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General Insurance Overview - UK - December 2009

This report considers broad trends in the general insurance marketplace, such as changes in distribution and the impact of the recession. It also examines the key players in the general insurance market and the performance of key personal lines markets including home, motor and health insurance.

  • According to Mintel’s consumer research around 11 million adults don’t trust insurers to pay out in the event of a claim.
  • More than 26 million people agree that they always shoparound when a policy is due for renewal to try and find a better deal.
  • However, ‘insurance switchers’ are more likely to be ABs and people with higher incomes, which suggests that looking for a better deal is not necessarily driven by the need to save money.
  • More than 7 million people agree that insurance companies are all the same, an attitude which undermines loyalty, increases customer churn and places a greater emphasis on price as a differentiating factor.
  • Cost and the level of cover are the most important considerations for consumers when arranging insurance cover. Cost is more likely to be an issue for those aged under 45, while the quality of cover is more likely to be important for people aged over 35.
  • People who prefer to arrange their insurance cover online are more likely to switch insurers at renewal, although those arranging cover directly with an insurer show a much higher propensity to be loyal compared to those using a price comparison site.

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Table of contents

  1. Issues in the Market

      • Key issues
        • Sector focus
          • Definitions
            • Note on consumer research
              • Abbreviations
              • Future Opportunities

                • Insurers need to tackle a lack of trust
                  • A point of difference
                    • Improving policyholder loyalty
                      • Scope to expand product ownership – targeting 16-24-year-olds
                      • Market in Brief

                        • General insurance market returns to underwriting profitability in 2008
                          • Figure 1: UK outgo and underwriting result for annual general insurance business, 2004-08
                        • Premium trends vary between different classes of business
                          • Figure 2: Share of total premium income (UK annual business), by sector, 2008
                        • Challenging conditions during 2009
                          • Aviva and RBS are leading general insurance underwriters
                            • Figure 3: Top five general insurers/reinsuers – total market (direct and facultative business), 2008
                          • Online channels revolutionise general insurance distribution
                            • Figure 4: Preferred methods of arranging insurance for the listed general insurance products, September 2009
                          • General insurance product ownership
                            • Figure 5: Ownership of general insurance products, September 2009
                          • Banks take a greater role in the home insurance market
                            • Figure 6: Type of provider used for main insurance policies, by different types of product held, September 2009
                          • Two thirds shop around at renewal time
                            • The issue of trust
                            • Market Environment

                              • Key points
                                • Challenging conditions for the general insurance market
                                  • Figure 7: GDP quarterly percentage change, 2004-09
                                • Consumer priorities have changed during 2009
                                  • Shoparound activity increases but policy cancellations are overstated
                                    • Consumers continue to move online…
                                      • Figure 8: British internet penetration at home/work/place of study or elsewhere, 2003-09
                                    • …but online channels do have consequences for profitability
                                      • General insurance fraud is on an upward trend
                                        • Figure 9: Estimated value of undetected fraudulent general insurance claims, 2008
                                      • Regulation – a change in approach
                                        • Law Commission proposals could boost consumer protection
                                          • Solvency II – a new regulatory regime
                                            • PPI continues to be placed under the spotlight
                                              • Extension of travel insurance regulations creates a level playing field
                                              • SWOT Analysis – General Insurance

                                                  • Figure 10: SWOT analysis for the general insurance market (personal lines), 2009
                                              • Trade Perspective

                                                  • Participating companies
                                                    • Impact of the recession
                                                      • What are the key challenges facing insurers?
                                                        • Customer acquisition vs. customer retention
                                                          • Aggregators – weathering the economic storm
                                                            • How important is brand strength and loyalty in the current market?
                                                              • Looking to the future
                                                              • Market Size

                                                                • Key points
                                                                  • Mixed fortunes across the general insurance market
                                                                    • Figure 11: Summary of annual general insurance business – UK risks, by sector, 2004-08
                                                                  • UK general insurance market records an underwriting profit in 2008…
                                                                    • Figure 12: UK outgo and underwriting result for annual general insurance business, 2004-08
                                                                  • …but results vary across different sectors
                                                                    • Personal lines business totalled around £23.5 billion in 2008
                                                                      • Figure 13: Split of general insurance gross written premiums, by personal, commercial and MAT sectors, 2008
                                                                  • Sector Performance

