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Motor Insurance - UK - March 2015

“Motor insurers have endured a prolonged period of difficult trading conditions, characterised by falling average premiums. However, improved household finances will provide a more accepting environment for insurers to introduce premium rises in the coming year, returning the market to growth.”

– Rich Shepherd, Financial Services Research Analyst

This report covers the following issues:

  • The eCall initiative will boost telematics by normalising in-car technology
  • A niche built on flexibility?
  • Comparison is key, but recognised brands have the advantage

The motor insurance market has been dogged by stagnant premium prices since the recession. This has resulted in three consecutive years of shrinking premium incomes. However, the growing strength of household finances is starting to produce an environment in which insurers can consider pushing up premiums. This, alongside the constant demand for a product which is a legal requirement for all drivers, should see the market return to growth, and potentially profit, in the next year or so.

Most people are interested in a range of benefits that can be purchased as additions to main policies. Just under a quarter of consumers would be willing to pay for breakdown cover and the same proportion to protect their no-claims bonus, while other benefits have slightly lower levels of interest. The main trend, however, is that consumer sentiment is often limited to an interest in having benefits, but not a willingness to pay for them.

This report examines the UK car insurance market. It includes an examination and forecast of the size of the market, and discussion of the key players and their recent activities. The report also presents Mintel’s exclusive consumer research. This looks at ownership of insurance, how it is bought, how consumers behave when their policies are up for renewal and their attitudes towards car insurance and add-on benefits.

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • Market set for return to growth
            • Figure 1: Gross written personal motor insurance premiums (UK business only), fan chart 2009-19
          • Direct Line Group is the UK’s largest motor insurance underwriter
            • Figure 2: Share of UK motor insurance market, by gross written premiums, 2011-13 (UK business only)
          • The consumer
            • Most people have fully comprehensive car insurance
              • Figure 3: Motor insurance ownership, December 2014
            • The internet is the key policy sales channel
              • Figure 4: Method used to arrange current car insurance policy, December 2014
            • Three quarters shopped around for their last quote, but only 31% switched
              • Figure 5: Car insurance renewal behaviour, December 2014
            • Add-ons raise some interest but willingness to pay is generally low
              • Figure 6: Interest in and ownership of car insurance add-on benefits, December 2014
            • Price is the most important factor in choosing cover
              • Figure 7: Attitudes towards car insurance, December 2014
          • Issues and Insights

            • The eCall initiative will boost telematics by normalising in-car technology
              • The facts
                • The implications
                  • A niche built on flexibility?
                    • The facts
                      • The implications
                        • Comparison is key, but recognised brands have the advantage
                          • The facts
                            • The implications
                            • The Market – What You Need to Know

                              • 4% fall in premiums in 2014, but expected to return to growth
                                • Premium rises to push the industry to profit
                                  • Breakthroughs in the fight against fraud
                                    • Insurers continue to develop telematics
                                      • 64% of policies are sold online
                                      • Market Size and Forecast

                                        • Gross written premiums shrank by 4% in 2014
                                          • Figure 8: Gross written personal motor insurance premiums (UK business only), 2010-14
                                        • Market forecast
                                          • Figure 9: Gross written personal motor insurance premiums (UK business only), fan chart 2009-19
                                      • Market Drivers

                                        • New registrations continue to grow
                                          • Figure 10: Number of cars registered for the first time in the UK, 2005-14
                                        • Premiums remained low in 2014…
                                          • Figure 11: AA BIPI motor comprehensive and third party whole market and shoparound premium trends, March 2010-December 2014
                                        • …but falling costs led to a drop in underwriting losses
                                          • Figure 12: Personal motor insurance underwriting result, 2009-13
                                        • Detected fraud has soared in recent years
                                          • Figure 13: Value of detected fraudulent personal motor claims, 2004-13
                                      • Telematics

                                        • Technology use remains rare…
                                          • …but insurers continue to see the potential of telematics
                                            • Wider use of telematics
                                            • Channels to Market

                                              • Online channels are the key space for policy sales…
                                                  • Figure 14: Method used to arrange current car insurance policy, December 2014
                                                • …but older drivers still have a tendency to buy over the phone
                                                  • Figure 15: Method used to arrange current car insurance policy, by age, December 2014
                                                • The role of price comparison websites
                                                • The Key Players – What You Need to Know

                                                  • Direct Line is the UK’s biggest motor insurer
                                                    • Competitive strategies
                                                      • Adspend fell in 2014
                                                        • Price comparison sites are transforming promotional strategies
                                                        • Market Share

                                                          • Direct Line Group is the UK’s biggest motor insurer
                                                            • Figure 16: Top 10 personal motor insurance underwriters, by gross written premiums, 2011-13 (UK business only)
                                                        • Competitive Strategies

                                                          • Growth or retention?
                                                            • Ageas
                                                              • esure
                                                                • Admiral
                                                                  • An opportunity for innovation
                                                                    • Direct Line Group
                                                                      • Aviva
                                                                        • Withdrawals and a focus on profitable niches
                                                                          • RSA
                                                                            • LV=
                                                                            • Brand Communication and Promotion

                                                                              • 18% fall in car insurance adspend
                                                                                • Figure 17: Total car insurance adspend, 2010-14*
                                                                              • Aviva bucks the trend to increase spending on promotion
                                                                                • Figure 18: Top 20 UK car insurance advertisers, 2012-14*
                                                                              • Television is the dominant advertising medium
                                                                                • Figure 19: Car insurance market adspend, by media type, 2014*
                                                                            • Brand Research

