer has expanded its UK motor presence 109
Amlin acquired the book of HCC, increasing its exposure to the UK motor insurance market 109
KGM Motor Insurance increased its UK motor insurance exposure the most of any Lloyd's insurer 109
RBS, Zurich, Fortis and RSA beat the market average COR 110
The RBS group had a superior COR compared to the overall market 110
Zurich, Fortis and RSA recorded CORs which were below the market average 110
The top 10 groups all made reserve releases to lower their reported year CORs 113
The top 10 private motor insurers relied on reserve releases to lower their reported CORs 113
Future Decoded 115
Introduction 115
Losses in the market are expected to reduce as premiums increase 115
Conditions in the private market are forecast to allow for further increases in premium rates 115
The UK private motor insurance market is predicted to be worth £12.5 billion in 2013 116
Losses are expected to reduce as premium rates rise 120
Appendix 122
Definitions 122
ABI members 122
Accident year combined ratio 122
Bancassurers 122
Brokers 122
Brandassurers 122
Channel 122
Direct insurer/writer 122
Earned premiums 122
Gross premium 122
Net premium 123
Platform 123
Reported year combined ratio 123
Reserve development 123
Written premiums 123
Methodology 123
Datamonitor's Home and Motor Insurance Survey 123
Further reading 124
Ask the analyst 124
Datamonitor consulting 124
Disclaimer 124
List of Tables
Table 1: Market share of Liverpool Victoria Group, 2008 11
Table 2: Once you had obtained quotes from the price comparison site, did you buy one of the policies or were you just using the site for research purposes? 16
Table 3: What made you decide to buy from this comparison site? 18
Table 4: When your car insurance policy last came up for renewal, did you visit any price comparison sites to obtain quotations? 20
Table 5: Would you use a price comparison site in the future to obtain quotations for car insurance? 21
Table 6: Change in average premium rates and total private motor market size, 1996-2008 27
Table 7: UK motor insurance NWP split between ABI members and Lloyd's, 2007 (£m) 28
Table 8: Private motor GWP by line of business, 2005-08e (£m) 30
Table 9: Motor policies in force, 1998-2008 33
Table 10: Average private motor insurance premium rates, Apr 2007-Apr 2009 (£) 36
Table 11: Example of average premiums quoted by sex and age 38
Table 12: Cars licensed in Great Britain by body type, 1998-2008 (000s) 39
Table 13: New private cars registrations in Great Britain by body type as a percentage of the total private car parc, 2004-08 (000s) 40
Table 14: Age composition of car parc, 2008 (000s) 42
Table 15: Number of motorcycles and new registrations in Great Britain, 2004-08 (000s) 43
Table 16: UK households with a private car, 2001-06 45
Table 17: Average motor claim costs, 2003-07 (£) 46
Table 18: Total number of road accidents in the UK, 1998-2008* (000s) 49
Table 19: Road traffic accidents relative to registered vehicles in Great Britain, 1998-2008 (000s) 51
Table 20: Deaths, seriously and slightly injured casualties resulting from UK road traffic accidents, 2004-08* 52
Table 21: Accident and reported year COR, private motor market, 2005-08 (%) 56
Table 22: Private motor insurance GWP distribution by channel (all business), 2004-08e 59
Table 23: With which of these insurance providers are you insured for your motor insurance? 60
Table 24: Advertising expenditure spent, by channel of top insurance providers, 2007-08 (£) 63
Table 25: Advertising expenditure spent by channel of top motor insurance advertisers, 2008 (£) 64
Table 26: Top 10 motor insurance advertisers, 2007-08 (£) 65
Table 27: Top 10 motor insurance advertisers' advertising expenditure by medium, 2008 70
Table 28: Top 11-20 motor insurance advertisers' expenditure by medium, 2008 (£) 72
Table 29: Top 10 motor insurance TV advertisers, 2007-08 (£) 73
Table 30: Top 10 motor insurance direct mail advertisers, 2007-08 (£) 74
Table 31: How did you arrange the motor insurance policy you currently have? 80
Table 32: Distribution of private motor insurance, by age and platform, 2008 81
Table 33: Distribution of private motor insurance, by socio-economic group, 2008 83
Table 34: Propensity to switch motor insurance provider and likelihood of getting other quotes by age, 2008 85
Table 35: Propensity to switch motor insurance provider and likelihood of getting other quotes by distribution platform, 2008 88
Table 36: Why did you take out your motor insurance with your current provider? (%) 90
Table 37: Why did you take out your motor insurance with current provider? (%) 92
Table 38: GWP and market share of the top 10 UK private motor insurance groups, 2007-08 98
Table 39: GWP and market share of the top 11-20 UK private motor insurers, 2007-08 102
Table 40: Top 10 private motor insures' comprehensive and non-comprehensive book, 2007-08 (%) 104
Table 41: Private comprehensive vehicle years for the top 10 private motor insurance groups, 2008 (000s) 106
Table 42: UK motor insurance NWP split between ABI members and Lloyd's, 2007 (£m) 108
Table 43: Motor insurance GWP of selected Lloyd's insurers with large UK motor exposure, 2007-08 110
Table 44: Accident year combined ratio and underwriting profit/loss for private motor business, top 10 motor insurance groups, 2008 112
Table 45: Reported year combined ratio and underwriting profit/loss for private motor business, top 10 motor insurance groups, 2008 114
Table 46: Key variables affecting private motor insurance GWP, 2009e-13f 116
Table 47: Forecast of UK private motor insurance GWP,2009-2013 (£m) 118
Table 48: Private motor GWP by line of business, 2005-13f (£m) 119
