Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Total general insurance GWP declined marginally in 2007 2
The general liability market witnessed the largest contraction 2
The pecuniary loss market grew in 2007 2
Banks and building societies are the largest distribution channel for home insurance 2
The majority of home insurance is distributed via banks and building societies 2
Around 15% of home insurance premium income is distributed via the partnerships channel 2
A number of aggregators as well as LV= entered the top 10 advertisers in 2008 3
RBSI's biggest brands, Direct Line and Churchill, were the biggest insurance advertisers in 2008 3
Three aggregators appeared in the top 10 advertisers in 2008, highlighting their importance to the market 3
The private motor market is forecast to achieve the strongest growth in GWP in the personal lines market between 2008 and 2013 3
The UK personal general insurance market is forecast to grow at a CAGR of 3.3% between 2008 and 2013 3
The individual accident and health market will reach £4.2 billion in GWP in 2013 3
Table of Contents 4
Table of figures 5
Table of tables 6
Market Context 7
Introduction 7
Total general insurance GWP declined marginally in 2007 7
Premium income in the motor insurance market increased for the first time since 2003 7
The property insurance market recorded a fall in premium income in 2007 7
The accident and health market experienced a marginal decline in GWP during 2007 7
The general liability market witnessed the largest contraction 7
The pecuniary loss market grew in 2007 7
The private motor, household and personal pecuniary loss markets increased in size in 2007, while the individual accident and health market contracted 9
The total general insurance market recorded a loss of £934m in 2007 10
The accident and health market experienced a marginal contraction in GWP and a decline in underwriting profitability in 2007 12
The group accident and health market outperformed the individual market in 2007 12
The health insurance market recorded GWP growth while the accident insurance market witnessed a contraction in 2007 14
The accident and health market witnessed its underwriting profitability decrease substantially in 2007 15
Premium income in the UK motor insurance market grew by 2.2% in 2007 17
The UK private motor insurance market saw an increase in premium income in 2007 17
Premium income in the private motor sector reached £9.7 billion in 2007 19
The motorcycle market was the only part of the private motor segment to witness a decrease in 2007 19
The private comprehensive and private non-comprehensive markets both grew in 2007 19
Profitability in the motor market continued to decline in 2007 21
Underwriting losses in the private motor market declined in 2007 23
Underwriting profitability declined in the pecuniary loss market despite an increase in GWP 25
Premium income in the pecuniary loss market increased by 2.2% in 2007 25
The pecuniary loss market witnessed its underwriting profit decrease by 19.4% in 2007 25
The household insurance market recorded a significant underwriting loss in 2007 due to the summer floods 27
Household insurance GWP increased in 2007, while commercial property GWP fell 27
The property insurance market experienced a significant underwriting loss in 2007 due to the summer floods 28
Household underwriters suffered large losses in 2007 due to high volumes of flood claims 30
Customer Focus 33
Introduction 33
The direct channel is the primary route to market for private motor insurers 33
The direct channel continues to be the dominant route to market for private motor insurance 33
The broker channel is the second largest distribution channel for private motor insurance 33
Corporate partnerships also play a strong role in the distribution of private motor insurance 33
Banks and building societies have a market share of 7% 34
Banks and building societies are the largest distribution channel for home insurance 35
The majority of home insurance is distributed via banks and building societies 35
Brokers accounted for an estimated 26% of home insurance premium income in 2008 35
The direct channel accounts for around a quarter of home insurance premium income 36
Around 15% of home insurance premium income is distributed via the partnerships channel 36
A number of aggregators as well as LV= entered the top 10 advertisers in 2008 37
RBSI's biggest brands, Direct Line and Churchill, were the biggest insurance advertisers in 2008 37
Three aggregators appeared in the top 10 advertisers in 2008, highlighting their importance to the market 37
