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Motor Insurance - UK - March 2016

"After a period of falling premiums, 2015 saw a sizeable increase in GWP with evidence that further premium increases are likely in 2016. Although those in the industry are likely to welcome the opportunity to boost profits, drivers have become increasingly savvy in recent years when it comes to buying insurance and will look for opportunities to lower their costs where possible."
– Deborah Osguthorpe, Head of UK Financial Services Research

This report examines the following areas:

  • Operating in a market of higher premiums
  • Competing in an increasingly fragmented market
  • Telematics policies set to benefit from further growth in target market

Set against this backdrop, many insurance companies are currently re-examining the way that they approach the market. A growing reliance on the internet for purchasing motor insurance has led to many trimming the amount they spend on above-the-line advertising and promotion. Initiatives to improve their market penetration are being pursued with partnerships and there is an increasing interest in the use of new technology across the market.

This report examines the UK car insurance market. It includes an examination and forecast of the size of the market and market drivers impacting on the sector, as well as 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 insurance is purchased and from whom, how consumers view the use of various insurance channels when looking for information and statements associated with key issues, as well as views on the use of telematics insurance policies.

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Table of contents

  1. Overview

    • What you need to know
    • Executive Summary

        • The market
          • Premiums up in 2015 after a period of decline
            • Figure 1: Gross written personal motor insurance premiums (UK business only), fan chart, 2010-2020
          • Cost of average claims up despite fall in total claim costs
            • Online channels dominate policy purchasing
              • Figure 2: Methods of purchasing motor insurance, December 2015
            • Companies, brands and innovation
              • Car insurance market is highly consolidated
                • Figure 3: Top 10 personal motor insurance underwriters, by gross written premiums, 2014 (UK business only)
              • AA and RAC brands are most trusted
                • Figure 4: Attitudes towards and usage of selected finance brands, November 2015
              • Advertising expenditure in decline
                • The consumer
                  • Seven out of 10 adults hold some form of car insurance
                    • Figure 5: Ownership of motor insurance, December 2015
                  • Laptops are the preferred method to buy insurance online
                    • Figure 6: Ways of purchasing motor insurance online, December 2015
                  • Majority of customers ultimately stay with their insurer at renewal
                    • Figure 7: Statements associated with purchasing motor insurance, December 2015
                  • Provider websites preferred for cover information, while PCWs lead on price information
                    • Figure 8: Sources of information for motor insurance, December 2015
                  • Over a third have an interest in a telematics policy
                    • Figure 9: Interest in telematics-based motor insurance policies, December 2015
                  • What it means
                  • Issues and Insights

                    • Operating in a market of higher premiums
                      • The facts
                        • The implications
                          • Competing in an increasingly fragmented market
                            • The facts
                              • The implications
                                • Telematics policies set to benefit from further growth in target market
                                  • The facts
                                    • The implications
                                    • The Market – What You Need to Know

                                      • Period of falling premiums appears to be at an end …
                                        • … with average premium costs set to rise significantly during 2015
                                          • Cars remain a popular purchase
                                            • Average claim value trebles in 10 years
                                              • Online channels increase dominance in market
                                                • Sizeable niche interest in self-driving cars
                                                • Market Size and Forecast

                                                  • Gross written premium up in 2015
                                                    • Figure 10: Gross written personal motor insurance premiums (UK business only), 2010-15
                                                  • Market forecast
                                                    • Further increases in GWP forecast beyond 2015
                                                      • Figure 11: Gross written personal motor insurance premiums (UK business only), fan chart, 2010-2020
                                                      • Figure 12: Gross written personal motor insurance premiums (UK business only), fan chart, 2010-2020
                                                    • Forecast methodology
                                                    • Market Drivers

