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Motor Insurance - UK - March 2013

“Telematics insurance is the most innovative development in the motor insurance industry for years. As a result, the majority of insurers are focusing some resources on developing telematics offerings and trying to find ways to reduce upfront costs of installing the technology, such as mobile application development. However, before this product can become a mass-market success, insurers will need to deal with customer concerns regarding data monitoring and privacy – a concern amongst three fifths of drivers.”

– Stevan Obradovic, Financial Services Analyst

Some questions answered in this report include:

  • Telematics: where is it now?
  • Has the level of churn increased in the last year?
  • Does brand and quality matter, or are costs more important?
  • What is being done to tackle rising bodily injury claims?

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Table of contents

  1. Introduction

      • Market definitions
        • Abbreviations
        • Executive Summary

            • The market
              • Figure 1: Forecast of motor insurance GWP (personal lines), 2007-17
            • Market factors
              • Premium inflation stabilises
                • Net claims fall back below NWP
                  • Government ban on referral fees looms
                    • Competition Commission to review the motor insurance market
                      • Young adults shunning driving tests due to motoring costs
                        • Multiple car ownership on the wane
                          • Companies, brand communication and innovation
                            • Direct Line Group is the lead underwriter in the motor insurance market
                              • Figure 2: Top five personal motor underwriters, by gross written premiums, 2011 (UK insurers only)
                            • AA continues to lead the way on trust
                              • Figure 3: Attitudes towards and usage of brands that have a presence in the motor insurance sector, November 2012
                            • Motor insurance adspend declined in 2012
                              • Who’s innovating?
                                • The consumer
                                  • Motor insurance ownership
                                    • Figure 4: Car insurance ownership, December 2012
                                  • Policy additional extras
                                    • Figure 5: Additional motor insurance policy extras, December 2012
                                  • Motor insurance arrangement
                                    • Figure 6: Channels used to arrange motor insurance, December 2012
                                  • Renewal behaviour
                                    • Figure 7: Car insurance renewal behaviour, December 2012
                                  • Attitudes towards telematics
                                    • Figure 8: Attitudes towards telematics insurance, December 2012
                                  • Attitudes towards motor insurance
                                    • Figure 9: Attitudes towards motor insurance, December 2012
                                  • What we think
                                  • Issues in the Market

                                      • Telematics: where is it now?
                                        • Has the level of churn increased in the last year?
                                          • Does brand and quality matter, or are costs more important?
                                            • What is being done to tackle rising bodily injury claims?
                                            • Trend Application

                                              • Your privacy is important to us
                                                • A fun twist to vehicle breakdowns
                                                  • Mintel futures: Human
                                                  • Market Drivers

                                                    • Key points
                                                      • Premiums declined slightly towards the end of 2012
                                                        • Figure 10: AA BIPI Motor Third Party and Comprehensive shoparound premium trends, October 2008-October 2012
                                                      • Net claims back below NWP
                                                        • Figure 11: NWP and net claims for UK personal motor insurance, 2001-11
                                                      • Personal injury claims continue to grow
                                                        • Figure 12: Average UK motor claims payout, by type, 2007-11
                                                      • ABI releases guidance on how to deal with whiplash
                                                        • Referral fee ban set for April 2013
                                                          • Claims volumes continue to fall, helping to stem losses
                                                            • Figure 13: Total number of private UK car insurance claims notified and claims frequency, 2003-12
                                                          • OFT refers the motor insurance market to the Competition Commission
                                                            • Number of cars on UK roads remains stable
                                                              • Figure 14: UK car parc, 2000-11
                                                            • Men more likely to have a driving licence, but learner drivers are falling
                                                              • Figure 15: Full GB driving licence holders, by gender, 1975/76-2011
                                                            • New car registrations still below pre-recession levels
                                                              • Figure 16: UK new car registrations, 2002-12
                                                            • Fuel prices up significantly since January 2010
                                                              • Figure 17: Trend in petrol and diesel pump prices, January 2010-October 2012
                                                            • Growth in one-car and no-car households on the up
                                                              • Figure 18: Number of cars in household, 2010-12
                                                            • Gender-neutral pricing has finally arrived
                                                            • SWOT Analysis

                                                                • Figure 19: SWOT analysis – personal motor insurance market, March 2013
                                                            • Who’s Innovating?

