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Vehicle Recovery - UK - September 2014

“The vehicle recovery market is mature and looking at ways of further developing business is of interest to all those in the sector. While recent years have seen the emergence of price competition in response to the UK economy suffering from the effects of the economic slowdown it is clear that this is unsustainable. With the economy strengthening many vehicle recovery companies are now looking at growing revenues. This is vital with our research suggesting that companies need to focus on how they best deal with untapped opportunities within the market.”
– Neil Mason, Head of Retail Research

This report looks at the following areas:

  • Price erosion remains an issue
  • Age, gender and income are important factors when choosing a company
  • Is the age of long distance travel at an end?

Since Mintel last reported on the vehicle recovery market back in September 2013, the UK economy has recorded a significant improvement such that by July 2014 GDP had surpassed its previous high in 2007. Personal expenditure is once again climbing with the automotive sector being one of the main beneficiaries. As such, we are much more positive about the prospects for markets such as vehicle recovery services than we have been for some time.

Yet despite the positive signs given by the economy and consumer expenditure, the market for vehicle recovery services remains one that is in a mature stage in its development. Membership of recovery organisations has been relatively stable for the last few years, with the market dominated by three main players (AA, RAC and Green Flag). The onset of recession led to difficult times for these and smaller companies with a growing emphasis on price competition. Although a focus on value remains a feature of the sector there is evidence that during 2014 a number of companies have sought to refocus their attention on non-price factors. 

Mintel’s research suggests that such prioritisation of the customer and away from mere price competition is likely to bring about an improvement in fortunes for those in the market. A number of potentially profitable customer groups exist within the market, most notably older adults as well as drivers in higher socio-economic groups. Research also suggests that some consumers are still wedded more towards price with customers of Green Flag and some of the smaller players in this market less likely to shrug off price as a factor when selecting vehicle recovery insurance.

The main reason for taking out vehicle recovery insurance remains one of peace of mind, with women in particular likely to want to get back on the road as quickly as possible. As for channels, these remain varied although the use of bundling appears to be growing in importance with a growing percentage of members acquiring insurance through the purchase of an additional product or service.

Looking ahead, those in the market will need to be more sophisticated in how they promote themselves to their existing customer base and to potential customers emphasising the attractiveness of staying with a company long-term. Moving because of a price hike or discount by a rival are identified as the two most obvious reasons for moving from an existing provider. Although continued economic recovery is certainly set to lead to an improvement in market conditions for all those competing in this sector, it is not expected to diminish the high level of competition that currently exists.

This report covers vehicle breakdown recovery services available to private car owners, whether on a direct or indirect basis, as is common in the marketplace.

The value of the vehicle recovery services market is made up of fees from memberships, paid either directly or indirectly, as well as revenue from the ad hoc sector.

Membership fees comprise any premiums paid to ensure that a vehicle or person is insured in the event of a breakdown. Fees can be paid either direct by the consumer to the recovery company or indirectly through an intermediary who will offer insurance to the consumer often as part of a bundle of services.

The value of the ad hoc sector is revenue from motorists who are not members of an organisation and therefore use the services of a recovery operator – normally an independent – on an informal or ad hoc basis.

 

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Table of contents

  1. Introduction

      • Definition
        • Abbreviations
        • Executive Summary

            • The market
              • Figure 1: The vehicle recovery market, by value, 2009-19
            • Market factors
              • Companies, brands and innovation
                • Figure 2: Company share of the vehicle recovery market, by members, 2014
                • Figure 3: Key channels used for purchasing breakdown recovery insurance, June 2014
              • The consumer
                • Figure 4: Ownership of breakdown cover, by recovery organisation, 2011-14
                • Figure 5: Most important factors when choosing breakdown cover, June 2014
                • Figure 6: Most important features sought from a breakdown insurance provider, June 2014
                • Figure 7: How breakdown cover was acquired, June 2014
                • Figure 8: Reasons for switching from existing provider, June 2014
                • Figure 9: Reasons for not having breakdown cover, June 2014
              • What we think
              • Issues and Insights