LV= entered the top 10 after almost doubling its advertising spending in 2008 38
Norwich Union Direct's advertising spend declined the most in 2008 38
The top insurance advertisers devoted the bulk of their budgets to TV advertising in 2008 39
The top 10 insurance advertisers collectively spent more than £128.6m on TV advertising in 2008 39
Saga spent the most on direct mail, highlighting its importance in cross-selling 39
Other media such as radio and press played a smaller role 40
Competitive Dynamics 42
Introduction 42
AXA, BUPA, Fortis and RSA saw strong growth in personal lines premium income in 2007 42
RBSI retained its position as the UK's largest personal general insurer in 2007 42
Norwich Union remained the second largest UK personal insurance group in 2007 despite a decline in GWP 42
RSA achieved significant growth in its personal lines business in 2007 due to the Paymentshield account 43
AXA's personal lines business grew by 13.3% in 2007, driven by personal pecuniary loss, private motor and travel insurance 43
Zurich witnessed a marginal increase in its personal lines book in 2007 44
BUPA recorded strong GWP growth in the UK personal lines insurance market in 2007 44
St Andrew's witnessed a fall in its personal lines premium income 44
Fortis witnessed its personal lines premium income increase by 10% in 2007 44
Three of the of the top 10 UK personal insurers did not underwrite any commercial business in 2007 46
The majority of the top 10 accident and health insurers witnessed their profitability decline in 2007 48
The average loss ratio of the top 10 UK accident and health insurers decreased by one percentage point in 2007, with five insurers witnessing an improvement in their ratios 48
The average loss ratio of the top 10 UK accident and health insurers improved marginally in 2007 48
New Hampshire and ACE witnessed significant improvements in their loss ratios in 2007 48
Norwich Union, ComInsofAmerica, SimplyHealth and Standard Life saw their loss ratios deteriorate in 2007 49
The average expense ratio of the top 10 UK accident and health insurers decreased by 1.2 percentage points in 2007, as five insurers saw improvements in their ratios 51
The average expense ratio of the top 10 UK accident and health insurers decreased to 31.0% 51
ACE, Norwich Union and Simply Health achieved the largest improvements in their expense ratios 51
AXA, ComInsofAmerica and Standard Life saw the largest increase in their expense ratios 52
The rest of the top 10 UK accident and health insurers saw marginal changes in their expense ratios 52
The average combined ratio improved by 2.2 percentage points, with ACE and New Hampshire seeing the two largest decreases in 2007 54
The average combined ratio of the top 10 accident and health insurers decreased by 2.2 percentage points to 90.2% 54
Five of the top 10 UK accident and health insurers recorded improvements in their combined ratios in 2007 54
Four of the top 10 UK accident and health insurers witnessed increases in their combined ratios 55
Four of the top 10 liability insurers saw an improvement in profitability in 2007 57
Five of the top 10 liability insurers witnessed an improvement in their loss ratios in 2007 57
The average loss ratio of the top 10 UK liability insurers decreased by 10.9 percentage points in 2007 57
NFU Mutual and QBE saw the largest increase in their loss ratios 57
AXA, Zurich and RSA achieved significant improvements in their loss ratio 58
New Hampshire achieved an improvement in its loss ratio and premium income growth 58
All of the top 10 liability insurers recorded an increase in their expense ratios in 2007 59
The average expense ratio of the top 10 liability insurers increased by 3.2 percentage points in 2007 59
New Hampshire possessed the lowest expense ratio in 2007 59
Norwich Union, Zurich, RSA and Allianz recorded the highest increases in their expense ratios in 2007 59
The average combined ratio of the top 10 UK liability insurers improved by 7.7 percentage points, with AXA, Zurich and RSA seeing the largest decreases in 2007 61
The average combined ratio of the top 10 liability insurers decreased by 7.7 percentage points to 94.4% 61
NFU Mutual saw the largest increase in its combined ratio in 2007, which was significantly higher than its peers 61
Four of the top 10 UK liability insurers managed to improve their combined ratios significantly 61
Six of the top 10 motor insurers witnessed profitability increase in 2007 64
The motor insurance market recorded a heavy underwriting loss in 2007 and motor insurers made significant reserve releases 64
The motor insurance market recorded an accident year combined ratio of 113.2% in 2007 64
