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Motor Insurance - UK - March 2012

“Interest and awareness in telematics-based motor insurance will increase during the next 12 months. Whether or not this type of policy can transfer to the mainstream will depend largely on how well the industry resolves issues surrounding data usage.”

– Deborah Osguthorpe, Senior Financial Services Analyst

Some questions answered in this report include:

  • Is the rise in motor insurance premiums over?
  • How important are online channels in the distribution of motor insurance?
  • How widespread is switching and shoparound behaviour?
  • Which sectors of the market are growing?
  • To what extent are consumers ready for the expansion of telematics-based insurance products?

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Table of contents

  1. Introduction

      • Market definitions
        • Abbreviations
        • Executive Summary

            • The market
              • Premiums increase as insurers push up rates
                • Figure 1: Forecast of motor insurance GWP (personal lines) 2006-16
              • Premium growth slows down
                • Market factors
                  • Claim volume down but claims costs have continued to rise
                    • Figure 2: Personal lines motor insurance NWP and net claims, 2000-10
                  • Legislation to reduce the burden of claims costs
                    • EU gender ruling to take effect from December 2012
                      • Underlying market remains flat
                        • Figure 3: UK car parc, 2000-10
                      • Cost of motoring continues to increase
                        • Companies, brands and innovation
                          • RBS continues to top list of motor insurance underwriters
                            • Figure 4: Personal motor underwriters share, by gross written premiums, 2010 (UK insurers only)
                          • AA leads the way on trust
                            • Figure 5: Attitudes towards and usage of insurance brands, January 2012
                          • Telematics technology is the main focus for innovation in market
                            • The consumer
                              • Less than 50% of under-25s have car insurance
                                • Nearly 80% shopped around at their last renewal
                                  • Figure 6: Car insurance renewal behaviour, January 2012
                                • Price comparison sites dominate quotation activity
                                  • Figure 7: Channels used to obtain car insurance quotations, January 2012
                                • Offline channels still have major role in the purchasing of car insurance
                                  • Figure 8: Channels used to purchase car insurance, January 2012
                                • Consumers like the idea of a policy that rewards good driving behaviour
                                  • Figure 9: Agreement with statements relating to telematics technology, January 2012
                                • What we think
                                • Issues in the Market

                                    • Is the rise in motor insurance premiums over?
                                      • How important are online channels in the distribution of motor insurance?
                                        • How widespread is switching and shoparound behaviour?
                                          • Which sectors of the market are growing?
                                            • To what extent are consumers ready for the expansion of telematics-based insurance products?
                                            • Future Opportunities

                                              • Consumers attracted by the idea of a fairer type of insurance
                                                • Bridging the online/offline gap
                                                • Internal Market Environment

                                                  • Key points
                                                    • Premiums continue to increase, but growth rate slows
                                                      • Figure 10: AA British Premium Index Market Average Trends, July 1994-January 2012
                                                    • Policymakers turn attention to rising cost of motor insurance
                                                      • Younger drivers facing prohibitive insurance costs
                                                        • Rising claims costs undermine profitability
                                                          • Figure 11: Personal lines motor insurance NWP and net claims, 2000-10
                                                        • Personal injury claims inflate costs
                                                          • Figure 12: Average motor claims payment amount, by type, 2006-10
                                                        • Fraud detection remains high on agenda for insurers
                                                          • Claims volume maintains a downward trend
                                                            • Figure 13: Total number of private car insurance claims notified and claims frequency, 2003-11
                                                          • Legislation and regulation to tackle rising claims costs
                                                            • EU gender ruling to increase premiums for female drivers
                                                            • Broader Market Environment

                                                              • Key points
                                                                • Number of vehicles on the road remains flat
                                                                  • Figure 14: UK car parc, 2000-10
                                                                • Cost of motoring continues to rise
                                                                  • Fewer 17-20-year-olds are learning to drive
                                                                    • Figure 15: Full GB driving licence holders, by gender, 1975/76-2010
                                                                  • New car sales dip below 2 million in 2011
                                                                    • Figure 16: New car registrations, by sector, 2002-11
                                                                  • Proportion of no-car and single-car households rises
                                                                    • Figure 17: Number of cars in household, 2008-12
                                                                • SWOT Analysis

                                                                    • Figure 18: SWOT analysis for personal lines motor insurance, 2012
                                                                • Who’s Innovating?