                  • Price erosion remains an issue
                    • The facts
                      • The implications
                        • Age, gender and income are important factors when choosing a company
                          • The facts
                            • The implications
                              • Is the age of long distance travel at an end?
                                • The facts
                                  • The implications
                                  • Trend Applications

                                      • FSTR HYPR
                                        • The Nouveau Poor
                                          • Alpha Mothers
                                          • Market Environment

                                            • Key points
                                              • New car sales return to pre-recessionary levels
                                                • Figure 10: UK new registrations of cars, 2009-14
                                              • Trips taken and distance travelled are in steady decline
                                                • Figure 11: Trips, distance travelled and time taken, 2003-13
                                              • Multiple car ownership remains steady
                                                • Figure 12: Percentage of households with car availability, in England, 1995-2013
                                              • Expenditure on car purchasing climbs as motor expense remain significant
                                                • Figure 13: Consumer expenditure on car purchasing, servicing and repair and motoring expenses, seasonally adjusted at current prices, 2009-13
                                              • Number of licence holders continues to expand
                                                • Figure 14: Number of licence holders, by age, 1975/76-2013
                                              • Batteries and tyres dominate call-out demands
                                                • Figure 15: Top ten most common breakdown call-outs (AA roadside patrols only), 2011 and 2012
                                              • Bundling with bank accounts and insurance policies
                                                • Growth set to continue for the UK economy
                                                  • Figure 16: GDP, PDI, consumer expenditure and savings, at current prices, 2009-19
                                                • GDP growth will take time to strengthen
                                                  • Consumer expenditure set to expand faster
                                                    • GDP growth appears to be firmly on the up
                                                      • Figure 17: GDP quarterly percentage change, Q1 2006 - Q4 2013
                                                    • Financial confidence begins to strengthen
                                                      • Figure 18: GfK Consumer Confidence Index, January 1988 – February 2014
                                                    • Pain of high fuel prices may be easing
                                                      • Figure 19: Monthly UK petrol, diesel and oil price trends, 2009-13**
                                                    • UK population moving socially downward
                                                      • An ageing population
                                                      • Competitive Context

                                                        • Key points
                                                          • Running costs outpace the value of new and used car market
                                                            • Figure 20: UK transport market value by segment, 2008-13
                                                          • Fuel prices stabilise
                                                            • Figure 21: Annual Petrol and Diesel price trends, 2000-13
                                                          • Inflation slows since 2012
                                                            • Figure 22: Annual percentage change in transport costs, 2006-13
                                                          • Second-hand cars remain a competitively priced purchase
                                                            • Figure 23: Prices indices of new and used cars, 1999-2013
                                                          • Economic slowdown hits road traffic figures
                                                            • Figure 24: Road traffic (billion vehicle miles) in Great Britain, by vehicle type, 2000-13
                                                          • Economic slowdown hits travel plans
                                                            • Car mileage is yet to recover
                                                            • Who’s Innovating?

                                                              • Key points
                                                                • New treads
                                                                  • Electric on the go
                                                                    • From Green Flag with love
                                                                    • Strengths and Weaknesses

                                                                      • Strengths
                                                                        • Weaknesses
                                                                        • Market Size and Forecast

                                                                          • Key points
                                                                            • Revenue growth accelerates as economic recovery strengthens
                                                                              • Figure 25: UK vehicle recovery market, by value, at current and constant prices, 2009-19
                                                                            • Entry of UK into recession depresses sector
                                                                              • Improvements in UK economy bring about positive returns for the vehicle recovery sector
                                                                                • Price competition grows in importance
                                                                                  • Figure 26: Average premium paid, 2009-14
                                                                                • The future
                                                                                  • Forecast
                                                                                    • Figure 27: Best- and worst-case forecasts of vehicle recovery market, by value, 2009-19
                                                                                • Segment Performance

                                                                                  • Key points
                                                                                    • Regular membership recovers
                                                                                      • Figure 28: Segmentation of the vehicle recovery market, by value, at current prices, 2009-14
                                                                                    • Regular membership revenues top 85%
                                                                                      • Regular membership up as economy strengthens
                                                                                        • Price completion gives way to offers
                                                                                        • Market Share