                                                      • UK licensed car parc approaches 30 million
                                                        • Figure 13: Licensed vehicles (cars), million vehicles, 1994-2014
                                                      • New car sales record especially strong growth
                                                        • Figure 14: New and used car market volumes, 2010-15
                                                      • Age of car parc is broadening
                                                        • Figure 15: Age structure of the car parc in years, 2012, 2013 and 2014
                                                      • Premiums rise strongly in 2015
                                                        • Figure 16: AA BIPI motor comprehensive and third party whole market and shoparound premium trends, Q1 2010-Q4 2015
                                                      • Claim value up while total cost of claims is down
                                                        • Figure 17: Cost of claims settled and average claim value, private car, 2004-14
                                                      • Market edges closer to breakeven in underwriting performance
                                                        • Figure 18: Personal motor insurance underwriting result, 2010-15
                                                      • Detected fraud records an upward trend
                                                        • Popularity of telematics continue to grow
                                                          • Figure 19: Volume of live telematics policies, 2009-14
                                                        • Rise in IPT set increase shoparound behaviour
                                                        • Channels to Market

                                                          • Online dominates as the preferred channel for purchasing
                                                            • Figure 20: Methods of purchasing motor insurance, December 2015
                                                          • Different age groups have preferences for different channels
                                                            • Figure 21: Methods used to purchase motor insurance, by age, December 2015
                                                          • Income and socio economic status also impact channel choices
                                                          • Autonomous and Driverless Cars

                                                              • Figure 22: Attitudes towards car purchasing and ownership, December 2015
                                                            • Young adults and city dwellers are more likely to see the appeal
                                                              • Wide ranging implication for motor insurance industry
                                                                • Figure 23: Statements associated with car insurance, December 2015
                                                              • Partnerships with manufacturers and technology providers will be crucial for insurers
                                                              • Companies and Brands – What You Need to Know

                                                                • Market dominated by a small number of companies
                                                                  • Falling premiums impact on company performance
                                                                    • Launch of new initiatives and extending partnerships
                                                                      • Total advertising expenditure in decline
                                                                      • Market Share

                                                                        • Dominance of large players shows sign of weakening
                                                                          • Mixed fortunes for individual insurers
                                                                            • Admiral – the largest player in the market overall
                                                                              • Figure 24: Top 10 personal motor insurance underwriters, by gross written premiums, 2012-14 (UK business only)
                                                                          • Competitive Strategies

                                                                            • Falling premiums signal activity within the market
                                                                              • Consolidation is the route for some
                                                                                • Customer transparency pursued by AXA
                                                                                  • Partnerships continue to be used to grow share …
                                                                                    • … and to make the most of new opportunities
                                                                                      • New initiatives also being pursued
                                                                                        • AA Underwriting – a new player enters the underwriting market
                                                                                        • Advertising and Marketing Activity

                                                                                          • Investment in advertising and marketing in decline
                                                                                            • Figure 25: Total above-the line, online display and direct mail advertising expenditure on car insurance, 2010/11-2014/15
                                                                                          • Mixed messages with regards to individual expenditure
                                                                                            • Figure 26: Above-the line, online display and direct mail advertising expenditure for top 20 car insurance advertisers, 2012/13-2014/15
                                                                                          • Television holds dominant position in the market
                                                                                            • Figure 27: Total above-the line, online display and direct mail advertising expenditure on car insurance by media type, 2014/15
                                                                                          • Nielsen Media Research coverage
                                                                                          • Brand Research

                                                                                              • Brand map
                                                                                                • Figure 28: Attitudes towards and usage of selected finance brands, November 2015
                                                                                              • Key brand metrics
                                                                                                • Figure 29: Key metrics for selected finance brands, November 2015
                                                                                              • Brand attitudes: Customer service, fairness, trust, quality and reputation are typical of many brands
                                                                                                • Figure 30: Attitudes, by brand, November 2015
                                                                                              • Brand personality: Views on brand image are more variable
                                                                                                • Figure 31: Brand personality – macro image, November 2015
                                                                                              • Many brands are viewed as performing similarly against specific issues
                                                                                                • Figure 32: Brand personality – micro image, November 2015
                                                                                            • The Consumer – What You Need to Know