                                                                  • Key points
                                                                    • Telematics technology remains the main focus for innovation
                                                                      • Lowering costs for young drivers
                                                                        • AA launches Drivesafe
                                                                          • TomTom moves into telematics car insurance
                                                                            • New brand Ingenie targets 17-25-year-olds
                                                                              • Direct Line moves into telematics space
                                                                                • Aviva launches new car insurance policies
                                                                                  • Car insurance goes mobile
                                                                                    • Online claims tracking from MORE TH>N
                                                                                    • Market Size and Forecast

                                                                                      • Key points
                                                                                        • GWP continues to increase…
                                                                                          • Figure 19: Personal lines motor insurance, GWP, 2005-11
                                                                                        • …but delivering underwriting profitability remains a challenge
                                                                                          • Figure 20: Breakdown of personal motor insurance market, by GWP, NWP, total outgoings and underwriting result, 2005-11
                                                                                        • Forecast
                                                                                          • Figure 21: Forecast of motor insurance GWP (personal lines) 2006-16
                                                                                          • Figure 22: Forecast of motor insurance GWP (personal lines), 2006-16
                                                                                        • Forecast methodology
                                                                                          • Fan chart explained
                                                                                          • Market Share

                                                                                            • Key points
                                                                                              • RBS Insurance continues to top market share list…
                                                                                                • Figure 23: Top 15 personal motor underwriters, by gross written premiums, 2009 and 2010 (UK insurers only)
                                                                                              • …but is actually losing share year on year
                                                                                                • Rate rises lead to increase in GWP for most insurers
                                                                                                  • A note on Admiral
                                                                                                  • Companies and Products

                                                                                                    • Admiral Group
                                                                                                        • Figure 24: Admiral Group Financials, UK car insurance, 2010 and 2011
                                                                                                      • Aviva
                                                                                                          • Figure 25: Aviva UK General Insurance* financials, 2010 and 2011
                                                                                                        • AXA
                                                                                                          • LV=
                                                                                                              • Figure 26: LV= General Insurance financials, 2010 and 2011
                                                                                                            • RBS
                                                                                                                • Figure 27: RBS Insurance financials, 2010 and 2011
                                                                                                              • RSA
                                                                                                                  • Figure 28: RSA financials, 2010 and 2011
                                                                                                              • Channels to Market

                                                                                                                • Key points
                                                                                                                  • Direct and intermediary share of market has stabilised
                                                                                                                    • Figure 29: Proportional distribution of personal lines motor insurance, by value, 2006-10
                                                                                                                  • Online purchasing blurs the lines between direct and intermediary products
                                                                                                                    • Price comparison sites lead the way on quotation activity…
                                                                                                                      • Figure 30: Channels used to obtain car insurance quotations, January 2012
                                                                                                                    • …but policyholders still prefer to arrange cover directly with provider
                                                                                                                      • Figure 31: Channels used to purchase car insurance, January 2012
                                                                                                                    • More than 50% of policies are arranged via the internet
                                                                                                                    • Brand Communication and Promotion

                                                                                                                      • Key points
                                                                                                                        • Motor insurance adspend shows signs of recovery
                                                                                                                          • Figure 32: Annual advertising expenditure on car insurance products, 2008-11
                                                                                                                        • Direct Line topped adspend list in 2011
                                                                                                                          • Figure 33: Top 20 advertisers of car insurance, 2009-11
                                                                                                                        • TV accounts for a growing share of motor insurance adspend
                                                                                                                          • Figure 34: Distribution of total adspend on car insurance products, by media type, 2009-11
                                                                                                                        • Car insurance adspend peaks during winter and summer months
                                                                                                                          • Figure 35: Advertising expenditure on car insurance products, by month, 2009-11
                                                                                                                      • Brand Research