                                                              • Key points
                                                                • Telematics continues to evolve
                                                                  • Autosaint provides real-time driving updates to parents
                                                                    • Vauxhall Motors embraces telematics insurance
                                                                      • Apps for telematics
                                                                        • Aviva launches ‘Aviva Drive’
                                                                          • ‘MotorMate’ app debuted by confused.com
                                                                            • ‘Try before you buy’ telematics app from the AA
                                                                              • Bundled motor insurance
                                                                                • Direct Line launches Together
                                                                                  • Santander offers car insurance deal to existing customers
                                                                                    • Other developments
                                                                                      • LV= scraps upper age limits for car insurance
                                                                                        • Confused.com launches QuickQuote
                                                                                        • Market Size and Forecast

                                                                                          • Key points
                                                                                            • Minimal growth in GWP expected in 2012
                                                                                              • Figure 20: Personal lines of motor insurance, GWP, 2006-12
                                                                                            • Following a record loss in 2010, underwriting losses shrink rapidly in 2011
                                                                                              • Figure 21: Breakdown of personal motor insurance market, by GWP, NWP, total outgoings and underwriting result, 2006-11
                                                                                            • Market forecast
                                                                                              • GWP expected to increase over the next five years
                                                                                                • Figure 22: Forecast of motor insurance GWP (personal lines), 2007-17
                                                                                                • Figure 23: Forecast of motor insurance GWP (personal lines) 2007-17
                                                                                              • Forecast methodology
                                                                                                • Fan chart explanation
                                                                                                • Market Share

                                                                                                  • Key points
                                                                                                    • Direct Line Group is still the number one player in the motor insurance market
                                                                                                      • Figure 24: Top 15 personal motor underwriters, by gross written premiums, 2010 and 2011 (UK insurers only)
                                                                                                    • A note on Admiral
                                                                                                    • Companies and Products

                                                                                                      • Admiral Group
                                                                                                        • Company background/description
                                                                                                          • Relevant brands/subsidiaries
                                                                                                            • Motor insurance product range
                                                                                                              • Distribution channels
                                                                                                                • Financial performance/key data
                                                                                                                  • Figure 25: Key financial data for Admiral Group plc UK Car Insurance, 2010-12
                                                                                                                • Recent activity
                                                                                                                  • Promotional/marketing activities
                                                                                                                    • Aviva
                                                                                                                      • Company background/description
                                                                                                                        • Relevant brands/subsidiaries
                                                                                                                          • Motor insurance product range
                                                                                                                            • Distribution channels
                                                                                                                              • Financial performance/key data
                                                                                                                                • Figure 26: Aviva UK general insurance financials, 2011 and 2012
                                                                                                                              • Recent activity
                                                                                                                                • Promotional/marketing activities
                                                                                                                                  • AXA
                                                                                                                                    • Company background/description
                                                                                                                                      • Relevant brands/subsidiaries
                                                                                                                                        • Motor insurance product range
                                                                                                                                          • Distribution channels
                                                                                                                                            • Financial performance/key data
                                                                                                                                              • Recent activity
                                                                                                                                                • Promotional/marketing activities
                                                                                                                                                  • Direct Line Group
                                                                                                                                                    • Company background/description
                                                                                                                                                      • Relevant brands/subsidiaries
                                                                                                                                                        • Motor insurance product range
                                                                                                                                                          • Distribution channels
                                                                                                                                                            • Financial performance/key data
                                                                                                                                                              • Figure 27: DLG motor insurance financials, 2011 and 2012
                                                                                                                                                            • Recent activity
                                                                                                                                                              • Promotional/marketing activities
                                                                                                                                                                • LV=
                                                                                                                                                                  • Company background/description
                                                                                                                                                                    • Relevant brands/subsidiaries
                                                                                                                                                                      • Motor insurance product range
                                                                                                                                                                        • Distribution channels
                                                                                                                                                                          • Financial performance/key data
                                                                                                                                                                            • Figure 28: Key financial data for LV= General Insurance, 2010 and 2011
                                                                                                                                                                          • Recent activity
                                                                                                                                                                            • Promotional/marketing activities
                                                                                                                                                                              • RSA
                                                                                                                                                                                • Company background/description
                                                                                                                                                                                  • Relevant brands/subsidiaries
                                                                                                                                                                                    • Motor insurance product range
                                                                                                                                                                                      • Distribution channels
                                                                                                                                                                                        • Financial performance/key data
                                                                                                                                                                                          • Figure 29: RSA financials, 2011 and 2012
                                                                                                                                                                                        • Recent activity
                                                                                                                                                                                          • Others
                                                                                                                                                                                            • The AA (Automobile Association)
                                                                                                                                                                                              • Co-operative Insurance
                                                                                                                                                                                                • esure
                                                                                                                                                                                                  • Hastings Direct
                                                                                                                                                                                                  • Channels to Market