                                                                                          • Key points
                                                                                            • AA continues to dominate the market
                                                                                              • Figure 29: Company shares of the vehicle recovery market, by UK membership*, 2010-14
                                                                                            • Overall membership shows gradual expansion
                                                                                              • AA continues to dominate the market
                                                                                                • RAC strengthens its position as number two
                                                                                                  • Green Flag underperforms
                                                                                                    • Others maintain position as challengers
                                                                                                      • New owners offer potential to invigorate market
                                                                                                        • AA and RAC hike premiums for basic cover to focus on added value services
                                                                                                          • Figure 30: Prices of breakdown recovery products for the AA, RAC, Green Flag and LV=, 2012-2014
                                                                                                        • Premium prices hiked for basic services...
                                                                                                          • ... while lowered for more premium policies
                                                                                                            • Green Flag is cheapest of the big 3 where it competes
                                                                                                            • Companies and Services

                                                                                                              • The AA
                                                                                                                • Background
                                                                                                                  • Position in the market
                                                                                                                    • Product range
                                                                                                                      • Key data
                                                                                                                        • Figure 31: Key financials for the Automobile Association Limited, by Group and by Roadside Assistance, 2013 and 2014
                                                                                                                      • Recent activity and promotion
                                                                                                                        • Green Flag
                                                                                                                          • Background
                                                                                                                            • Position in the market
                                                                                                                              • Product range
                                                                                                                                • Figure 32: Green Flag breakdown cover range by type of cover, 2014
                                                                                                                              • Key data
                                                                                                                                • Recent activity and promotion
                                                                                                                                  • RAC
                                                                                                                                    • Background
                                                                                                                                      • Position in the market
                                                                                                                                        • Product range
                                                                                                                                          • Key data
                                                                                                                                            • Figure 33: Key financials for RAC Finance Group (Holdings) Limited, 2012 and 2013
                                                                                                                                          • Recent activity and promotion
                                                                                                                                            • Other companies
                                                                                                                                              • Allianz Global Assistance
                                                                                                                                                • Aria Assistance
                                                                                                                                                  • Autonational Rescue
                                                                                                                                                    • AXA Assistance
                                                                                                                                                      • Breakdown Direct
                                                                                                                                                        • First Call GB
                                                                                                                                                          • GEM Motoring Assist
                                                                                                                                                            • LV=/Britannia Rescue
                                                                                                                                                              • Rescuemycar.com
                                                                                                                                                                • Start Rescue
                                                                                                                                                                  • Retailer-branded breakdown cover
                                                                                                                                                                    • Tesco
                                                                                                                                                                      • Asda
                                                                                                                                                                        • Sainsbury’s
                                                                                                                                                                          • The Co-operative
                                                                                                                                                                            • Car manufacturer-branded breakdown cover
                                                                                                                                                                              • Figure 34: Car manufacturer-branded breakdown cover on new purchases, 2014
                                                                                                                                                                            • Roadside assistance and breakdown cover from banks
                                                                                                                                                                              • Figure 35: Packaged current accounts that offer breakdown cover, 2014
                                                                                                                                                                          • Brand Communication and Promotion

                                                                                                                                                                            • Key points
                                                                                                                                                                              • Advertising expenditure falls back
                                                                                                                                                                                • Figure 36: UK main media advertising expenditure on vehicle breakdown and recovery service, 2010-13
                                                                                                                                                                              • Summer records uplift in expenditure
                                                                                                                                                                                • Figure 37: UK main media advertising expenditure on vehicle breakdown and recovery services, by month, 2013
                                                                                                                                                                              • Direct mail surges in importance
                                                                                                                                                                                • Figure 38: Main media advertising expenditure on vehicle breakdown and recovery services, by media type, 2010-13
                                                                                                                                                                                • Figure 39: Main media monitored advertising expenditure on vehicle breakdown and recovery services, by % of media type, 2010-13
                                                                                                                                                                              • Big 3 within the market also dominate advertising
                                                                                                                                                                                • Figure 40: Main monitored media advertising expenditure on vehicle breakdown and recovery services, by top 15 advertisers, 2010-13
                                                                                                                                                                            • Channels to Market