Motor insurers have increasingly relied on reserve releases in recent years 64
The average loss ratio of the top 10 UK motor insurers increased in 2007 65
The average loss ratio of the top 10 motor insurers rose by 0.9 percentage points in 2007 65
Four insurers saw their loss ratios increase 65
Six of the top 10 motor insurers recorded a decline in their loss ratios in 2007 65
The average expense ratio of the top 10 UK motor insurers decreased marginally, with Allianz recording the largest reduction in 2007 67
The average expense ratio of the top 10 UK motor insurers decreased by 0.1 percentage points to 27.4% 67
RSA, Norwich Union and UKI saw the largest increases in their expense ratios 67
Half of the top 10 UK motor insurers achieved an improvement in their expense ratios 68
The average combined ratio of the top 10 UK motor insurers increased moderately 70
The average combined ratio of the top 10 motor insurers increased by 0.7 percentage points 70
Four insurers recorded an increase in their combined ratio 70
Six of the top 10 insurers recorded a reduction in their combined ratios in 2007 70
Half of the top 10 pecuniary loss insurers witnessed an increase in profitability 72
The average loss ratio of the top 10 UK pecuniary loss insurers decreased in 2007 72
The average loss ratio of the top 10 UK pecuniary loss insurers decreased by 2.3 percentage points in 2007 72
Only three of the top 10 UK pecuniary loss insurers improved their loss ratios in 2007 72
Allianz and Norwich Union saw the largest loss ratio increases in 2007 73
Six of the top 10 pecuniary loss insurers saw an increase in their expense ratios 75
The average expense ratio of the top 10 UK pecuniary loss insurers rose by 1.1 percentage points in 2007 75
Four of the top 10 UK pecuniary loss insurers achieved significant improvements in their expense ratios 75
AXA, UKI, St Andrews and Landmark saw the largest increases in their expense ratios in 2007 76
The average combined ratio of the top 10 UK pecuniary loss insurers improved moderately 77
The average combined ratio of the top 10 pecuniary loss insurers decreased by 1.2 percentage points 77
UKI and Direct Line were the only two players that achieved an improvement in their combined ratios and GWP growth 77
AXA saw the largest increase in its combined ratio among the top 10 UK pecuniary loss insurers 78
All top 10 property insurers witnessed profitability decrease in 2007 due to the summer floods 80
All top 10 property insurers saw their loss ratios increase in 2007 due to the summer floods 80
The average loss ratio of the top 10 UK property insurers increased by 23.1 percentage points 80
St Andrews, Direct Line, Lloyds TSB and Zurich experienced significant increases in their loss ratios 80
Six insurers returned loss ratios that were below the market average in 2007 81
The average expense ratio of the top 10 property insurers increased in 2007, with NIG and Direct Line recording the largest individual increases 83
The average expense ratio of the top 10 property insurers rose by one percentage point in 2007 83
Churchill, Lloyds TSB and St Andrews achieved expense ratio reductions 83
Seven of the top 10 property insurers witnessed their ratios deteriorate in 2007 83
All top 10 property insurers saw their combined ratio increase in 2007 86
The average combined ratio of the top 10 property insurers rose by 24.1 percentage points in 2007 86
Four insurers saw their combined ratios increase by more than 30 percentage points 86
Churchill and Allianz recorded moderate increases to their combined ratios 87
Future Decoded 89
Introduction 89
The private motor market is forecast to achieve the strongest growth in GWP in the personal lines market between 2008 and 2013 89
The UK personal general insurance market is forecast to grow at a CAGR of 3.3% between 2008 and 2013 89
The household insurance market is forecast to grow at a CAGR of 3.0% between 2008 and 2013 89
The individual accident and health market will reach £4.2 billion in GWP in 2013 89
The personal pecuniary loss market is forecast to grow by a CAGR of 2.0% between 2008 and 2013 89
The individual accident and health market is forecast to grow at a marginal rate between 2009 and 2013 91
Continuing premium rate increases will drive marginal growth in the individual accident and health market 91
The individual A&H market is forecast to see marginal growth despite an expected drop in subscribers 92
Private motor GWP is forecast to reach £12.7 billion by 2013 under neutral conditions 94
Conditions in the private motor market are forecast to allow for further increases in premium rates 94