                                                                                                                        • Brand map
                                                                                                                            • Figure 36: Attitudes towards and usage of insurance brands, January 2012
                                                                                                                          • Correspondence analysis
                                                                                                                            • Brand attitudes
                                                                                                                              • Figure 37: Attitudes, by insurance brand, January 2012
                                                                                                                            • Brand personality
                                                                                                                              • Figure 38: Insurance brand personality – macro image, January 2012
                                                                                                                              • Figure 39: Insurance brand personality – micro image, January 2012
                                                                                                                            • Brand experience
                                                                                                                              • Figure 40: Insurance brand usage, January 2012
                                                                                                                              • Figure 41: Satisfaction with various insurance brands, January 2012
                                                                                                                              • Figure 42: Consideration of insurance brands, January 2012
                                                                                                                              • Figure 43: Consumer perceptions of current insurance brand performance, January 2012
                                                                                                                              • Figure 44: Insurance brand recommendation – Net Promoter Score, January 2012
                                                                                                                            • Brand index
                                                                                                                              • Figure 45: Insurance brand index, January 2012
                                                                                                                              • Figure 46: Insurance brand index vs. recommendation, January 2012
                                                                                                                            • Target group analysis
                                                                                                                              • Figure 47: Target groups, January 2012
                                                                                                                              • Figure 48: Insurance brand usage, by target groups, January 2012
                                                                                                                            • Group One – Conformists
                                                                                                                              • Group Two – Simply the Best
                                                                                                                                • Group Three – Shelf Stalkers
                                                                                                                                  • Group Four – Habitual Shoppers
                                                                                                                                    • Group Five – Individualists
                                                                                                                                    • Motor Insurance Ownership

                                                                                                                                      • Key points
                                                                                                                                        • Seven in ten have some type of motor insurance
                                                                                                                                          • Figure 49: Car insurance ownership, January 2012
                                                                                                                                          • Figure 50: Type of cover in place among car insurance policyholders, January 2012
                                                                                                                                        • Younger adults face a significant affordability challenge
                                                                                                                                          • Figure 51: Car insurance ownership, by age, January 2012
                                                                                                                                        • Over-65s are a growing demographic for car insurers
                                                                                                                                          • Low-income households are finding it more difficult to afford premiums
                                                                                                                                            • Figure 52: Car insurance ownership, by gross annual household income, January 2012
                                                                                                                                            • Figure 53: Car insurance ownership, by financial situation at the moment, January 2012
                                                                                                                                        • Renewal Behaviour

                                                                                                                                          • Key points
                                                                                                                                            • Nearly 80% shopped around at their last renewal
                                                                                                                                              • Figure 54: Car insurance renewal behaviour, January 2012
                                                                                                                                            • Are retention strategies working?
                                                                                                                                              • Intermediary customers may be unaware of switching activity
                                                                                                                                                • Third party cover holders are more likely to renew an existing policy
                                                                                                                                                  • Figure 55: Car insurance renewal behaviour, by car insurance ownership, January 2012
                                                                                                                                                • Switching is higher among 35-54-year-olds
                                                                                                                                                  • Figure 56: Car insurance renewal behaviour, by age, January 2012
                                                                                                                                                • Higher income groups need more incentive to switch providers
                                                                                                                                                  • Figure 57: Car insurance renewal behaviour, by gross annual household income, January 2012
                                                                                                                                                  • Figure 58: Financial situation at the moment, by car insurance renewal behaviour, January 2012
                                                                                                                                              • Renewal Premium Experience

                                                                                                                                                • Key points
                                                                                                                                                  • One in four experienced a significant premium rise at renewal
                                                                                                                                                    • Figure 59: Car insurance renewal premium experience, January 2012
                                                                                                                                                  • Switchers are more likely to have seen steep rise in premiums
                                                                                                                                                    • Figure 60: Car insurance renewal premium experience, by car insurance renewal behaviour, January 2012
                                                                                                                                                  • Young drivers are more likely to have experienced a fall in premiums
                                                                                                                                                    • Figure 61: Car insurance renewal premium experience, by age, January 2012
                                                                                                                                                  • Lower income groups see significant rise in renewal premiums
                                                                                                                                                    • Figure 62: Car insurance renewal premium experience, by annual household income, January 2012
                                                                                                                                                • Quotation Channels