                                                                    • Key points
                                                                      • Private motor and domestic property represents 40% of all premium income
                                                                        • Figure 14: Share of total premium income (UK annual business), by sector, 2008
                                                                      • Premium income trends by business class
                                                                        • Figure 15: Detailed premium analysis – UK, by selected class of business, 2003/04-2007/08
                                                                      • Premiums start to creep up in the private motor insurance market
                                                                        • Figure 16: UK private motor – GWP, 2004-09
                                                                      • Premium growth is limited in the home insurance market
                                                                        • Figure 17: UK domestic property – GWP, 2004-09
                                                                      • Accident and health sector is more susceptible to economic conditions
                                                                        • Figure 18: UK accident and health – GWP, 2004-09
                                                                      • Lower demand for travel insurance due to difficult economic conditions
                                                                        • Figure 19: UK travel insurance – GWP, 2004-09
                                                                    • Claims Experience

                                                                      • Key points
                                                                        • Claims costs increase in most general insurance markets
                                                                          • Figure 20: Net claims incurred – UK annual general insurance business, by sector, 2004-08
                                                                        • Claims ratios worsen during 2009
                                                                          • Figure 21: Claims ratio – UK annual general insurance business, by sector, 1999-2008
                                                                        • Almost three in ten don’t trust insurers to pay out for claims…
                                                                          • Figure 22: Consumer findings regarding claims experience, September 2009
                                                                        • …but negative views are not necessarily borne out of experience
                                                                          • Improving trust is an important consideration for industry
                                                                            • Law Commission proposals should improve consumer confidence
                                                                            • Underwriter Market Share

                                                                              • Key points
                                                                                • Aviva and RBS head the list of general insurance underwriters
                                                                                  • Figure 23: Largest general insurers/reinsuers – total market (direct and facultative business), 2006-08
                                                                                • RBS is dominant in the private motor market
                                                                                  • Figure 24: Top ten underwriters in the private motor sector, 2008
                                                                                • Aviva is leading provider of domestic property insurance
                                                                                  • Figure 25: Top ten underwriters in the personal property insurance sector, 2008
                                                                              • Companies and Products

                                                                                • Major players
                                                                                  • Aviva UK Insurance
                                                                                    • Figure 26: Aviva – UK general insurance (including health) financial key performance indicators, 2007-09
                                                                                  • Royal Bank of Scotland Insurance
                                                                                    • Figure 27: RBS Insurance – key performance indicators, 2007-09
                                                                                  • Royal & SunAlliance
                                                                                    • Figure 28: RSA – Key performance indicators, 2007-09
                                                                                  • AIG
                                                                                    • AXA Insurance
                                                                                      • Figure 29: AXA – UK and Ireland general insurance financial key performance indicators, 2007-09
                                                                                      • Figure 30: Gross revenues for property and casualty insurance in the UK, by channel, 2007 and 2008
                                                                                    • Zurich Insurance
                                                                                      • Figure 31: Zurich Financial Services General Insurance financials, 2007-09
                                                                                    • Major insurance brokers
                                                                                      • Acromas Holding Ltd (Saga/AA)
                                                                                        • BGL Group
                                                                                          • Swinton Group
                                                                                          • Channels to Market

                                                                                            • Key points
                                                                                              • Intermediaries hold share but direct channels continue to expand
                                                                                                • Figure 32: Proportional distribution for personal lines general insurance, by value, 1999-2008
                                                                                              • Direct channels dominate in the motor insurance sector
                                                                                                • Figure 33: Proportional distribution for personal lines motor insurance, by value, 2004-08
                                                                                              • Intermediaries and banks are the main channels for home insurance
                                                                                                • Figure 34: Proportional distribution for personal lines property insurance, by value, 2004-08
                                                                                              • Online channels are the preferred way to arrange insurance products
                                                                                                • Figure 35: Preferred methods of arranging insurance for the listed general insurance products, September 2009
                                                                                              • Aggregator influence continues to spread
                                                                                                • Figure 36: Products purchased online or through price-comparison sites, September 2009
                                                                                            • Brand Communication and Promotion

