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Vehicle Recovery - UK - September 2015

“The market for vehicle recovery services is showing evidence that it has finally shrugged off the difficulties from the recent economic slowdown. Confidence is returning to both operators and consumers with this offering the potential for the sector to see a rejuvenation in the way that it delivers its services.”
– Neil Mason, Head of Retail Research

This report looks at the following areas:

  • How can companies increase profitability in a price-driven market?
  • What is the future of marketing?
  • How does the market attract the 15% who currently don’t hold vehicle recovery insurance?

The vehicle recovery services market has recently seen growth both in its value and in the number of members holding policies. Various reasons are behind this strong growth with the recovery of the UK economy and the buoyant car market, especially for new cars, both notable.

Internally the market is dominated by the purchase of regular policies. These account for over four fifths of the market in 2014. Ad hoc policies account for the remainder of sales. Price competition is a major factor within the market and is evident at all levels but especially in the entry-level fix at roadside sector.

The market is dominated by three large companies (AA, RAC and Green Flag). All three are established in the sector and offer a range of services. Smaller rivals are numerous and include motor clubs and companies offering vehicle recovery services alongside financial products as well as retailers and car manufacturers. Mintel’s consumer research suggests they are currently gaining share.

Our research shows that 85% of vehicle owners have vehicle recovery insurance with peace of mind the main reason given by those with insurance for taking out a policy. Ability to fix a vehicle at the roadside is overall the most important factor overall when it comes to the purchase of insurance followed by competitive prices and speed of response.

Despite such a high level of ownership of vehicle recovery insurance, actually calling upon assistance is relatively low. Some 44% with policies say they have never needed the most basic assistance, namely fix at the roadside.

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. Overview

    • What you need to know
      • Scope of this report
      • Executive Summary

          • A market showing signs of growth
            • Figure 1: The vehicle recovery market, by value, 2010-20
          • Regular membership dominates the market
            • Figure 2: Segmentation of the vehicle recovery market, by value, at current prices, 2010-15
          • Price competition impacts on average amount paid for policies
            • Figure 3: Average premium paid, 2010-15
          • Three companies dominate in terms of membership numbers
            • Figure 4: Company shares of the vehicle recovery market, by UK membership, 2015
          • Free or insurance offered at a reduced price is a growing market
            • Figure 5: Key channels used for purchasing breakdown recovery insurance, 2011-15
          • Promotional activity is focused on the summer months
            • Figure 6: Recorded above-the-line, online display and direct mail total advertising expenditure on vehicle recovery, by month, 2014
          • Consumer preferences suggest smaller companies are gaining prominence
            • Figure 7: Ownership of breakdown cover, by recovery organisation, 2011-15
          • Peace of mind is key reason for holding vehicle recovery insurance
            • Figure 8: Reason for holding vehicle recovery insurance, June 2015
          • Ability to fix a vehicle dominates when choosing a supplier of recovery services
            • Figure 9: Most important factors when choosing a vehicle breakdown cover provider (most important factor), June 2015
          • Purchase with vehicle insurance is most important way of buying vehicle recovery services
            • Figure 10: Key means by which your current breakdown cover for your main vehicle was acquired, June 2015
          • Fix at roadside is service most likely to have been used by drivers
            • Figure 11: Use of vehicle recovery services by those who hold vehicle recovery insurance, June 2015
        • Issues and Insights

          • How can companies increase profitability in a price-driven market?
            • What is the future of marketing?
              • How does the market attract the 15% who currently don’t hold vehicle recovery insurance?
              • The Market – What You Need to Know

                • Revenues ahead 15% on 2010
                  • Strong growth for new car sales is a major driver
                    • Falling fuel prices are making filling up cheaper
                      • Regular membership is growing
                        • Price competition is a feature of the market
                          • Long-term concerns about the role of car and in personal transport
                          • Market Size and Forecast

                              • Figure 12: UK vehicle recovery market, by value, at current and constant prices, 2010-20
                              • Figure 13: Best- and worst-case forecasts of vehicle recovery market, by value, 2010-20
                          • Segment Performance

                            • Regular membership dominates
                                • Figure 14: Segmentation of the vehicle recovery market, by value, at current prices, 2010-15
                              • Price competition dents average premiums…
                                  • Figure 15: Average premium paid, 2010-15
                                • …as does use of partners
                                • Market Drivers

                                  • New sales increasing in both private and business and fleet sectors
                                      • Figure 16: UK new registrations of motor vehicles, 2010-15
                                    • Distance travelled is in steady decline
                                      • Figure 17: Trips, distance travelled and time taken, 2004-14
                                    • Stagnation in car ownership and multi-car households
                                      • Figure 18: Percentage of households with car availability, England, 1995-2014
                                    • Cost of car ownership on the rise
                                      • Figure 19: Consumer expenditure on car purchasing, servicing and repair and motoring expenses, seasonally adjusted at current prices, 2010-14
                                    • Falling fuel prices
                                      • Figure 20: Typical retail prices of petroleum products in the UK, May 2012-June 2015
                                    • Second-hand cars record a fall in their price
                                      • Figure 21: Price indices of new and used cars, 2003-14
                                    • Other factors influencing the market
                                    • Key Players – What You Need to Know

                                      • Market dominated by big three players…
                                        • …in addition to a large number of smaller concerns
                                          • Membership is showing signs of expanding
                                            • Profitability within sector can be an issue
                                              • Success in the entry-level market is sought after
                                                • Indirect sale of policies is an important market on its own
                                                • Companies and Services