                                                                                                                                                                                                    • Key points
                                                                                                                                                                                                      • Direct and intermediary channels account for 83% of motor insurance premiums
                                                                                                                                                                                                        • Figure 30: Proportional distribution of personal lines of motor insurance, by value, 2007-11
                                                                                                                                                                                                      • Online business accounts for around two thirds of sales
                                                                                                                                                                                                        • Figure 31: Channels used to arrange motor insurance, December 2012
                                                                                                                                                                                                    • Brand Communication and Promotion

                                                                                                                                                                                                      • Key points
                                                                                                                                                                                                        • Advertising on motor insurance continues to see-saw
                                                                                                                                                                                                          • Figure 32: Annual advertising expenditure on car insurance products, 2008-12
                                                                                                                                                                                                        • Confused doubles adspend to displace Direct Line as top advertiser
                                                                                                                                                                                                          • Figure 33: Top 20 advertisers of car insurance, 2008-12
                                                                                                                                                                                                        • TV and direct mail account for 90% of motor insurance adspend
                                                                                                                                                                                                          • Figure 34: Distribution of total adspend on car insurance product, by media type, 2008-12
                                                                                                                                                                                                        • Advertising expenditure bucks seasonal trends in 2012
                                                                                                                                                                                                          • Figure 35: Advertising expenditure on car insurance products, by month, 2009-12
                                                                                                                                                                                                      • Brand Research

                                                                                                                                                                                                        • Brand map
                                                                                                                                                                                                            • Figure 36: Attitudes towards and usage of brands that have a presence in the motor insurance sector, November 2012
                                                                                                                                                                                                          • Correspondence analysis
                                                                                                                                                                                                            • Brand attitudes
                                                                                                                                                                                                              • Figure 37: Attitudes, by brands that have a presence in the motor insurance market, November 2012
                                                                                                                                                                                                            • Brand personality
                                                                                                                                                                                                              • Figure 38: Insurance brand personality – macro image, November 2012
                                                                                                                                                                                                              • Figure 39: Insurance brand personality – micro image, November 2012
                                                                                                                                                                                                            • Brand experience
                                                                                                                                                                                                              • Figure 40: Insurance brand usage, November 2012
                                                                                                                                                                                                              • Figure 41: Satisfaction with various insurance brands, November 2012
                                                                                                                                                                                                              • Figure 42: Consideration of insurance brands, November 2012
                                                                                                                                                                                                              • Figure 43: Consumer perceptions of current insurance brand performance, November 2012
                                                                                                                                                                                                              • Figure 44: Insurance brand recommendation – Net Promoter Score, November 2012
                                                                                                                                                                                                            • Brand index
                                                                                                                                                                                                              • Figure 45: Insurance brand index, November 2012
                                                                                                                                                                                                              • Figure 46: Insurance brand index vs. recommendation, November 2012
                                                                                                                                                                                                            • Target group analysis
                                                                                                                                                                                                              • Figure 47: Target groups, November 2012
                                                                                                                                                                                                              • Figure 48: Insurance brand usage, by target groups, November 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
                                                                                                                                                                                                                        • The majority of car insurance holders have a comprehensive policy
                                                                                                                                                                                                                          • Figure 49: Car insurance ownership, December 2012
                                                                                                                                                                                                                        • Telematics policies are still in their infancy
                                                                                                                                                                                                                          • Prohibitively high costs challenge younger drivers
                                                                                                                                                                                                                            • Figure 50: Car insurance ownership, by age, December 2012
                                                                                                                                                                                                                          • Londoners and urban dwellers less likely to have car insurance
                                                                                                                                                                                                                            • Figure 51: Car insurance ownership, by region and area, December 2012
                                                                                                                                                                                                                          • Homeowners present a good opportunity for cross-selling products
                                                                                                                                                                                                                            • Figure 52: Car insurance ownership, by housing situation, December 2012
                                                                                                                                                                                                                        • Policy Additional Extras

                                                                                                                                                                                                                          • Key points
                                                                                                                                                                                                                            • Protecting no-claims discount is favoured by one in two drivers
                                                                                                                                                                                                                              • Figure 53: Additional motor insurance extras, December 2012
                                                                                                                                                                                                                            • Courtesy car and breakdown cover are popular with some drivers
                                                                                                                                                                                                                              • Appeal of optional extras depends on age
                                                                                                                                                                                                                                • Figure 54: Additional motor insurance extras, by age, December 2012
                                                                                                                                                                                                                              • Comprehensive policies more likely to be purchased with additional extras
                                                                                                                                                                                                                                • Figure 55: Additional motor insurance extras, by car insurance ownership, December 2012
                                                                                                                                                                                                                            • Motor Insurance Arrangement