The UK private motor insurance market is predicted to be worth £12.7 billion in 2013 95
The household insurance market is forecast to reach £9 billion in GWP by 2013 97
Premium rate increases are expected to drive growth in household GWP 97
The market will reach a peak of £9 billion in 2013 98
Personal pecuniary loss GWP is forecast to grow at a CAGR of 2.0% between 2008 and 2013 100
The personal pecuniary loss market is forecast to reach £5.1 in GWP by 2013 100
APPENDIX 103
Definitions 103
Definitions for lines of business 103
Accident & health 103
Motor 103
Property 105
Financial/Pecuniary loss business 106
Liability business 107
Total personal 108
Total commercial 108
Premium income measures 108
Gross Premium 108
Written premiums 108
Distribution definitions 109
Banks/building societies 109
Brokers 109
Company staff 109
Direct 109
'Other' company agents 109
Utilities/retailers/affinity groups 109
Methodology 110
Market size 110
Changes in market size information 110
Market size methodology 110
Lloyd's players and underwriting result figures 110
Further reading 110
Ask the analyst 111
Datamonitor consulting 111
Disclaimer 111
List of Tables
Table 1: Total general insurance GWP by line of business, 2003-07 8
Table 2: Personal GWP split by line of business, 2003-07 10
Table 3: Total general insurance underwriting results by line of business, 1997-2007 (£m) 12
Table 4: Accident and health GWP split between individual and group, 2003-07 13
Table 5: Accident and health GWP by sector, 2003-07 15
Table 6: Total UK accident and health underwriting account, 1997-2007 (£m) 17
Table 7: Total motor market GWP by private and commercial segment, 2003-07 18
Table 8: Private motor insurance premium income by line of business 2003-07 21
Table 9: Total UK motor underwriting account, 1997-2007 (£m) 23
Table 10: Total UK private motor underwriting account, 1997-2007 (£m) 24
Table 11: Pecuniary loss market GWP by line of business, 2003-07 25
Table 12: Total UK pecuniary loss underwriting account, 1997-2007 (£m) 27
Table 13: Property insurance GWP split between household and commercial business, 2003-07 28
Table 14: Total UK property underwriting account, 1997-2007 (£m) 30
Table 15: Total UK household underwriting account, 1997-2007 (£m) 32
Table 16: Private motor insurance GWP distribution by channel (All business), 2004-08e 35
Table 17: Household insurance GWP distribution by channel (All business), 2004-08e 37
Table 18: Top 10 personal general insurance advertisers, 2006-08, (£) 39
Table 19: Top 10 personal general insurance advertisers' spend by media, 2006-08 (£) 41
Table 20: Top 10 personal insurance competitors by GWP and market share, 2007 46
Table 21: Split between personal and commercial business for the top 10 personal insurers, 2007 48
Table 22: Premium income compared to change in loss ratio for the top 10 UK accident and health insurers, 2006-07 51
Table 23: Premium income compared to change in expense ratio for the top 10 UK accident and health insurers, 2006-07 54
Table 24: Premium income compared to change in combined ratio for the top 10 UK accident and health insurers, 2006-07 57
Table 25: Change in premium income compared to change in loss ratio for the top 10 UK liability insurers, 2006-07 59
Table 26: Change in premium income compared to change in expense ratio for the top 10 UK liability insurers, 2006-07 61
Table 27: Change in premium income compared to change in combined ratio for the top 10 UK liability insurers, 2006-07 63
Table 28: Combined ratio and accident year combined ratio, total motor market, 2003-07 65
Table 29: Premium income compared to change in loss ratio for the top 10 UK motor insurers, 2006-07 67
Table 30: Premium income compared to change in expense ratio for the top 10 UK motor insurers, 2006-07 70
Table 31: Premium income compared to change in combined ratio for the top 10 UK motor insurers, 2006-07 72
Table 32: Premium income compared to change in loss ratio for the top 10 UK pecuniary loss insurers, 2006-07 75
Table 33: Premium income compared to change in expense ratio for the top 10 UK pecuniary loss insurers, 2006-07 77
Table 34: Premium income compared to change in combined ratio for the UK top 10 pecuniary loss insurers, 2006-07 80
Table 35: Premium income compared to change in loss ratio for the top 10 UK property insurers, 2006-07 83
Table 36: Premium income compared to change in expense ratio among the top 10 property insurers, 2006-07 86
Table 37: Premium income compared to change in combined ratio among the top 10 property insurers, 2006-07 88
Table 38: Forecast of personal general insurance GWP, 2003-13f (£m) 91