                                                    • Vehicle Recovery Membership
                                                      • AA is clear leader in terms of members
                                                          • Figure 22: Company shares of the vehicle recovery market, by UK membership, 2009-15
                                                        • Vehicle Recovery Revenues
                                                          • Figure 23: Leading vehicle recovery companies, turnover, 2012-14
                                                        • Vehicle Recovery Operating Profit
                                                          • Figure 24: Leading vehicle recovery companies, operating profits, 2012-14
                                                        • Operating in the market
                                                          • Price is an important differentiator
                                                            • RAC looks to reposition itself
                                                              • Figure 25: Prices of breakdown recovery products for the AA, RAC, Green Flag and LV=, 2012-15
                                                            • Involvement of others
                                                              • Retailers
                                                                • Financial institutions
                                                                  • Figure 26: Packaged current accounts that offer breakdown cover, 2014
                                                                • Vehicle manufacturers
                                                                  • Figure 27: Car manufacturer-branded breakdown cover on new purchases, 2014
                                                              • Channels to Market

                                                                • Free or reduced price insurance attracts half of all customers…
                                                                  • …and is growing in importance
                                                                    • Figure 28: Key channels used for purchasing breakdown recovery insurance, 2011-15
                                                                • Brand Communication and Promotion

                                                                  • Fluctuating advertising spend
                                                                    • Figure 29: Recorded above-the-line, online display and direct mail total advertising expenditure on vehicle recovery, 2011-14
                                                                  • Advertising peaks during the summer
                                                                    • Figure 30: Recorded above-the-line, online display and direct mail total advertising expenditure on vehicle recovery, by month, 2014
                                                                  • Three companies dominate the market
                                                                      • Figure 31: Recorded above-the-line, online display and direct mail total advertising expenditure on vehicle recovery, by advertiser, 2011-14
                                                                    • Growth in radio advertising
                                                                      • Figure 32: Recorded above-the-line, online display and direct mail total advertising expenditure on vehicle recovery, by media type, 2011-14
                                                                      • Figure 33: Recorded above-the-line, online display and direct mail total advertising expenditure on vehicle recovery, by media type, 2011-14
                                                                    • A note on adspend
                                                                    • Innovation and Launch Activity

                                                                        • Service enhancement
                                                                          • Technology
                                                                            • New markets
                                                                              • Marketing
                                                                              • The Consumer – What You Need to Know

                                                                                • Breakdown cover is popular with most motorists
                                                                                  • Peace of mind is key reason for holding insurance
                                                                                    • Ability to fix a vehicle is more important than price as a factor when purchasing
                                                                                      • Around three in 10 purchase recovery insurance with their breakdown insurance
                                                                                        • Many policyholders have never called upon assistance
                                                                                        • Presence of Recovery Organisations

                                                                                          • Leading three companies account for over half of the market
                                                                                            • Figure 34: Ownership of breakdown cover, by recovery organisation, June 2015
                                                                                          • Age and income appear to influence choice of company
                                                                                            • Big three dominate despite fall in their share of market
                                                                                              • Figure 35: Ownership of breakdown cover, by recovery organisation, 2011-15
                                                                                            • Three quarters of used car owners don’t have cover on their main vehicle
                                                                                            • Reasons for Holding Vehicle Recovery Insurance

                                                                                              • Peace of mind dominates as key reason for holding cover
                                                                                                • Figure 36: Reason for holding vehicle recovery insurance, June 2015
                                                                                              • Age, gender, location and wealth – four segments with noticeable differences
                                                                                                • New and old owners buy for different reasons
                                                                                                • Factors Sought when Choosing Vehicle Recovery Insurance

                                                                                                  • Ability to fix at roadside dominates as most important factor
                                                                                                    • Figure 37: Most important factors when choosing a vehicle breakdown cover provider (most important factor), June 2015
                                                                                                  • Older adults, urban drivers and those on low incomes demand the most
                                                                                                    • Price dominates what are a small number of factors that are important to drivers
                                                                                                      • Figure 38: Most important factors when choosing a vehicle breakdown cover provider (any and top five factors), June 2015
                                                                                                  • Where Cover is Acquired

                                                                                                    • Vehicle insurance is a common time to purchase recovery insurance
                                                                                                      • Figure 39: Key means by which your current breakdown cover for your main vehicle was acquired, June 2015
                                                                                                    • Young adults prefer indirect channels
                                                                                                      • Growth in indirect purchasing
                                                                                                        • Figure 40: Key means by which your current breakdown cover for your main vehicle was acquired, 2011-15
                                                                                                      • Direct sale is more important for those with a second-hand or nearly new car
                                                                                                      • Frequency of Vehicle Recovery Use

                                                                                                        • Around half of policyholders have never called on assistance
                                                                                                          • Figure 41: Use of vehicle recovery services by those who hold vehicle recovery, June 2015
                                                                                                        • Roadside fixes are the most common reason for requesting assistance
                                                                                                          • Figure 42: Use of vehicle recovery services by those who hold vehicle recovery insurance (any use by service used), June 2015
                                                                                                        • Men are more likely to have used recovery services
                                                                                                          • Young adults have experience of using a broad range of services
                                                                                                            • Experience in use of these services is highest amongst urban and wealthy car owners
                                                                                                              • A quarter have required vehicle recovery services in the last 12 months
                                                                                                                • Figure 43: Use of vehicle recovery services by those who hold vehicle recovery insurance (any service by when used), June 2015
                                                                                                              • Young adults likely to be regular users of services
                                                                                                                • Urban areas provide regular demand
                                                                                                                  • Those with a used car are more likely to use vehicle recovery services
                                                                                                                  • Appendix –Data Sources and Abbreviations

                                                                                                                    • Data sources
                                                                                                                      • Market sizing and segment performance
                                                                                                                        • Fan Chart Forecast
                                                                                                                          • Abbreviations

                                                                                                                          Companies Covered

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

                                                                                                                          Vehicle Recovery - UK - September 2015

                                                                                                                          £1,995.00 (Excl.Tax)