                                                                                                                                                                              • Key points
                                                                                                                                                                                • Around half of purchasers benefit from a deal when acquiring insurance
                                                                                                                                                                                  • Figure 41: Key channels used for purchasing breakdown recovery insurance, June 2014
                                                                                                                                                                                • Free and discounted insurance is growing its profile
                                                                                                                                                                                  • Figure 42: Key channels used for purchasing breakdown recovery insurance, 2011 and 2014
                                                                                                                                                                                • Comparethemarket.com dominates price comparison market
                                                                                                                                                                                  • Figure 43: Most popular price comparison websites, by percentage used in the last 12 months, March 2014
                                                                                                                                                                                • Loyalty towards comparison sites is low
                                                                                                                                                                                  • Figure 44: Number of aggregator sites used in the last 12 months, March 2014
                                                                                                                                                                              • The Consumer – Presence of Recovery Organisations

                                                                                                                                                                                • Key points
                                                                                                                                                                                  • Big 3 account for two thirds of market
                                                                                                                                                                                      • Figure 45: Ownership of vehicle breakdown cover, by recovery organisation, June 2014
                                                                                                                                                                                    • Different recovery organisations popular with specific age groups
                                                                                                                                                                                      • Green Flag – a company with broad appeal
                                                                                                                                                                                        • Income a major factor in choosing the AA
                                                                                                                                                                                          • Big three strengthening their presence
                                                                                                                                                                                            • Figure 46: Ownership of breakdown cover, by recovery organisation, 2011-14
                                                                                                                                                                                          • AA and RAC more likely to attract owners of new cars
                                                                                                                                                                                            • Figure 47: Who do you have breakdown recovery insurance with, by vehicle ownership, June 2014
                                                                                                                                                                                        • The Consumer – Key Factors When Choosing Breakdown Cover

                                                                                                                                                                                          • Key points
                                                                                                                                                                                            • Response times and costs are key factors when choosing a company
                                                                                                                                                                                                • Figure 48: Most important factors when choosing breakdown cover, June 2014
                                                                                                                                                                                              • Women focus on a number of key factors
                                                                                                                                                                                                • Older adults want reassurance over cost
                                                                                                                                                                                                  • Urban drivers less demanding overall
                                                                                                                                                                                                    • Customer demands help shape what is offered
                                                                                                                                                                                                      • Figure 49: Factors sought when choosing a breakdown recovery provider, by who do you have breakdown recovery insurance with, June 2014
                                                                                                                                                                                                    • Used and nearly new owners focus on cost
                                                                                                                                                                                                      • Figure 50: Factors sought when choosing a breakdown recovery provider, by vehicle ownership, June 2014
                                                                                                                                                                                                  • The Consumer – Key Features Sought

                                                                                                                                                                                                    • Key points
                                                                                                                                                                                                      • Drivers focus their attention on a number of key features
                                                                                                                                                                                                          • Figure 51: Most important features sought from a breakdown insurance provider, June 2014
                                                                                                                                                                                                        • Women want to keep moving
                                                                                                                                                                                                          • Wealthier drivers look for some specific services
                                                                                                                                                                                                            • Urbanites less bothered about services
                                                                                                                                                                                                              • Those looking at key features also focus on key factors
                                                                                                                                                                                                                • Figure 52: Key features sought from breakdown recovery insurance, by most popular factors sought when choosing a breakdown recovery provider, June 2014
                                                                                                                                                                                                                • Figure 53: Key features sought from breakdown recovery insurance, by next most popular factors sought when choosing a breakdown recovery provider, June 2014
                                                                                                                                                                                                              • RAC members appear as the most demanding
                                                                                                                                                                                                                • Figure 54: Key features sought from breakdown recovery insurance, by who do you have breakdown recovery insurance with, June 2014
                                                                                                                                                                                                            • The Consumer – How Cover is Acquired

