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Consumers and General Insurance - UK - December 2013

“Loyalty or reward schemes could help to improve customer retention. However, Mintel’s research suggests that an annual reduction in premiums is much more likely to drive loyalty than an elaborate rewards programme or discount scheme.”

– Deborah Osguthorpe, Head of UK Financial Services Research

Some questions answered in this report include:

  • How much appeal do multi-product discount schemes have?
  • How much time do customer retention schemes have to make an impact?
  • Why does the insurance industry need to tackle consumers uncertainty?

General insurers are facing challenging conditions. Regulators are paying close attention to the market, and customers are more demanding and discerning. Switching is high across the general insurance market, but is most pronounced in the car and home insurance markets. Few people are prepared to renew their policy without shopping around, resulting in high levels of churn. Insurers use aggressive pricing to attract new customers, which puts downward pressure on underwriting profits and encourages people to switch providers each year.

Some insurers have tried to improve retention rates through the introduction of loyalty schemes. However, in a market where switching has become an engrained behaviour, policyholders will only be tempted to remain with an existing provider if there is a financial incentive. They are unlikely to welcome multifaceted reward schemes, preferring instead a straightforward loyalty discount for each year that they remain with a provider.

This report looks at the relationship between consumers and general insurance providers. It offers a broad overview of the market for personal lines general insurance in terms of the market size, market segmentation and underwriter share. It also includes exclusive research on brand perception, as well as profiles of the main players and an overview of advertising activity. Mintel’s consumer research provides insight into product ownership, shoparound behaviour and attitudes towards loyalty schemes. It also looks at general attitudes towards insurance and examines consumer trust in insurance companies.

Report scope and market definitions

This report is a consumer research-focused overview of the UK personal lines general insurance market.

General insurance – is insurance that covers (non-life) risks for a limited period, typically one year.

The main sectors within the personal lines market are:

  • Motor – motor policies cover the legal liabilities arising from the use of a motor vehicle, such as a private car or motorcycle. Comprehensive policies additionally cover damage to the vehicle.
  • Household – household policies cover specified property that may be damaged or destroyed by events or perils such as fire, storm, subsidence or theft.
  • Accident and health – comprises two main types of business: personal accident and medical expenses. Personal accident policies will pay a lump sum or weekly benefits in the event of accidental death or a specified injury. Private medical insurance (PMI) will pay the costs of medical treatment for acute conditions.
  • Pecuniary loss – relates to financial losses that may have occurred, includes travel insurance, pet insurance, legal expenses etc.

Gross written premium (GWP) – premium income accepted during the year, which is quoted gross of reinsurance ceded, but net of reinsurance accepted.

Net written premium (NWP) – premium income net of reinsurance ceded but gross of commission, and excluding Insurance Premium Tax.

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Table of contents

  1. Introduction

      • Report scope and market definitions
        • Note on consumer research
          • Abbreviations
          • Executive Summary

              • The market
                • Personal lines GWP declined slightly in 2012
                  • Figure 1: General insurance revenue – retail products – UK risks, by GWP, 2008-12
                • Private motor insurance accounts for 40% of personal lines GWP
                  • Only one in 10 have no form of general insurance cover
                    • Figure 2: General insurance product ownership, September 2013
                  • Ownership of some discretionary forms of insurance is likely to fall
                    • Companies, brands and innovation
                      • Post office leads the way in terms of trust and differentiation
                        • Figure 3: Attitudes towards and use of brands in the insurance sector, October 2013
                      • Aviva was the leading personal lines general insurance underwriter in 2012
                        • Figure 4: Largest personal lines underwriters, by GWP, 2012
                      • Consumer purchasing patterns
                        • Shopping around is now normal practice
                          • Figure 5: Behaviour at last policy renewal, September 2013
                        • Around half of policyholders shop around to check competitiveness of renewal quote
                          • Intentions to shop around at next renewal are highest among newer policyholders
                            • Figure 6: Proportion who are likely to shop around at next policy renewal, September 2013
                          • Policyholders prefer rewards for how long a product is held than multi-product discounts
                            • Figure 7: Interest in incentives to encourage loyalty to an insurance provider, September 2013
                          • Consumer attitudes
                            • Three in 10 find arranging insurance is a hassle
                              • Figure 8: Attitudes towards general insurance, September 2013
                            • Policyholders are divided over level of trust in insurers
                              • Figure 9: Consumer trust in general insurance providers, September 2013
                            • What we think
                            • Issues and Insights