Table 39: Key variables affecting individual A&H insurance GWP, 2008e-13f 92
Table 40: Forecast of individual A&H GWP, 2003-13f (£m) 94
Table 41: Key variables affecting private motor insurance GWP, 2008e-13f 95
Table 42: Forecast of private motor insurance GWP , 2003-13f (£m) 97
Table 43: Key variables affecting household insurance GWP, 2008e-13f 98
Table 44: Forecast of household insurance GWP, 2003-13f (£m) 100
Table 45: Forecast of UK pecuniary loss GWP, 2003-13f (£m) 102
List of Figures
Figure 1: The motor and pecuniary loss insurance markets grew in 2007 however the accident and health, property and general liability sectors contracted 8
Figure 2: Private motor and household markets experienced growth in 2007 9
Figure 3: The total general insurance market plunged into a loss of £934m in 2007 11
Figure 4: Growth in both the individual and group accident and health sectors slowed in 2007 13
Figure 5: The individual and group health insurance sectors grew in 2007 however the accident insurance market contracted 14
Figure 6: The accident and health market witnessed a significant decline in profitability in 2007 16
Figure 7: In 2007 the private motor market expanded for the first time in a number of years 18
Figure 8: The private comprehensive and private non-comprehensive markets grew in 2007 however the motorcycle market contracted 20
Figure 9: The motor insurance market continued to make an underwriting loss in 2007 22
Figure 10: Underwriting losses in the private motor market declined in 2007 24
Figure 11: The pecuniary loss market saw its underwriting profit decrease in 2007 26
Figure 12: Household insurance GWP continued to rise in 2007 while commercial property insurance GWP declined 28
Figure 13: The property insurance market moved into a significant loss in 2007 29
Figure 14: The household insurance market moved into a significant underwriting loss in 2007 due to the summer floods 31
Figure 15: The direct channel continues to be the number one route to market for private motor insurance 34
Figure 16: Banks lost market share in the home insurance market as mortgage linked sales declined in 2008 36
Figure 17: Three aggregators now feature in the top 10 insurance advertisers 38
Figure 18: The top 10 general insurance advertisers devoted the majority of their spending to TV advertising in 2008 40
Figure 19: RBSI was the largest personal general insurance group in 2007 45
Figure 20: UKI, Churchill and St Andrews did not write any commercial lines business in 2007 47
Figure 21: New Hampshire and ACE recorded the largest improvements in their loss ratios in 2007 50
Figure 22: ACE and Norwich Union saw the largest improvement in their expense ratios in 2007 53
Figure 23: ACE achieved the largest decrease in its combined ratio, which was accompanied by GWP growth in 2007 56
Figure 24: Half of the top 10 UK liability insurers saw their loss ratios improve in 2007 58
Figure 25: All of the top 10 liability insurers recorded an increase in their expense ratios in 2007 60
Figure 26: AXA, Zurich and RSA recorded the largest improvements in their combined ratios in 2007 62
Figure 27: Motor insurers have become increasingly reliant on reserve releases to bolster their reported profitability 64
Figure 28: Six insurers recorded a decline in their loss ratio in 2007 66
Figure 29: Allianz's expense ratio improved significantly in 2007 69
Figure 30: A number of insurers saw their combined ratios increase in 2007 71
Figure 31: The majority of the top 10 pecuniary loss insurers experienced a moderate increase to their ratios in 2007 74
Figure 32: Norwich Union and GEFI both achieved significant decreases in their expense ratios 76
Figure 33: Half of the top 10 UK pecuniary loss insurers achieved an improvement in their combined ratios in 2007 79
Figure 34: All top 10 property insurers saw their loss ratio increase in 2007 due to the summer floods 82
Figure 35: Lloyds TSB was the only insurer to improve its expense ratio and achieve GWP growth at the same time in 2007 85
Figure 36: All top 10 property insurers saw their combined ratio increase in 2007 87
Figure 37: The private motor market is forecast to achieve the strongest growth in the personal lines market between 2008 and 2013 90
Figure 38: The individual A&H market is forecast to grow to £4.2 billion in 2013 93
Figure 39: Private motor GWP is predicted to grow significantly over the forecast period 96
Figure 40: Total household GWP is forecast to steadily increase, reaching £9 billion in 2013 99
Figure 41: The personal pecuniary loss market is forecast to reach £5.1 billion in GWP by 2013 101