                                                                                              • Comprehensive insurance is preferred by most drivers
                                                                                                • Online is popular with laptops accounting for a half of purchases
                                                                                                  • One in three switched providers at last renewal
                                                                                                    • Provider websites preferred for cover information, while PCWs lead on price information
                                                                                                      • Interest in telematics insurance policies is split
                                                                                                      • Ownership of Motor Insurance

                                                                                                        • 90% of car insurance policyholders have comprehensive cover
                                                                                                          • Figure 33: Ownership of motor insurance, December 2015
                                                                                                        • Younger drivers seek ways to lower their premium costs
                                                                                                          • Figure 34: Motor insurance ownership by age, December 2015
                                                                                                      • Purchasing Motor Insurance

                                                                                                        • Online increasingly dominates the market
                                                                                                          • Figure 35: Methods of purchasing motor insurance, December 2014 and December 2015
                                                                                                        • Laptops lead as the main way to access websites for car insurance
                                                                                                            • Figure 36: Ways of purchasing motor insurance online, December 2015
                                                                                                          • Different age groups prefer different devices
                                                                                                          • Motor Insurance Providers

                                                                                                            • Traditional insurance companies dominate market
                                                                                                              • Figure 37: Type of company providing car insurance, December 2015
                                                                                                            • Insurance companies hold sway with older adults
                                                                                                              • … and also wealthier adults
                                                                                                              • Motor Insurance Renewal Behaviour

                                                                                                                • The majority shop around at renewal
                                                                                                                    • Figure 38: Motor insurance renewal behaviour, December 2015
                                                                                                                  • Mixed messages from older drivers
                                                                                                                    • Scots are less likely to switch
                                                                                                                      • Price comparison site activity drives switching
                                                                                                                        • Figure 39: Motor insurance renewal behaviour, by methods of purchasing car insurance, December 2015
                                                                                                                    • Sources of Information about Motor Insurance

                                                                                                                      • Vast majority access motor insurance information online
                                                                                                                        • Opportunities for insurance providers to compete with PCWs on cover information
                                                                                                                          • Figure 40: Sources of Information, December 2015
                                                                                                                        • Price comparison websites are popular with men
                                                                                                                          • Online forums have most influence among under-35s
                                                                                                                            • ABC1s and wealthy individuals attracted to provider websites
                                                                                                                              • Around half of drivers rely on a single source for information
                                                                                                                              • Statements Associated with Car Insurance

                                                                                                                                • Focus is on keeping premiums down
                                                                                                                                  • Figure 41: Statements associated with car insurance, December 2015
                                                                                                                                • Young and old drivers have polarised views towards certain statements
                                                                                                                                  • Parents and urban drivers are amongst the most demanding
                                                                                                                                  • Interest in Telematics

                                                                                                                                    • Mixed interest towards telematics
                                                                                                                                        • Figure 42: Interest in telematics, December 2015
                                                                                                                                      • Men, parents and those in urban areas show a stronger interest in telematics
                                                                                                                                        • Concerns about use of telematics data dominate worries
                                                                                                                                          • Figure 43: No interest in telematics, December 2015
                                                                                                                                        • Data privacy most likely to polarise opinions towards acceptance of telematics
                                                                                                                                        • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                            • Abbreviations
                                                                                                                                              • Consumer research methodology
                                                                                                                                              • Appendix – Market Size and Forecast

                                                                                                                                                  • Figure 44: Best- and worst-case forecast of gross written personal motor insurance premiums (UK business only), 2015-20
                                                                                                                                                • Forecast Methodology

                                                                                                                                                Companies Covered

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

                                                                                                                                                Motor Insurance - UK - March 2016

                                                                                                                                                £1,995.00 (Excl.Tax)