Table 49: Forecast of accident year COR, private motor market, 2009-2013f (%) 121
Table 50: Consumer survey sample sizes by age and income 123
List of Figures
Figure 1: Lloyds Banking Group has become the second biggest distributor of private motor insurance 3
Figure 2: Liverpool Victoria Group's market share has been catapulted to 4.5% following the acquisition of Highway Insurance 11
Figure 3: Lloyds Banking Group has became the second biggest distributor of private motor insurance 13
Figure 4: Aggregator-instigated private motor sales grew significantly in 2008 15
Figure 5: Over half of consumers that obtained car insurance quotes went on to buy one of the policies 16
Figure 6: It is essential that insurers on aggregators can offer the cheapest price to consumers 18
Figure 7: Higher risk younger consumers are more likely to use an aggregator to arrange their motor cover 19
Figure 8: A large proportion of consumers were willing to visit a price comparison site in the future 21
Figure 9: Aggregators were focused on building their brand in 2008 through large marketing outlays 22
Figure 10: The private motor insurance market is starting to see stronger growth rates 26
Figure 11: Lloyd's syndicates underwrote £1 billion of motor insurance business in 2007 28
Figure 12: Comprehensive motor insurance premium income has driven the increase in overall GWP 29
Figure 13: Comprehensive policies make up the vast majority of the private motor market 31
Figure 14: Comprehensive policies are taking a greater share of policies in force 32
Figure 15: Both the market and shoparound average price of comprehensive private motor insurance grew strongly in 2008 and early 2009 34
Figure 16: The shoparound average price of non-comprehensive private motor insurance has been continually growing since the beginning of 2007 35
Figure 17: The number of new private cars has been declining in Great Britain over the last five years 40
Figure 18: Half of the UK car parc was older than six years in 2008 41
Figure 19: Great Britain witnessed a decline in new motorcycle numbers while total numbers grew in 2008 43
Figure 20: Multicar households have become more popular 44
Figure 21: The average motor claim cost continued to rise rapidly in 2007 at 14.1% 46
Figure 22: Insurers have benefitted from falling claims frequency 47
Figure 23: The number of UK road accidents has continued to fall since 1998 48
Figure 24: Accidents in the UK have fallen despite a steady increase in the number of vehicles 50
Figure 25: Casualties continued to decline across all categories in 2008 52
Figure 26: The private motor insurance COR appears to be peaking 53
Figure 27: The rate of increase in the private motor COR is slowing 54
Figure 28: Private motor insurers continued to make reserve releases in 2008 to improve their reported year COR 55
Figure 29: The direct channel continues to be the number one route to market for private motor insurance 58
Figure 30: Direct Line is the number one private motor insurance brand while Saga clearly scores well with the over 60s 60
Figure 31: Direct Line and Saga are the two most popular brands for male private motor insurance policyholders 61
Figure 32: Sheilas' Wheels and the Post Office enter the top 10 in the female private motor insurance market 62
Figure 33: Aggregators' advertising expenditure increased substantially in 2008 63
Figure 34: More Th>n offered gifts to help motorists through the cold snap 67
Figure 35: Swiftcover.com launched a £25m advertising campaign-Get a Life -in January 2009 68
Figure 36: Television remained the most popular medium choice for the top 10 advertisers in 2008 69
Figure 37: Television and direct mail remained the dominant form of advertising media among motor insurance advertisers ranked 11-20 71
Figure 38: Consumers aged over 60 possess the highest penetration rate for private motor insurance cover 76
Figure 39: Consumers with higher incomes have higher penetration rates 77
Figure 40: Consumers with higher socio-economic group have higher penetration rates 78
Figure 41: Most consumers purchase their car insurance policy on the internet or by phone 79
Figure 42: Internet distribution is most popular among 18-29 year olds 81
Figure 43: Internet was the most popular platform to arrange the motor insurance across different social grades 82
Figure 44: Private motor insurance retention rates improve significantly as age increases 84
Figure 45: Private motor insurance retention rates were lowest for internet consumers 86
Figure 46: Internet shoppers were least loyal to their motor insurance providers 87
Figure 47: Price was a factor in provider choice for most motor insurance consumers in 2008 89
Figure 48: Price is the primary factor for consumers across all platforms 90
Figure 49: 94% of consumers who arranged their motor insurance with aggregators were seeking a cheaper quote 91
Figure 50: Lloyds Banking Group, AXA, Liverpool Victoria and Zurich gained market share in 2008 97
Figure 51: FIM Holdings achieved significant growth in market share 101
Figure 52: All of the top 10 private motor insurers underwrite primarily in the comprehensive market 103
Figure 53: RBS had over 6.7 million private comprehensive policies in force in 2008 105
Figure 54: Lloyd's syndicates underwrote £1 billion of motor insurance business in 2007 108
Figure 55: RBS, RSA, Fortis and Zurich recorded below average CORs 111
Figure 56: CORs after reserve releases ranged from 100% to 114.1% 113
Figure 57: Growth in premium income is forecast to be strong as unprofitability spurs rate increases 117
Figure 58: The market will continue to be based primarily on comprehensive policy income 119
Figure 59: The COR for the private motor sector will gradually improve 120