                                • Playing on people’s natural fear of losing out can reduce churn
                                  • The facts
                                    • The implications
                                      • Multi-product discount schemes have a limited appeal
                                        • The facts
                                          • The implications
                                            • Customer retention schemes have a short space of time to make an impact
                                              • The facts
                                                • The implications
                                                  • Tackling uncertainty to improve levels of trust
                                                    • The facts
                                                      • The implications
                                                      • Trend Application

                                                        • Celebrate rather than deter shoparound behaviour
                                                          • Helping people to understand their insurance needs
                                                            • Insurers will need to rethink their strategy for cross-selling to the over-55s
                                                            • Market Size

                                                              • Key points
                                                                • Gross written premiums contracted by 3% in 2012
                                                                  • Figure 10: General insurance revenue – retail products – UK risks, by GWP, 2008-12
                                                                • Underwriting profits decline but the general insurance market is still in the black
                                                                  • Figure 11: General insurance – retail products – UK outgo and underwriting result, 2008-12
                                                              • Market Segmentation

                                                                • Key points
                                                                  • Motor insurance accounts for around two fifths of total GI income
                                                                    • Figure 12: Share of premium income, by sector, UK general insurance retail products, 2012
                                                                  • Motor insurance sector closes in on underwriting profitability…
                                                                    • Figure 13: Underwriting ratio – UK general insurance retail products, 2008-12
                                                                  • …as claim costs are brought under control
                                                                    • Figure 14: Claims ratio – UK general insurance retail products, 2008-12
                                                                • Underwriter Share

                                                                  • Key points
                                                                    • Aviva is the top personal lines underwriter
                                                                      • Figure 15: Largest personal lines underwriters, by GWP, 2010-12
                                                                  • Companies and Products

                                                                    • Aviva
                                                                        • Figure 16: Key financial data for Aviva UK & Ireland General Insurance business, Interim results for first nine months, 2012 and 2013
                                                                        • Figure 17: Key financial data for Aviva UK & Ireland General Insurance business, 2011 and 2012
                                                                      • Ageas
                                                                          • Figure 18: Key financial data for Ageas UK, Non-life insurance business, H1 2012 AND H1 2013
                                                                          • Figure 19: Key financial data for Ageas Insurance limited, UK business, 2011 and 2012
                                                                        • AXA
                                                                            • Figure 20: Key financial data for AXA Insurance plc, 2011 and 2012
                                                                          • Bupa
                                                                              • Figure 21: Bupa – UK market unit results, H1 2012 and H1 2013
                                                                            • Direct Line Group
                                                                                • Figure 22: Key financial data for Direct Line Group, interim results for the first nine months 2012 and 2013
                                                                                • Figure 23: Key financial data for Direct Line Group, 2011 and 2012
                                                                              • LV=
                                                                                  • Figure 24: Key financial data for LV= Group, General Insurance business, H1 2012 AND H1 2013
                                                                                  • Figure 25: Key financial data for LV=, 2011 and 2012
                                                                                • RSA Insurance
                                                                                    • Figure 26: Key financial data for RSA UK Insurance, H1 2012 AND H1 2013
                                                                                    • Figure 27: Key financial data for RSA UK Insurance, 2011 and 2012
                                                                                • Brand Research

                                                                                  • Brand map
                                                                                      • Figure 28: Attitudes towards and usage of brands in the insurance sector, October 2013
                                                                                    • Correspondence analysis
                                                                                      • Brand attitudes
                                                                                        • Figure 29: Attitudes, by insurance brand, October 2013
                                                                                      • Brand personality
                                                                                        • Figure 30: Insurance brand personality – macro image, October 2013
                                                                                        • Figure 31: Insurance brand personality – micro image, October 2013
                                                                                      • Brand experience
                                                                                        • Figure 32: Insurance brand usage, October 2013
                                                                                        • Figure 33: Satisfaction with various insurance brands, October 2013
                                                                                        • Figure 34: Consideration of insurance brands, October 2013
                                                                                        • Figure 35: Consumer perceptions of current insurance brand performance, October 2013
                                                                                      • Brand index
                                                                                        • Figure 36: Insurance brand index, October 2013
                                                                                      • Target group analysis
                                                                                        • Figure 37: Target groups, October 2013
                                                                                        • Figure 38: Insurance brand usage, by target groups, October 2013
                                                                                      • Group One – Conformists
                                                                                        • Group Two – Simply the Best
                                                                                          • Group Three – Shelf Stalkers
                                                                                            • Group Four – Habitual Shoppers
                                                                                              • Group Five – Individualists
                                                                                              • Brand Communication and Promotion