                                                                                                                                                                                                                              • Key points
                                                                                                                                                                                                                                • Online distribution accounts for around two thirds of sales
                                                                                                                                                                                                                                  • Figure 56: Channels used to arrange motor insurance, December 2012
                                                                                                                                                                                                                                • Telephone is the only other widely used channel
                                                                                                                                                                                                                                  • Minor differences in purchasing channels for motor insurance policies
                                                                                                                                                                                                                                    • Figure 57: Channels used to arrange motor insurance, by car insurance ownership, December 2012
                                                                                                                                                                                                                                  • Over-the-phone sales can lead to more add-ons
                                                                                                                                                                                                                                    • Figure 58: Additional motor insurance extras, by channels used to arrange motor insurance, December 2012
                                                                                                                                                                                                                                • Renewal Behaviour

                                                                                                                                                                                                                                  • Key points
                                                                                                                                                                                                                                    • Three quarters of drivers shop around…
                                                                                                                                                                                                                                      • Figure 59: Car insurance renewal behaviour, December 2012
                                                                                                                                                                                                                                    • ...but three in five stay with their current insurer
                                                                                                                                                                                                                                      • Renewal behaviour has little influence on optional extras
                                                                                                                                                                                                                                        • Figure 60: Additional motor insurance extras, by car insurance renewal behaviour, December 2012
                                                                                                                                                                                                                                      • Switching behaviour driven by aggregators and price
                                                                                                                                                                                                                                        • Figure 61: Channels used to arrange motor insurance, by car insurance renewal behaviour, December 2012
                                                                                                                                                                                                                                    • Attitudes Towards Telematics

                                                                                                                                                                                                                                      • Key points
                                                                                                                                                                                                                                        • Saving money and personalised risk-profiling are appealing to drivers
                                                                                                                                                                                                                                          • Figure 62: Attitudes towards telematics insurance, December 2012
                                                                                                                                                                                                                                        • Data gathering and privacy issues are a concern…
                                                                                                                                                                                                                                          • …while installation costs also present a different challenge
                                                                                                                                                                                                                                            • The link between good behaviour and safer driving
                                                                                                                                                                                                                                              • Figure 63: Any agreement with the statement ‘Being rewarded for good behaviour would make me drive more safely/carefully’, by age, December 2012
                                                                                                                                                                                                                                          • Attitudes Towards Motor Insurance

                                                                                                                                                                                                                                            • Key points
                                                                                                                                                                                                                                              • Fraudulent and non-insured drivers are a burden for the majority
                                                                                                                                                                                                                                                • Figure 64: Attitudes towards motor insurance, December 2012
                                                                                                                                                                                                                                              • Perception of costs and the race to the bottom
                                                                                                                                                                                                                                                • One in two drivers have heard about the gender directive
                                                                                                                                                                                                                                                  • Renewal behaviour has an influence on customer outlook
                                                                                                                                                                                                                                                    • Figure 65: Attitudes towards motor insurance, by car insurance renewal behaviour, December 2012
                                                                                                                                                                                                                                                • Appendix – Market Size and Forecast

                                                                                                                                                                                                                                                    • Figure 66: Motor insurance market forecast, best and worst-case scenario, 2012-17
                                                                                                                                                                                                                                                • Appendix – Brand Research

                                                                                                                                                                                                                                                    • Figure 67: Brand usage, November 2012
                                                                                                                                                                                                                                                    • Figure 68: Brand commitment, November 2012
                                                                                                                                                                                                                                                    • Figure 69: Brand momentum, November 2012
                                                                                                                                                                                                                                                    • Figure 70: Brand diversity, November 2012
                                                                                                                                                                                                                                                    • Figure 71: Brand satisfaction, November 2012
                                                                                                                                                                                                                                                    • Figure 72: Brand recommendation, November 2012
                                                                                                                                                                                                                                                    • Figure 73: Brand attitude, November 2012
                                                                                                                                                                                                                                                    • Figure 74: Brand image – macro image, November 2012
                                                                                                                                                                                                                                                    • Figure 75: Brand image – micro image, November 2012
                                                                                                                                                                                                                                                    • Figure 76: Profile of target groups, by demographics, November 2012
                                                                                                                                                                                                                                                    • Figure 77: Psychographic segmentation by target groups, November 2012
                                                                                                                                                                                                                                                    • Figure 78: Brand usage, by target groups, November 2012
                                                                                                                                                                                                                                                  • Brand index
                                                                                                                                                                                                                                                    • Figure 79: Brand index, November 2012
                                                                                                                                                                                                                                                • Appendix – Motor Insurance Ownership

