UK Motor Insurance Market Report 2023
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“The motor insurance market faced a tough 2022 as a result of claims inflation and new regulation. Despite these difficulties, the market will be resilient in the long term as motor insurance remains an essential purchase for drivers. Opportunities to evolve with technological and environmental developments will help insurers appeal to the new generation of motorists.”
– Natasha Hayes, Senior Financial Services Analyst, February 2023
Key issues covered in this Report
- Market size and forecast for the motor insurance market.
- Recent claims activity and underwriting performance.
- Key market drivers and regulatory developments.
- Analysis of the competitive environment, including advertising activity and brand research.
- Ownership of motor insurance.
- Analysis of renewal behaviours and intentions.
- Analysis of behaviours and attitudes in the motor insurance market.
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Overview
- Key issues covered in this Report
- Products covered in this Report
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Executive Summary
- The five year outlook for motor insurance
- Figure 1: Category outlook for motor insurance, 2023-27
- The market
- Market size and forecast
- Figure 2: Market size for domestic motor insurance market, 2017-27
- Average premiums demonstrate impact of new pricing rules
- Figure 3: Quarterly average premiums for domestic motor insurance policies, 2018-22
- Claims levels remain below pre-pandemic level
- Figure 4: Number of claims notified and claims frequency for private car insurance, 2018-22
- New GIPP rules continue to impact competitive environment
- Companies and brands
- Admiral overtakes Direct Line as market leader
- Figure 5: Top insurance providers of domestic motor insurance (ABI members), by GWP, 2020 and 2021
- Insurers struggle in first half of 2022…
- …and increase prices to combat claims inflation
- Product launches will appeal to young consumers and those wanting digital services
- The consumer
- Most motor insurance policyholders have comprehensive cover
- Figure 6: Motor insurance ownership, 2022
- Shopping around is engrained in motorists’ behaviour
- Figure 7: Behaviour at car insurance policy renewal, 2022
- Policyholders experience the knock-on effect from claims inflation
- Figure 8: Price changes at policy renewal, 2022
- Drivers are reluctant to make material policy changes to reduce premiums
- Figure 9: Intended behaviours to reduce the price of car insurance, 2022
- Despite rising costs, breakdown cover remains a priority for many
- Figure 10: Motor insurance behaviours, 2022
- Cost of living crisis raises concerns over paying excesses
- Figure 11: Attitudes towards motor insurance, 2022
- Consumer duty will help jargon-bust the market
- The five year outlook for motor insurance
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Issues and Insights
- Claims inflation creates a challenging environment…
- …as the market adapts to regulatory change
- Opportunities to cater to the new generation of motorists
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Market Size and Performance
- GWP estimated to have fallen for the third time in five years in 2022…
- Figure 12: Total gross written personal premiums for domestic motor insurance market, 2017-22
- … despite sales volumes exceeding 28 million for the first time
- Figure 13: Number of domestic motor insurance policies sold, 2012-22
- Average premiums demonstrate impact of new pricing rules
- Figure 14: Quarterly average premiums for domestic motor insurance policies, 2018-22
- GWP estimated to have fallen for the third time in five years in 2022…
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Market Forecast
- Domestic motor insurance market is gripped by claims inflation
- Figure 15: Category outlook for motor insurance, 2023-27
- Total premiums will increase over the next five years
- Figure 16: Market forecast for domestic motor insurance, 2022-27
- Learnings from the last income squeeze
- Figure 17: Gross written personal motor insurance premiums (UK domestic business only), 2007-12
- Forecast methodology
- Domestic motor insurance market is gripped by claims inflation
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Claims and Underwriting Performance
- Claims levels remain below pre-pandemic level…
- Figure 18: Number of claims notified and claims frequency for private car insurance, 2018-22
- …however average claims reach highest level on record
- Figure 19: Average cost of claims paid for private car insurance, 2013-22
- Insurers make underwriting profit for second year running
- Figure 20: Combined operating ratio for direct motor insurance business, 2009-21
- Claims levels remain below pre-pandemic level…
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Market Drivers
- Inflation dents consumer confidence for the next year
- Figure 21: Consumer confidence index, 2018-23
- Rising energy and petrol prices continue to impact motorists
- High inflation and rising interest rates will compound the impact of the slowing recovery
- Claims inflation grips the motor insurance market
- Figure 22: Transport and motor fuels annual inflation rates, 2015-22
- Traffic levels remain below pre-pandemic levels
- Figure 23: Rolling annual motor vehicle traffic for cars in Great Britain, 2016-22
- Inflation dents consumer confidence for the next year
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Regulatory and Legislative Changes
- New GIPP rules continue to impact competitive environment
- Industry must also adhere to new Consumer Duty rules in 2023
- FCA launches consultation for consumers in financial difficulty…
- … and warns insurers over low car valuations
- Cross-industry letter calls for self-driving vehicle legislation
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Market Share
- Admiral overtakes Direct Line as market leader
- Figure 24: Top insurance providers of domestic motor insurance (ABI members), by GWP, 2020 and 2021
- Insurers struggle in first half of 2022
- Admiral overtakes Direct Line as market leader
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Competitive Strategies
- Insurers increase prices to combat claims inflation
- Competitive strategies focus on cost of living response