                                                                                                • Key points
                                                                                                  • Adspend on general insurance products continues its downward trend
                                                                                                    • Figure 39: Topline adspend for general insurance products, 2010/11-2012/13
                                                                                                  • Car insurance and home insurance continue to dominate the market
                                                                                                    • Figure 40: Adspend, by general insurance category, 2010/11-2012/13
                                                                                                  • TV advertising remains the most popular channel for insurance adspend
                                                                                                    • Figure 41: General insurance adspend, by media type, 2010/11-2012/13
                                                                                                  • Majority of top 10 insurers reduced adspend over the last 12 months
                                                                                                    • Figure 42: Top 20 general insurance advertisers, 2010/11-2012/13
                                                                                                  • A note on adspend
                                                                                                  • General Insurance Product Ownership

                                                                                                    • Key points
                                                                                                      • Only one in 10 do not have some type of general insurance cover
                                                                                                        • Figure 43: General insurance product ownership, September 2013
                                                                                                      • Car and home insurance tops the product ownership list
                                                                                                        • Regulatory scrutiny could limit sales of many forms of discretionary insurance
                                                                                                          • 50% have four or more different types of general insurance cover
                                                                                                            • Figure 44: Number of different general insurance products held, September 2013
                                                                                                            • Figure 45: Number of insurance products held, by type of product owned, September 2013
                                                                                                        • Renewal Behaviour by Product

                                                                                                          • Key points
                                                                                                            • Policy switching is highest in the car insurance sector
                                                                                                              • Figure 46: Behaviour at last policy renewal, September 2013
                                                                                                            • Shoparound behaviour will extend across most insurance markets
                                                                                                              • An increased focus on customer retention
                                                                                                                • Insurance product tenure
                                                                                                                  • Insurers only have a couple of years to gain customer loyalty
                                                                                                                    • Figure 47: Length of time product held with existing insurer, by policy owned, September 2013
                                                                                                                  • Changing perceptions of insurance as a commodity
                                                                                                                  • Expected Behaviour at Next Renewal by Product

                                                                                                                    • Key points
                                                                                                                      • Intentions to shop around at next renewal remain high
                                                                                                                        • Figure 48: Likelihood to shop around at next policy renewal, September 2013
                                                                                                                      • Detailed underwriting and employer benefits reduce the incentive to shop around for health insurance
                                                                                                                        • New packaged current account rules could increase shoparound activity
                                                                                                                          • Customers who remain loyal for three or more years are much less likely to shop around
                                                                                                                            • Figure 49: Likelihood to shop around at next car insurance policy renewal, by length of time product held with existing insurer, September 2013
                                                                                                                            • Figure 50: Likelihood to shop around at next home contents insurance policy renewal, by length of time product held with existing insurer, September 2013
                                                                                                                        • Reasons for Shopping Around at Renewal

                                                                                                                          • Key points
                                                                                                                            • Consumers expect to find a cheaper deal at each renewal
                                                                                                                              • Figure 51: Reasons for shopping around at renewal, September 2013
                                                                                                                            • Renewal price checking increases with age
                                                                                                                              • Figure 52: Respondents who shopped around to check the competitiveness of their renewal quotation or to check if their provider offers lower premiums to new customers, by age, September 2013
                                                                                                                            • Price checking as a bargaining tool
                                                                                                                              • One in four shop around for a better level of cover
                                                                                                                                • Figure 53: Reasons for shopping around at renewal, by number of general insurance products owned, September 2013
                                                                                                                            • Attitudes Towards Insurance Loyalty Schemes

                                                                                                                              • Key points
                                                                                                                                • Policyholders link loyalty to lower premiums
                                                                                                                                  • Figure 54: Interest in incentives to encourage loyalty to an insurance provider, September 2013
                                                                                                                                • Customer service assurances hold limited appeal among policyholders
                                                                                                                                  • Multi-product discounts appeal to one in four policyholders
                                                                                                                                    • Figure 55: Interest in incentives to encourage loyalty to an insurance provider, by number of general insurance products owned, September 2013
                                                                                                                                  • Customer reward schemes may struggle to stand out in a plethora of special offers
                                                                                                                                    • Giving people a reason to remain loyal
                                                                                                                                      • Figure 56: Interest in incentives to encourage loyalty to an insurance provider, by reasons for shopping around at renewal, September 2013
                                                                                                                                  • Attitudes Towards General Insurance