                                                                                                                                                                                                              • Key points
                                                                                                                                                                                                                • Indirect purchase as part of vehicle insurance is most popular way of acquiring cover
                                                                                                                                                                                                                    • Figure 55: How breakdown cover was acquired, June 2014
                                                                                                                                                                                                                  • Bundling with insurance attracts a number of different groups
                                                                                                                                                                                                                    • Different age groups purchase different ways
                                                                                                                                                                                                                      • Purchasing channels continue to evolve
                                                                                                                                                                                                                        • Figure 56: How breakdown cover was acquired, 2011-14
                                                                                                                                                                                                                      • Companies have strengths with particular sales channels
                                                                                                                                                                                                                        • Figure 57: How breakdown recovery insurance acquired, by who do you have breakdown recovery insurance with, June 2014
                                                                                                                                                                                                                    • The Consumer – Switching From Your Current Provider

                                                                                                                                                                                                                      • Key points
                                                                                                                                                                                                                        • Price is the main reason for switching
                                                                                                                                                                                                                            • Figure 58: Reasons for switching from existing provider, June 2014
                                                                                                                                                                                                                          • Wealthier individuals are more likely to move
                                                                                                                                                                                                                            • Young are inclined to move for different reasons
                                                                                                                                                                                                                              • Rural drivers appear more loyal
                                                                                                                                                                                                                                • Price and service failures lead response-driven customers to move
                                                                                                                                                                                                                                  • Figure 59: What would make you change from your existing breakdown recovery provider, by most popular factors sought when choosing a breakdown recovery provider, June 2014
                                                                                                                                                                                                                                  • Figure 60: What would make you change from your existing breakdown recovery provider, by next most popular factors sought when choosing a breakdown recovery provider, June 2014
                                                                                                                                                                                                                                • Customer profile of major organisations impacts on reasons to move
                                                                                                                                                                                                                                  • Figure 61: What would make you change from your existing breakdown recovery provider, by who do you have breakdown recovery insurance with, June 2014
                                                                                                                                                                                                                                • Owners of used cars seem price sensitive
                                                                                                                                                                                                                                  • Figure 62: What would make you change from your existing breakdown recovery provider, by vehicle ownership, June 2014
                                                                                                                                                                                                                              • The Consumer – Why Cover Is Not Held

                                                                                                                                                                                                                                • Key points
                                                                                                                                                                                                                                  • Price dominates as the main reason for not having cover
                                                                                                                                                                                                                                      • Figure 63: Reasons for not having breakdown cover, June 2014
                                                                                                                                                                                                                                  • Appendix – Market Environment

                                                                                                                                                                                                                                      • Figure 64: Forecast adult population trends, by socio-economic group, 2008-18
                                                                                                                                                                                                                                      • Figure 65: Trends in the age structure of the UK population, 2009-19
                                                                                                                                                                                                                                  • Appendix – The Consumer – Presence of Recovery Organisations

                                                                                                                                                                                                                                      • Figure 66: Most popular who do you have breakdown recovery insurance with, by demographics, June 2014
                                                                                                                                                                                                                                      • Figure 67: Next most popular who do you have breakdown recovery insurance with, by demographics, June 2014
                                                                                                                                                                                                                                  • Appendix – The Consumer – Key Factors When Choosing Breakdown Cover

                                                                                                                                                                                                                                      • Figure 68: Most popular factors sought when choosing a breakdown recovery provider, by demographics, June 2014
                                                                                                                                                                                                                                      • Figure 69: Next most popular factors sought when choosing a breakdown recovery provider, by demographics, June 2014
                                                                                                                                                                                                                                      • Figure 70: Other factors sought when choosing a breakdown recovery provider, by demographics, June 2014
                                                                                                                                                                                                                                  • Appendix – The Consumer – Key Features Sought