- Go.Compare supports customers with excess payments
- Digital strategies will future-proof the market
- Technology plays an important role in customer experience
- Market will need to adapt to driverless vehicles in the long term
- ESG initiatives will be attractive to the environmentally-conscious motorist
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Launch Activity and Innovation
- Big names move into the insurance comparison space
- Martin Lewis launches Compare+ tool for car insurance
- Amazon moves into insurance space
- Product launches will appeal to young consumers and those wanting digital services
- AXA launches digital-only insurance brand Moja
- Marmalade launches pay-as-you-go for young drivers with Ageas
- Nutshell offers millennial car insurance cover
- Insurance brand designed for women, Stella, launches in the UK
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Advertising and Marketing Activity
- Advertising spend on car insurance continues to fluctuate
- Figure 25: Total above-the line, online display and direct mail advertising expenditure on car insurance, 2017/18-2021/22
- Saga bucks the trend on TV spend
- Figure 26: Total above-the line, online display and direct mail advertising expenditure on car insurance, by advertiser and media type, 2019/20-2021/22
- AXA launches sing-a-long car insurance advert
- Vitality Car leans on its cashback offering in first TV advert
- Aviva launches ‘solving financial puzzles’ campaign
- GoCompare rebrands to Go.Compare
- Figure 27: Go Compare rebrands to Go.Compare, 2022
- Nielsen Ad Intel coverage
- Advertising spend on car insurance continues to fluctuate
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Brand Research
- Brand map
- Figure 28: Attitudes towards and usage of selected brands, 2023
- Key brand metrics
- Figure 29: Key metrics for selected brands, 2023
- Brand attitudes: Covéa and By Miles stand out for rewarding loyalty
- Figure 30: Attitudes, by brand, 2023
- Brand personality: market leading brands are considered accessible and ethical
- Figure 31: Brand personality – Macro image, 2023
- Hastings Direct is considered the most affordable brand
- Figure 32: Brand personality – Micro image, 2023
- Brand analysis
- By Miles is the most engaged-with brand
- Direct Line’s reliability demonstrates its strong market position
- Despite its low usage, AA Insurance has a good reputation
- Aviva is considered an ethical brand
- Admiral and Covéa perceived highly for experience
- Commitment to Hastings Direct and esure is low
- Brand map
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Motor Insurance Ownership
- Most motor insurance policyholders have comprehensive cover
- Figure 33: Motor insurance ownership, 2022
- Prompts could improve policy understanding throughout term
- Figure 34: Insurance product ownership, by renewal behaviour, 2022
- Multi-car insurance most popular among families
- Figure 35: Additional motor insurance products ownership, 2022
- Opportunity for growth in telematics cover in long-term
- Most motor insurance policyholders have comprehensive cover
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Experience at Last Renewal – Shopping Around
- Shopping around is engrained in motorists’ behaviour
- Figure 36: Behaviour at car insurance policy renewal, 2022
- Financial situation influences behaviour
- Figure 37: Behaviour at car insurance policy renewal, by financial situation, 2022
- Shopping around is engrained in motorists’ behaviour
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Experience at Last Renewal – Price Changes
- Policyholders experience the knock-on effect from claims inflation
- Figure 38: Price changes at policy renewal, 2022
- Price rises most common among over-65s
- Figure 39: Price changes at policy renewal, by age, 2022
- Experience at last renewal influences intention to reduce insurance in the future
- Figure 40: Intention to try and reduce the price of car insurance at next renewal, by price change at last renewal, 2022
- Policyholders experience the knock-on effect from claims inflation
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Renewal Behaviours
- Drivers are reluctant to make material policy changes to reduce premiums…
- Figure 41: Intended behaviours to reduce the price of car insurance, 2022
- …and nearly half are happy to absorb any additional cost
- Under-25s most willing to try to reduce insurance costs
- Figure 42: Intended behaviours to reduce the price of car insurance, by age, 2022
- Digital-only product launches will also help lower cost of insurance
- Drivers are reluctant to make material policy changes to reduce premiums…
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Motor Insurance Behaviours
- Despite rising costs, breakdown cover remains a priority for many
- Figure 43: Motor insurance behaviours, 2022
- Black box installation is most popular among those new to the market
- Figure 44: Car insurance behaviours, by actions taken at last renewal, 2022
- Despite rising costs, breakdown cover remains a priority for many
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Attitudes towards Motor Insurance
- Cost of living crisis raises concerns over paying excess
- Figure 45: Attitude towards paying car insurance excess in the event of a claim, by financial situation, 2022
- Consumer duty will help jargon-bust the market
- Figure 46: Attitudes towards understanding car insurance documents, 2022
- Certain groups are keen to lower premiums through technology
- Figure 47: Attitudes towards using technology in cars to lower car insurance cost, by intentions to try and lower cost of insurance, 2022
- Despite rising costs, cars remain essential
- Figure 48: Attitudes towards car insurance, 2022
- Cost of living crisis raises concerns over paying excess
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Appendix – Data Sources, Abbreviations and Supporting Information
- Abbreviations
- Consumer research methodology
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Appendix: Forecast Methodology
- Market forecast and prediction intervals
- Figure 49: Market forecast for domestic motor insurance – gross written premiums, with prediction intervals, 2022-27
- Market drivers and assumptions
- Forecast methodology
- Market forecast and prediction intervals
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