                                                                                                                                    • Key points
                                                                                                                                      • 30% admit that arranging insurance is a hassle
                                                                                                                                        • Figure 57: Attitudes towards general insurance, September 2013
                                                                                                                                      • Appealing to a sense of achievement
                                                                                                                                        • Over-55s are more likely to be reassured by insurance…
                                                                                                                                          • Figure 58: Agreement with selected attitudinal statements regarding general insurance, by age, September 2013
                                                                                                                                        • …but are also more likely to be overwhelmed by choice of products on offer
                                                                                                                                          • Consumers are unenthusiastic about multi-product deals unless they deliver a financial saving
                                                                                                                                            • Multi-product holders are prepared to invest time in finding the best deal
                                                                                                                                              • Figure 59: Attitudes towards general insurance, by number of general insurance products owned, September 2013
                                                                                                                                          • Trust in General Insurance Providers

                                                                                                                                            • Key points
                                                                                                                                              • Consumers are divided over perceptions of trust in insurance companies
                                                                                                                                                • Figure 60: Consumer trust in general insurance providers, September 2013
                                                                                                                                              • Consumers are most likely to distrust the approach to pricing
                                                                                                                                                • Over-65s are much more likely to trust insurance companies
                                                                                                                                                  • Figure 61: Agreement with statements about trust in general insurance providers, by age, September 2013
                                                                                                                                                • Lack of trust can be partly linked to confusion and uncertainty
                                                                                                                                                  • Figure 62: Attitudes towards general insurance, by consumer trust in general insurance providers, September 2013
                                                                                                                                              • Appendix – Brand Research

                                                                                                                                                  • Figure 63: Brand usage, October 2013
                                                                                                                                                  • Figure 64: Brand commitment, October 2013
                                                                                                                                                  • Figure 65: Brand usage, October 2013
                                                                                                                                                  • Figure 66: Brand diversity, October 2013
                                                                                                                                                  • Figure 67: Brand satisfaction, October 2013
                                                                                                                                                  • Figure 68: Brand attitude, October 2013
                                                                                                                                                  • Figure 69: Brand image – macro image, October 2013
                                                                                                                                                  • Figure 70: Brand image – micro image, October 2013
                                                                                                                                                  • Figure 71: Profile of target groups, by demographics, October 2013
                                                                                                                                                  • Figure 72: Psychographic segmentation, by target groups, October 2013
                                                                                                                                                  • Figure 73: Brand usage, by target groups, October 2013
                                                                                                                                                • Brand index
                                                                                                                                                  • Figure 74: Brand index, October 2013
                                                                                                                                              • Appendix – General Insurance Product Ownership

                                                                                                                                                  • Figure 75: Most popular general insurance product ownership, by demographics, September 2013
                                                                                                                                                  • Figure 76: Next most popular general insurance product ownership, by demographics, September 2013
                                                                                                                                                  • Figure 77: Other general insurance product ownership, by demographics, September 2013
                                                                                                                                                  • Figure 78: Number of general insurance products owned, by demographics, September 2013
                                                                                                                                              • Appendix – Renewal Behaviour by Product

                                                                                                                                                  • Figure 79: Behaviour at last policy renewal – Car insurance, by demographics, September 2013
                                                                                                                                                  • Figure 80: Behaviour at last policy renewal – Annual travel insurance, by demographics, September 2013
                                                                                                                                                  • Figure 81: Behaviour at last policy renewal – Pet insurance, by demographics, September 2013
                                                                                                                                                  • Figure 82: Behaviour at last policy renewal – Medical/health insurance, by demographics, September 2013
                                                                                                                                                  • Figure 83: Behaviour at last policy renewal – Home emergency cover, by demographics, September 2013
                                                                                                                                                  • Figure 84: Behaviour at last policy renewal – Mobile phone insurance, by demographics, September 2013
                                                                                                                                              • Appendix – Expected Behaviour at Next Renewal by Product