                                                                                                                                                                                                                                      • Figure 71: Most popular key features sought from breakdown recovery insurance, by demographics, June 2014
                                                                                                                                                                                                                                      • Figure 72: Next most popular key features sought from breakdown recovery insurance, by demographics, June 2014
                                                                                                                                                                                                                                  • Appendix – The Consumer – How Cover Is Acquired

                                                                                                                                                                                                                                      • Figure 73: Most popular how breakdown recovery insurance acquired, by demographics, June 2014
                                                                                                                                                                                                                                      • Figure 74: Next most popular how breakdown recovery insurance acquired, by demographics, June 2014
                                                                                                                                                                                                                                  • Appendix – The Consumer – Switching From Your Current Provider

                                                                                                                                                                                                                                      • Figure 75: Most popular what would make you change from your existing breakdown recovery provider, by demographics, June 2014
                                                                                                                                                                                                                                      • Figure 76: Next most popular what would make you change from your existing breakdown recovery provider, by demographics, June 2014

                                                                                                                                                                                                                                  Companies Covered

                                                                                                                                                                                                                                  • AB Volvo
                                                                                                                                                                                                                                  • Acromas Holdings
                                                                                                                                                                                                                                  • Alfa Romeo
                                                                                                                                                                                                                                  • Allianz Group
                                                                                                                                                                                                                                  • Aria Technology Ltd
                                                                                                                                                                                                                                  • Asda Group Ltd
                                                                                                                                                                                                                                  • Audi United Kingdom
                                                                                                                                                                                                                                  • Automobile Association (AA)
                                                                                                                                                                                                                                  • Automobile Association Personal Finance Limited
                                                                                                                                                                                                                                  • Aviva Plc
                                                                                                                                                                                                                                  • AXA
                                                                                                                                                                                                                                  • Barclays Bank plc
                                                                                                                                                                                                                                  • Bayerische Motoren Werke AG (BMW)
                                                                                                                                                                                                                                  • Britannia Rescue
                                                                                                                                                                                                                                  • Carlyle Group (The)
                                                                                                                                                                                                                                  • Charterhouse Capital Partners LLP
                                                                                                                                                                                                                                  • Clydesdale Bank
                                                                                                                                                                                                                                  • CVC Capital Partners Limited
                                                                                                                                                                                                                                  • Direct Line Group Limited
                                                                                                                                                                                                                                  • Equity Red Star
                                                                                                                                                                                                                                  • Europ Assistance UK
                                                                                                                                                                                                                                  • Fiat Auto
                                                                                                                                                                                                                                  • First Direct
                                                                                                                                                                                                                                  • Glastonbury Festivals Ltd
                                                                                                                                                                                                                                  • Green Flag Motoring Assistance
                                                                                                                                                                                                                                  • Greenflag
                                                                                                                                                                                                                                  • Guild of Experienced Motorists (GEM)
                                                                                                                                                                                                                                  • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                                                                                  • J. Sainsbury
                                                                                                                                                                                                                                  • Jaguar Cars Limited
                                                                                                                                                                                                                                  • Land Rover UK
                                                                                                                                                                                                                                  • Lloyds Banking Group
                                                                                                                                                                                                                                  • London Stock Exchange plc
                                                                                                                                                                                                                                  • LV=
                                                                                                                                                                                                                                  • Mercedes-Benz UK
                                                                                                                                                                                                                                  • Mondial Assistance (UK) Limited
                                                                                                                                                                                                                                  • NatWest
                                                                                                                                                                                                                                  • Nissan Motor (GB) Ltd
                                                                                                                                                                                                                                  • Royal Automobile Club
                                                                                                                                                                                                                                  • Royal Bank of Scotland Group plc
                                                                                                                                                                                                                                  • Skoda Auto a.s.
                                                                                                                                                                                                                                  • Tesco (UK)
                                                                                                                                                                                                                                  • Toyota (GB) PLC
                                                                                                                                                                                                                                  • Volkswagen AG
                                                                                                                                                                                                                                  • YouTube, Inc.

                                                                                                                                                                                                                                  Vehicle Recovery - UK - September 2014

                                                                                                                                                                                                                                  £1,995.00 (Excl.Tax)