                                                                                                                                                  • Key points
                                                                                                                                                    • Price comparison sites dominate quotation activity…
                                                                                                                                                      • Figure 63: Channels used to obtain car insurance quotations, January 2012
                                                                                                                                                    • …but direct channels still have a role to play
                                                                                                                                                      • Price comparison site users are more likely to switch insurers
                                                                                                                                                        • Figure 64: Car insurance renewal behaviour, by next most popular channels used to obtain car insurance quotations, January 2012
                                                                                                                                                      • Brokers are well placed to manage premium shocks
                                                                                                                                                        • Figure 65: Car insurance renewal premium experience, by most popular channels used to obtain car insurance quotations, January 2012
                                                                                                                                                      • Price comparison sites are favoured across the age spectrum
                                                                                                                                                        • Figure 66: Channels used to obtain car insurance quotations, by age, January 2012
                                                                                                                                                    • Purchasing Channels

                                                                                                                                                      • Key points
                                                                                                                                                        • More than 50% of policyholders arranged cover online…
                                                                                                                                                          • Figure 67: Channels used to purchase car insurance, January 2012
                                                                                                                                                        • …but the telephone is still favoured by almost four in ten
                                                                                                                                                          • A third of price comparison site users purchased cover over the phone
                                                                                                                                                            • Figure 68: Channels used to purchase car insurance, by next most popular channels used to obtain car insurance quotations, January 2012
                                                                                                                                                          • Telephone purchasers are much less likely to switch insurers at renewal
                                                                                                                                                            • Figure 69: Car insurance renewal behaviour, by channels used to purchase car insurance, January 2012
                                                                                                                                                          • Telephone appeals to policyholders at either end of age spectrum
                                                                                                                                                            • Figure 70: Channels used to purchase car insurance, by age, January 2012
                                                                                                                                                        • Managing Premium Costs

                                                                                                                                                          • Key points
                                                                                                                                                            • Shopping around for cheaper cover is seen as the main way to lower costs
                                                                                                                                                              • Figure 71: Approaches taken to manage premium costs, January 2012
                                                                                                                                                            • 25-34-year-olds are more prepared to change their cover to lower costs
                                                                                                                                                              • Online purchasers are more likely to compromise on level of cover
                                                                                                                                                                • Figure 72: Approaches taken to manage premium costs, by channels used to purchase car insurance, January 2012
                                                                                                                                                              • Premium experience has limited impact on attitudes
                                                                                                                                                                • Figure 73: Approaches taken to manage premium costs, by car insurance renewal premium experience, January 2012
                                                                                                                                                              • Loyal customers are not too concerned about lowering their insurance costs
                                                                                                                                                                • Figure 74: Approaches taken to manage premium costs, by car insurance renewal behaviour, January 2012
                                                                                                                                                            • Attitudes towards Telematics Technology

                                                                                                                                                              • Key points
                                                                                                                                                                • Appetite for cover that rewards positive driving behaviour and lowers costs
                                                                                                                                                                  • Figure 75: Agreement with statements relating to telematics technology, January 2012
                                                                                                                                                                • Greater fairness appeals to policyholders
                                                                                                                                                                  • However, policyholders still need to be convinced about data usage
                                                                                                                                                                    • Figure 76: Agreement with statements relating to telematics technology (full responses), January 2012
                                                                                                                                                                  • Gender split evident in attitudes towards telematics
                                                                                                                                                                    • Figure 77: Agreement with statements relating to telematics technology, by demographics, January 2012
                                                                                                                                                                  • Parental support for telematics-based insurance
                                                                                                                                                                    • Premium rises could help to expand usage of telematics technology
                                                                                                                                                                      • Figure 78: Agreement with statements relating to telematics technology, by car insurance renewal premium experience, January 2012
                                                                                                                                                                  • Appendix – Market Forecast

                                                                                                                                                                      • Figure 79: Motor insurance market forecast – best- and worst-case scenario, 2011-16
                                                                                                                                                                  • Appendix – Brand Research

                                                                                                                                                                      • Figure 80: Brand usage, January 2012
                                                                                                                                                                      • Figure 81: Brand commitment, January 2012
                                                                                                                                                                      • Figure 82: Brand momentum, January 2012
                                                                                                                                                                      • Figure 83: Brand diversity, January 2012
                                                                                                                                                                      • Figure 84: Brand satisfaction, January 2012
                                                                                                                                                                      • Figure 85: Brand recommendation, January 2012
                                                                                                                                                                      • Figure 86: Brand attitude, January 2012
                                                                                                                                                                      • Figure 87: Brand image – macro image, January 2012
                                                                                                                                                                      • Figure 88: Brand image – micro image, January 2012
                                                                                                                                                                      • Figure 89: Profile of target groups, by demographics, January 2012
                                                                                                                                                                      • Figure 90: Psychographic segmentation, by target group, January 2012
                                                                                                                                                                      • Figure 91: Brand usage, by target group, January 2012
                                                                                                                                                                    • Brand index
                                                                                                                                                                      • Figure 92: Brand index, January 2012
                                                                                                                                                                  • Appendix – Motor Insurance Ownership