                                                                              • What you need to know
                                                                                • Brand map
                                                                                  • Figure 20: Attitudes towards and usage of selected brands, December 2014
                                                                                • Key brand metrics
                                                                                  • Figure 21: Key metrics for selected brands, December 2014
                                                                                • Brand attitudes: Sainsbury’s Bank stands out for perception of rewarding loyalty
                                                                                  • Figure 22: Attitudes, by brand, December 2014
                                                                                • Brand personality: Advertising influences vibrancy, exposure in non-finance markets influences accessibility and ethicality
                                                                                  • Figure 23: Brand personality – Macro image, December 2014
                                                                                • Wide spread of personality traits, but lack of strong negative associations
                                                                                  • Figure 24: Brand personality – Micro image, December 2014
                                                                                • Brand analysis
                                                                                  • LV= combines strong overall brand image with vibrancy and a positive experience
                                                                                    • Figure 25: User profile of LV=, December 2014
                                                                                  • AA Insurance has a strong benefit from AA’s reputation
                                                                                    • Figure 26: User profile of AA Insurance, December 2014
                                                                                  • Sainsbury’s Bank uses Nectar card to encourage perception of rewarding loyalty
                                                                                    • Figure 27: User profile of Sainsbury’s Bank, December 2014
                                                                                  • Aviva defined by quality and competency
                                                                                    • Figure 28: User profile of Aviva, December 2014
                                                                                  • RAC Insurance appears to be catching up with AA Insurance
                                                                                    • Figure 29: User profile of RAC Insurance, December 2014
                                                                                  • Post Office Insurance’s links with customer-facing service promote customer service
                                                                                    • Figure 30: User profile of Post Office Insurance, December 2014
                                                                                  • AXA’s more serious offering results in authoritative image
                                                                                    • Figure 31: User profile of AXA, December 2014
                                                                                  • Admiral is another brand with all-round attributes
                                                                                    • Figure 32: User profile of Admiral, December 2014
                                                                                  • esure lacks the same personality as other brands
                                                                                    • Figure 33: User profile of esure, December 2014
                                                                                  • MORE TH>N’s fresher brand image creates progressive image
                                                                                    • Figure 34: User profile of MORE TH>N, December 2014
                                                                                  • Churchill uses advertising to create a particularly fun brand image
                                                                                    • Figure 35: User profile of Churchill, December 2014
                                                                                  • Direct Line has a strong, recognisable brand which continues to encourage usage
                                                                                    • Figure 36: User profile of Direct Line, December 2014
                                                                                  • Saga Insurance’s over-50s specialism creates a unique proposition
                                                                                    • Figure 37: User profile of Saga Insurance, December 2014
                                                                                • The Consumer – What You Need To Know

                                                                                  • The most common insurance product in the UK
                                                                                    • Telematics still haven’t hit the mainstream
                                                                                      • Shopping around is standard practice
                                                                                        • A price-driven market
                                                                                          • Questions over fairness and value
                                                                                          • Motor Insurance Ownership

                                                                                            • 69% of people have car insurance
                                                                                              • Figure 38: Motor insurance ownership, December 2014
                                                                                            • Drivers continue to shun telematics
                                                                                              • One in 10 under-25s choose third party cover
                                                                                                • Figure 39: Motor insurance ownership, by age, December 2014
                                                                                            • Motor Insurance Renewal Behaviour

                                                                                                • Most stayed with their existing insurer at their last renewal
                                                                                                  • Figure 40: Car insurance renewal behaviour, December 2014
                                                                                                • Fully comprehensive policyholders are more likely to switch…
                                                                                                  • Figure 41: Car insurance renewal behaviour, by type of car insurance policy held, December 2014
                                                                                                • …and price comparison sites are the most effective channels for switching
                                                                                                  • Figure 42: Car insurance renewal behaviour, by method used to arrange current car insurance policy, December 2014
                                                                                              • Interest in Add-ons

                                                                                                  • There is a strong demand for add-on benefits…
                                                                                                    • Figure 43: Interest in and ownership of car insurance add-on benefits, December 2014
                                                                                                  • …but most are wanted as free perks, not as additional purchases
                                                                                                    • A third would prefer to build their own policy
                                                                                                      • Young drivers are most open to paying for add-ons
                                                                                                        • Figure 44: Interest in paying for car insurance add-ons, by age, December 2014
                                                                                                    • Attitudes Towards Motor Insurance

                                                                                                        • Price is the most important feature of insurance policies
                                                                                                          • Figure 45: Attitudes towards car insurance, December 2014
                                                                                                        • The benefits of insurance are universally recognised
                                                                                                          • Figure 46: Agreement with the statement “I would not choose to purchase car insurance if it was not a legal requirement”, by current financial situation, December 2014
                                                                                                        • Reputational problems threaten the market…
                                                                                                          • …despite positive claims experiences outweighing negative ones
                                                                                                          • Appendix – Market Size and Forecast

                                                                                                              • Figure 47: Best- and worst-case forecast of gross written personal motor insurance premiums (UK business only), 2014-19
                                                                                                          • Appendix – Claims Statistics

                                                                                                            • Average claim value
                                                                                                              • Figure 48: Average car insurance claim cost, by type of claim, 2013 and 2014
                                                                                                            • Claims volume
                                                                                                              • Figure 49: Volume of car insurance claims settled, by type of claim, 2013 and 2014

                                                                                                          Companies Covered

                                                                                                          To learn more about the companies covered in this report please contact us.

                                                                                                          Motor Insurance - UK - March 2015

                                                                                                          £1,995.00 (Excl.Tax)