                                                                                                                                                  • Figure 85: Likelihood to shop around at next policy renewal – Car insurance, by demographics, September 2013
                                                                                                                                                  • Figure 86: Likelihood to shop around at next policy renewal – Home contents insurance, by demographics, September 2013
                                                                                                                                                  • Figure 87: Likelihood to shop around at next policy renewal – Buildings insurance, by demographics, September 2013
                                                                                                                                                  • Figure 88: Likelihood to shop around at next policy renewal – Home emergency cover, by demographics, September 2013
                                                                                                                                                  • Figure 89: Likelihood to shop around at next policy renewal – Annual travel insurance, by demographics, September 2013
                                                                                                                                                  • Figure 90: Likelihood to shop around at next policy renewal – Medical/health insurance, by demographics, September 2013
                                                                                                                                                  • Figure 91: Likelihood to shop around at next policy renewal – Pet insurance, by demographics, September 2013
                                                                                                                                                  • Figure 92: Likelihood to shop around at next policy renewal – Mobile phone insurance, by demographics, September 2013
                                                                                                                                                  • Figure 93: Likelihood to shop around at next buildings insurance policy renewal, by length of time product held with existing insurer, September 2013
                                                                                                                                                  • Figure 94: Likelihood to shop around at next home emergency cover policy renewal, by length of time product held with existing insurer, September 2013
                                                                                                                                                  • Figure 95: Likelihood to shop around at next annual travel insurance policy renewal, by length of time product held with existing insurer, September 2013
                                                                                                                                                  • Figure 96: Likelihood to shop around at next medical/health insurance policy renewal, by length of time product held with existing insurer, September 2013
                                                                                                                                                  • Figure 97: Likelihood to shop around at next pet insurance policy renewal, by length of time product held with existing insurer, September 2013
                                                                                                                                                  • Figure 98: Likelihood to shop around at next mobile phone insurance policy renewal, by length of time product held with existing insurer, September 2013
                                                                                                                                              • Appendix – Reasons for Shopping Around at Renewal

                                                                                                                                                  • Figure 99: Most popular reasons for shopping around at renewal, by demographics, September 2013
                                                                                                                                                  • Figure 100: Next most popular reasons for shopping around at renewal, by demographics, September 2013
                                                                                                                                              • Appendix – Attitudes Towards Insurance Loyalty Schemes

                                                                                                                                                  • Figure 101: Interest in incentives to encourage loyalty to an insurance provider, by demographics, September 2013
                                                                                                                                                  • Figure 102: Interest in incentives to encourage loyalty to an insurance provider, by demographics, September 2013 (continued)
                                                                                                                                              • Appendix – Attitudes Towards General Insurance

                                                                                                                                                  • Figure 103: Attitudes towards general insurance, by demographics, September 2013
                                                                                                                                                  • Figure 104: Attitudes towards general insurance, by demographics, September 2013 (continued)
                                                                                                                                              • Appendix – Trust in General Insurance Providers

                                                                                                                                                  • Figure 105: Agreement with the statement ‘I trust insurance companies to give me a fair deal’, by demographics, September 2013
                                                                                                                                                  • Figure 106: Agreement with the statement ‘I trust insurance companies to handle any claims that I make fairly’, by demographics, September 2013
                                                                                                                                                  • Figure 107: Agreement with the statement ‘I trust insurance companies to give me a product that is suitable for my needs’, by demographics, September 2013
                                                                                                                                                  • Figure 108: Consumer trust in general insurance providers, by number of general insurance products owned, September 2013

                                                                                                                                              Companies Covered

                                                                                                                                              • Age UK
                                                                                                                                              • Ageas
                                                                                                                                              • Argos
                                                                                                                                              • Asda Group Ltd
                                                                                                                                              • Aviva Plc
                                                                                                                                              • AXA PPP healthcare
                                                                                                                                              • AXA UK plc
                                                                                                                                              • Barclays Bank plc
                                                                                                                                              • BUPA
                                                                                                                                              • Churchill Insurance
                                                                                                                                              • Direct Line Group Limited
                                                                                                                                              • Green Flag Motoring Assistance
                                                                                                                                              • Grupo Santander UK
                                                                                                                                              • John Lewis Partnership
                                                                                                                                              • Kwik-Fit Insurance Services Ltd.
                                                                                                                                              • Liverpool Victoria Friendly Society Limited
                                                                                                                                              • London Stock Exchange plc
                                                                                                                                              • LV=
                                                                                                                                              • MORE TH>N
                                                                                                                                              • Nationwide Building Society
                                                                                                                                              • NatWest
                                                                                                                                              • Post Office Limited
                                                                                                                                              • Privilege Insurance
                                                                                                                                              • Prudential plc
                                                                                                                                              • Retirement Insurance Advisory Service (RIAS)
                                                                                                                                              • Royal Bank of Scotland Group plc
                                                                                                                                              • RSA
                                                                                                                                              • RSPCA
                                                                                                                                              • Sainsbury's Bank
                                                                                                                                              • Swiftcover
                                                                                                                                              • Tesco (UK)
                                                                                                                                              • The Green Insurance Company
                                                                                                                                              • The National Insurance and Guarantee Corporation Limited

                                                                                                                                              Consumers and General Insurance - UK - December 2013

                                                                                                                                              £2,195.00 (Excl.Tax)