                                                                                                                                                                                                                                                    • Figure 80: Car insurance ownership, by demographics, December 2012
                                                                                                                                                                                                                                                    • Figure 81: Consumers who do not own car insurance, by demographics, December 2012
                                                                                                                                                                                                                                                • Appendix – Additional Extras

                                                                                                                                                                                                                                                    • Figure 82: Additional motor insurance extras, by demographics, December 2012
                                                                                                                                                                                                                                                    • Figure 83: Less important additional motor insurance extras, by demographics, December 2012
                                                                                                                                                                                                                                                • Appendix – Motor Insurance Arrangement

                                                                                                                                                                                                                                                    • Figure 84: Channels used to arrange motor insurance, by demographics, December 2012
                                                                                                                                                                                                                                                • Appendix – Renewal Behaviour

                                                                                                                                                                                                                                                    • Figure 85: Car insurance renewal behaviour, by demographics, December 2012
                                                                                                                                                                                                                                                • Appendix – Attitudes Towards Telematics

                                                                                                                                                                                                                                                    • Figure 86: Agreement with the statement ‘I would consider this type of policy if it saved me money on my premiums’, by demographics, December 2012
                                                                                                                                                                                                                                                    • Figure 87: Agreement with the statement ‘I like the idea of linking insurance premiums directly to driving behaviour’, by demographics, December 2012
                                                                                                                                                                                                                                                    • Figure 88: Agreement with the statement ‘I am concerned about how insurers could use the data gathered’, by demographics, December 2012
                                                                                                                                                                                                                                                    • Figure 89: Agreement with the statement ‘Being rewarded for good behaviour would make me drive more safely/carefully’, by demographics, December 2012
                                                                                                                                                                                                                                                    • Figure 90: Agreement with the statement ‘I am concerned about the costs of installing this type of technology’, by demographics, December 2012
                                                                                                                                                                                                                                                    • Figure 91: Agreement with the statement ‘This type of policy is only suitable for people with low mileage’, by demographics, December 2012
                                                                                                                                                                                                                                                    • Figure 92: Agreement with the statement ‘I really don’t like the idea of this type of policy’, by demographics, December 2012
                                                                                                                                                                                                                                                    • Figure 93: Agreement with the statement ‘This product is only suitable for younger drivers’, by demographics, December 2012
                                                                                                                                                                                                                                                • Appendix – Attitudes Towards Motor Insurance

                                                                                                                                                                                                                                                    • Figure 94: Attitudes towards motor insurance, by demographics, December 2012
                                                                                                                                                                                                                                                    • Figure 95: Further attitudes towards motor insurance, by demographics, December 2012

                                                                                                                                                                                                                                                Companies Covered

                                                                                                                                                                                                                                                • Admiral Insurance
                                                                                                                                                                                                                                                • Automobile Association (AA)
                                                                                                                                                                                                                                                • Aviva Plc
                                                                                                                                                                                                                                                • AXA UK plc
                                                                                                                                                                                                                                                • Bluefin
                                                                                                                                                                                                                                                • Churchill Insurance
                                                                                                                                                                                                                                                • Co-operative Group
                                                                                                                                                                                                                                                • Confused.com
                                                                                                                                                                                                                                                • Direct Line Group Limited
                                                                                                                                                                                                                                                • elephant.co.uk
                                                                                                                                                                                                                                                • Facebook, Inc.
                                                                                                                                                                                                                                                • Ford Motor Company Limited (UK)
                                                                                                                                                                                                                                                • Google UK
                                                                                                                                                                                                                                                • Green Flag Motoring Assistance
                                                                                                                                                                                                                                                • Hastings Direct
                                                                                                                                                                                                                                                • Highway Insurance Holdings Plc
                                                                                                                                                                                                                                                • London Stock Exchange plc
                                                                                                                                                                                                                                                • LV=
                                                                                                                                                                                                                                                • MORE TH>N
                                                                                                                                                                                                                                                • Nectar
                                                                                                                                                                                                                                                • Privilege Insurance
                                                                                                                                                                                                                                                • Royal Automobile Club
                                                                                                                                                                                                                                                • Royal Bank of Scotland Group plc
                                                                                                                                                                                                                                                • RSA
                                                                                                                                                                                                                                                • Swiftcover
                                                                                                                                                                                                                                                • Tesco (UK)
                                                                                                                                                                                                                                                • YouTube, Inc.

                                                                                                                                                                                                                                                Motor Insurance - UK - March 2013

                                                                                                                                                                                                                                                US $2,478.79 (Excl.Tax)