                                                                                              • Key points
                                                                                                • General insurance attracts the largest adspend in financial services
                                                                                                  • Brand awareness remains a key issue for consumers
                                                                                                    • General insurance adspend is falling…
                                                                                                      • Figure 37: Topline adspend for general insurance products, 2006/07-2008/09
                                                                                                    • …but not all insurance sectors experience a fall in adspend
                                                                                                      • Figure 38: Adspend, by general insurance category, 2006/07-2008/09
                                                                                                    • Direct mail and TV advertising account for 80% of total spent
                                                                                                      • Figure 39: General insurance advertiisng, by media type, 2006/07-2008/09
                                                                                                    • Aggregator brands up their adspend significantly
                                                                                                      • Figure 40: Top 20 general insurance advertisers, 2006/07-2008/09
                                                                                                  • The Consumer – Insurance Product Ownership

                                                                                                    • Key points
                                                                                                      • Overview of product ownership
                                                                                                          • Figure 41: Ownership of general insurance products, September 2009
                                                                                                        • Product ownership target groups
                                                                                                          • Figure 42: Target groups identified for selected general insurance products, September 2009
                                                                                                        • Above and beyond the essentials
                                                                                                          • Cross-holding analysis reveals associations between products
                                                                                                              • Figure 43: Cross-holdings of the most popular general insurance products, September 2009
                                                                                                              • Figure 44: Cross-holdings of the next most popular general insurance products, September 2009, September 2009
                                                                                                            • More than 18 million have three or more general insurance products
                                                                                                              • Figure 45: Repertoire analysis of the number of insurance products held, September 2009
                                                                                                            • Scope to expand optional cover among insurance novices
                                                                                                              • Figure 46: Types of insurance products have, by repertoire of types of insurance products have, September 2009
                                                                                                          • The Consumer – Insurance Providers

                                                                                                            • Key points
                                                                                                              • Car insurance is dominated by insurance brands…
                                                                                                                  • Figure 47: Type of provider used for main insurance policies, by different types of product held, September 2009
                                                                                                                • …but banks have greater presence in home and travel sectors
                                                                                                                  • Banks are more likely to attract a slightly older insurance customer
                                                                                                                    • Figure 48: Key demographics for type of provider used for main types of insurance cover, September 2009
                                                                                                                  • Brands have strengths in different sectors
                                                                                                                    • Figure 49: Providers used for main types of insurance cover, by different types of product held, September 2009
                                                                                                                  • Brand cross-sale opportunities
                                                                                                                    • Figure 50: Product ownership, by users of different insurance brands, September 2009
                                                                                                                  • Insurance firms tend to be first port of call for insurance novices
                                                                                                                    • Figure 51: Providers and brands used for buildings/contents/car/annual travel insurance, by repertoire of the number of insurance products held, September 2009
                                                                                                                • The Consumer – Channel Preferences and Switching Activity

                                                                                                                  • Key points
                                                                                                                    • Price-comparison sites are the favoured channel for arranging general insurance policies
                                                                                                                        • Figure 52: Preferred methods of arranging insurance for the listed general insurance products, September 2009
                                                                                                                      • Online is generally the starting point for most insurance arrangements
                                                                                                                        • Under-45s opt for online channels
                                                                                                                          • Figure 53: Key demogrpahics for channels most likely to be used to arrange car/contents/buildings/travel insurance, September 2009
                                                                                                                        • Preferred channels have influence on brands chosen
                                                                                                                          • Figure 54: Providers and brands used for buildings/contents/car/annual travel insurance, by channels most likely to be used to arrange general insurance products, September 2009
                                                                                                                        • Two thirds of people advocate shopping around at renewal
                                                                                                                            • Figure 55: Agreement with statements regarding attitudes towards switching insurance policies, September 2009
                                                                                                                          • Consumer attitudes towards switching insurers
                                                                                                                            • Insurance switchers are more likely to be affluent
                                                                                                                              • Figure 56: Key demographics for agreement with statements about switching insurers, September 2009
                                                                                                                            • Not all online channels undermine customer loyalty
                                                                                                                              • Figure 57: Preferred method of arranging general insurance products, by agreement with statements regarding switching insurers, September 2009
                                                                                                                            • Switching levels vary between products
                                                                                                                              • Figure 58: Agreement with statements about switching insurers, by general insurance product ownership, September 2009
                                                                                                                            • How important is brand in the likelihood to switch?
                                                                                                                              • Figure 59: Renewal behaviour, by type of insurance provider used, September 2009
                                                                                                                          • The Consumer – Attitudes towards Buying General Insurance