                                                                                                                                                                      • Figure 93: Car insurance ownership, by demographics, January 2012
                                                                                                                                                                  • Appendix – Renewal Behaviour

                                                                                                                                                                      • Figure 94: Car insurance renewal behaviour, by demographics, January 2012
                                                                                                                                                                  • Appendix – Renewal Premium Experience

                                                                                                                                                                      • Figure 95: Car insurance ownership, by demographics, January 2012
                                                                                                                                                                  • Appendix – Quotation Channels

                                                                                                                                                                      • Figure 96: Most popular channels used to obtain car insurance quotations, by demographics, January 2012
                                                                                                                                                                  • Appendix – Purchasing Channels

                                                                                                                                                                      • Figure 97: Channels used to purchase car insurance, by demographics, January 2012
                                                                                                                                                                  • Appendix – Managing Premium Costs

                                                                                                                                                                      • Figure 98: Approaches taken to manage premium costs, by demographics, January 2012
                                                                                                                                                                  • Appendix – Attitudes Towards Telematics Technology

                                                                                                                                                                      • Figure 99: Agreement with statements ‘I like the idea of a policy that rewards good driving behaviour’ and ‘I don’t want my driving behaviour to be recorded in this manner’, by demographics, January 2012
                                                                                                                                                                      • Figure 100: Agreement with statements ‘I’m worried about how insurers would use this data’ and ‘I would be interested as my annual mileage is quite low’, by demographics, January 2012
                                                                                                                                                                      • Figure 101: Agreement with statements ‘I would be interested if the policy saved me money immediately’ and ‘I would be interested if the policy saved me money at renewal’, by demographics, January 2012
                                                                                                                                                                      • Figure 102: Agreement with statement ‘I think I would drive more safely if I had a box fitted’, by demographics, January 2012

                                                                                                                                                                  Companies Covered

                                                                                                                                                                  • Admiral Insurance
                                                                                                                                                                  • Aviva Plc
                                                                                                                                                                  • AXA UK plc
                                                                                                                                                                  • Bluefin
                                                                                                                                                                  • Channel 4
                                                                                                                                                                  • Churchill Insurance
                                                                                                                                                                  • Confused.com
                                                                                                                                                                  • Direct Line Group Limited
                                                                                                                                                                  • elephant.co.uk
                                                                                                                                                                  • Facebook, Inc.
                                                                                                                                                                  • Green Flag Motoring Assistance
                                                                                                                                                                  • Harlequins Rugby Union Club
                                                                                                                                                                  • Highway Insurance Holdings Plc
                                                                                                                                                                  • J. Sainsbury
                                                                                                                                                                  • LV=
                                                                                                                                                                  • MORE TH>N
                                                                                                                                                                  • NatWest
                                                                                                                                                                  • Nectar
                                                                                                                                                                  • Norwich City Football Club
                                                                                                                                                                  • Norwich Union
                                                                                                                                                                  • Privilege Insurance
                                                                                                                                                                  • Publicis (UK)
                                                                                                                                                                  • Royal Automobile Club
                                                                                                                                                                  • Royal Bank of Scotland Group plc
                                                                                                                                                                  • RSA
                                                                                                                                                                  • Swiftcover
                                                                                                                                                                  • The National Insurance and Guarantee Corporation Limited
                                                                                                                                                                  • Twitter, Inc.
                                                                                                                                                                  • UK Athletics
                                                                                                                                                                  • UK Insurance Ltd
                                                                                                                                                                  • UKI Partnerships
                                                                                                                                                                  • YouTube, Inc.

                                                                                                                                                                  Motor Insurance - UK - March 2012

                                                                                                                                                                  £1,995.00 (Excl.Tax)