                                                                                                                            • Key points
                                                                                                                              • Policy considerations differ between insurance products
                                                                                                                                  • Figure 60: Most important considerations when buying insurance, by holders of buildings, contents, car and travel insurance, September 2009
                                                                                                                                • Cost vs. the level of cover
                                                                                                                                  • Cost is the main consideration for under-45s
                                                                                                                                    • Figure 61: Key demographics for most important considerations when buying insurance, September 2009
                                                                                                                                  • Price is the main but not only concern for online insurance shoppers
                                                                                                                                    • Figure 62: Most important considerations when buying different insurance policies, by ways of arranging insurance most likely to use, September 2009
                                                                                                                                  • Majority don’t see the point in paying extra for general insurance
                                                                                                                                    • Figure 63: Attitudes towards general insurance products, September 2009
                                                                                                                                  • A lack of trust continues to undermine the industry
                                                                                                                                    • Offline purchasers are more likely to pay for quality products
                                                                                                                                      • Figure 64: Attitudes towards insurance products, by net of ways of arranging insurance most likely to use, September 2009
                                                                                                                                    • Brand is more important for those with optional insurance products
                                                                                                                                      • Figure 65: Attitudes towards general insurance products, by most popular general insurance products held, September 2009
                                                                                                                                    • A perceived lack of differentiation encourages greater focus on price
                                                                                                                                      • Figure 66: Most important considerations when buying insurance, by attitudes towards general insurance products, September 2009
                                                                                                                                  • The Consumer – Target Group Analysis

                                                                                                                                    • Key points
                                                                                                                                      • Who are the key targets for insurance providers?
                                                                                                                                        • Figure 67: Target groups based on attitudes towards buying general insurance products, September 2009
                                                                                                                                      • Disengaged and ambivalent
                                                                                                                                        • Price is everything
                                                                                                                                          • Cautious quality seekers
                                                                                                                                            • Discerning and demanding
                                                                                                                                              • Price is not a concern for every target group
                                                                                                                                                • Figure 68: Most important things look for when buying different insurance policies, by target groups, September 2009
                                                                                                                                              • Moving beyond price will require improvements in trust and differentiation
                                                                                                                                                • Figure 69: Attitudes towards insurance products, by target groups, September 2009
                                                                                                                                            • Appendix – The Consumer – Insurance Product Ownership

                                                                                                                                                • Figure 70: Ownership of general insurance products, by demographics, September 2009
                                                                                                                                                • Figure 71: Ownership of general insurance products, by demographics, September 2009
                                                                                                                                                • Figure 72: Repertoire of the number of insurance products owned, by demographics, September 2009
                                                                                                                                            • Appendix – The Consumer – Insurance Providers

                                                                                                                                                • Figure 73: Providers most likely to be used for buildings/contents/car/annual travel insurance, by demographics, September 2009
                                                                                                                                                • Figure 74: Next most popular providers used for buildings/contents/car/annual travel insurance, by demographics, September 2009
                                                                                                                                                • Figure 75: Other brands used for buildings/contents/car/annual travel insurance, by demographics, September 2009
                                                                                                                                            • Appendix – The Consumer – Channel Preferences and Switching Activity

                                                                                                                                                • Figure 76: Channels most likely to be used to arrange insurance (net of car, contents, buildings and travel insurance), by demographics, September 2009
                                                                                                                                                • Figure 77: Attitudes towards switching insurance policies, by demographics, September 2009
                                                                                                                                            • Appendix – The Consumer – Attitudes towards Buying General Insurance

                                                                                                                                                • Figure 78: Most important insurance policy considerations, by type of policy, September 2009
                                                                                                                                                • Figure 79: Most important insurance policy considerations, by demographics, September 2009
                                                                                                                                                • Figure 80: Next most important insurance policy considerations, by demographics, September 2009
                                                                                                                                                • Figure 81: Most popular attitudes towards insurance products, by demographics, September 2009
                                                                                                                                                • Figure 82: Next most popular attitudes towards insurance products, by demographics, September 2009
                                                                                                                                            • Appendix – The Consumer – Target Group Analysis

                                                                                                                                                • Figure 83: Target groups, by demographics, September 2009
                                                                                                                                                • Figure 84: Types of insurance products have, by target groups, September 2009
                                                                                                                                                • Figure 85: Net of ways of arranging insurance most likely to use, by target groups, September 2009
                                                                                                                                                • Figure 86: Attitudes towards insurance policy, by target groups, September 2009

                                                                                                                                            Companies Covered

                                                                                                                                            • Abbey
                                                                                                                                            • Abbott Mead Vickers BBDO Ltd
                                                                                                                                            • Admiral Insurance
                                                                                                                                            • AIG Group (American International Group Inc)
                                                                                                                                            • Allianz Cornhill Insurance plc
                                                                                                                                            • Asda Group Ltd
                                                                                                                                            • Association of British Insurers
                                                                                                                                            • Automobile Association (AA)
                                                                                                                                            • Aviva Plc
                                                                                                                                            • AXA PPP healthcare
                                                                                                                                            • AXA UK plc
                                                                                                                                            • Barclays Bank plc
                                                                                                                                            • BGL Group
                                                                                                                                            • Brit Insurance Holdings PLC
                                                                                                                                            • British Sky Broadcasting Group plc (BSkyB)
                                                                                                                                            • Budget Insurance Services Limited
                                                                                                                                            • BUPA
                                                                                                                                            • Churchill Insurance
                                                                                                                                            • Co-operative Group
                                                                                                                                            • Competition Commission
                                                                                                                                            • Confused.com
                                                                                                                                            • Direct Line Group Limited
                                                                                                                                            • Financial Ombudsman Service
                                                                                                                                            • Financial Services Authority (The)
                                                                                                                                            • Fortis Insurance Limited
                                                                                                                                            • Freeview
                                                                                                                                            • GoCompare
                                                                                                                                            • Government Actuary's Department (GAD)
                                                                                                                                            • Groupama Insurances
                                                                                                                                            • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                            • Hiscox Plc
                                                                                                                                            • HSBC Private Bank (UK) Limited
                                                                                                                                            • Insurance Fraud Bureau
                                                                                                                                            • La Mutuelle Du Mans Assurance
                                                                                                                                            • Legal & General Assurance Society Limited
                                                                                                                                            • Lidl (UK)
                                                                                                                                            • Lloyds Banking Group
                                                                                                                                            • LV=
                                                                                                                                            • Market & Opinion Research International (MORI)
                                                                                                                                            • Marks & Spencer
                                                                                                                                            • MoneySupermarket.com Limited
                                                                                                                                            • MORE TH>N
                                                                                                                                            • Munich Re Group
                                                                                                                                            • Norwich Union
                                                                                                                                            • Office for National Statistics
                                                                                                                                            • Office of Fair Trading
                                                                                                                                            • Outdoor Advertising Association of Great Britain
                                                                                                                                            • Post Office Limited
                                                                                                                                            • QBE Insurance (Europe)
                                                                                                                                            • Research in Motion Uk Ltd.
                                                                                                                                            • Retirement Insurance Advisory Service (RIAS)
                                                                                                                                            • Royal Automobile Club
                                                                                                                                            • Royal Bank of Scotland Group plc
                                                                                                                                            • RSA
                                                                                                                                            • Saga Services (finance)
                                                                                                                                            • Swinton
                                                                                                                                            • Tesco Personal Finance Limited
                                                                                                                                            • Tesco Plc
                                                                                                                                            • The National Insurance and Guarantee Corporation Limited
                                                                                                                                            • Virgin Media Ltd
                                                                                                                                            • Zurich Financial Services

                                                                                                                                            General Insurance Overview - UK - December 2009

                                                                                                                                            £2,195.00 (Excl.Tax)