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Vehicle Recovery - UK - September 2018

"The vehicle recovery services market has seen steady growth in recent years. However, with a downturn in car sales and a possible slowdown for the UK economy as it approaches departure from the EU, the sector is likely to enter a more challenging period. Competition may well intensify, necessitating well defined strategies from all those that wish to operate in this market."
- Neil Mason, Retail Category Director

This Report looks at the following areas:

  • Does slowdown in revenue growth signal difficult times ahead?
  • Comprehensive policies are back in fashion
  • Consolidation outside of the big three is increasingly evident

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
      • Executive Summary

          • The market
            • Market value set to increase further
              • Figure 1: Best- and worst-case forecasts of vehicle recovery market, by value, 2013-23
            • Traditional, comprehensive, policies are the most popular
              • Figure 2: Segmentation of the vehicle recovery market (value), by policy type, 2017
            • Free or reduced-price insurance is the most popular
              • Figure 3: Key channels used for purchasing breakdown recovery insurance, 2012, 2014, 2016 & 2018
            • Companies and brands
              • Big three companies coming under increased pressure
                • Figure 4: Company shares of the vehicle recovery market, by UK membership, 2012 and 2018
              • AA has the most positive brand characteristics
                • Figure 5: Attitudes towards and usage of selected brands, June 2018
              • Increased expenditure from the AA boosts promotional investment
                • Figure 6: Total above-the-line, online display and direct mail advertising expenditure on breakdown recovery, 2013-17
              • The consumer
                • The AA is the most popular with vehicle owners
                  • Figure 7: Ownership of breakdown cover, by recovery organisation, July 2018
                • Price is key when selecting a company
                  • Figure 8: Factors considered when selecting a provider of breakdown cover, July 2018
                • Buying online leads as the main way to acquire cover
                  • Figure 9: Key means by which current breakdown cover for your main vehicle was acquired, July 2018
                • Loyalty is important
                  • Figure 10: Action taken last time renewed breakdown recovery, July 2018
                • Two thirds are likely to renew with their existing provider
                  • Figure 11: Likelihood of renewing with your existing provider, July 2018
                • Traditional insurance policies dominate
                  • Figure 12: Interest in different types of vehicle recovery insurance policy, July 2018
                • Financial discounts dominate
                  • Figure 13: Factors considered when selecting a provider of breakdown cover, July 2018
                • What we think
                • Issues and Insights

                  • Does slowdown in revenue growth signal difficult times ahead?
                    • The implications
                      • Comprehensive policies are back in fashion
                        • The facts
                          • The implications
                            • Consolidation outside of the big three is increasingly evident
                              • The facts
                                • The implications
                                • The Market – What You Need to Know

                                  • Market value set to increase although real growth will stagnate
                                    • Membership and traditional policies dominate
                                      • Direct sale and free or reduced price policies are most popular
                                        • IPT reaches 12%
                                        • Market Size and Forecast

                                          • Revenues continue to climb although growth slows
                                            • Figure 14: Best- and worst-case forecasts of vehicle recovery market, by value, 2013-23
                                            • Figure 15: UK vehicle recovery market, by value, at current and constant prices, 2013-23
                                          • Forecast methodology
                                          • Market Segmentation

                                            • Regular membership market continues to expand
                                              • Figure 16: Segmentation of the vehicle recovery market, by value, at current prices, 2013-18
                                            • Average premiums rise as major players refocus on adding value
                                              • Figure 17: Average premium paid, 2013-18
                                            • Policies with restrictions account for a sizeable share of the market
                                              • Figure 18: Segmentation of the vehicle recovery market (value), by policy type, 2017
                                            • Most policies are sold direct
                                              • Figure 19: Segmentation of the vehicle recovery market (value), by direct/indirect channels, 2017
                                          • Channels to Market

                                            • Over half of recovery insurance is acquired free or at a reduced price
                                              • Mixed fortunes for other channels
                                                • Figure 20: Key channels used for purchasing breakdown recovery insurance, 2012, 2014, 2016 & 2018
                                            • Market Drivers

                                              • Nearly a quarter of cars are 12 years or older
                                                • Figure 21: Age structure of the UK car parc in years, 2013, 2015 and 2017
                                              • Car sales move into reverse…
                                                • Figure 22: New and used car market volumes, 2013-18
                                              • …with rising costs of ownership evident since 2015
                                                • Figure 23: Consumer expenditure on car purchasing, servicing and repair and motoring expenses, seasonally adjusted at current prices, 2013-17
                                              • Yet more consumers still plan to buy in the next three years
                                                • Figure 24: Do you or someone else in your household plan to buy a car(s) within the next 3 years, December 2017
                                              • Second car ownership is increasing once again
                                                • Figure 25: Percentage of households with car availability, in England, 2007-17
                                              • Falling prices for second-hand cars increasingly make them affordable
                                                • Figure 26: Price indices of new and used cars, 2007-17
                                              • Rising fuel prices are a growing issue
                                                • Figure 27: Average monthly retail prices of petroleum products and a crude oil price index, at current prices, January 2012-June 2018
                                              • Stabilisation in IPT at 12% is helpful for policies
                                                • Figure 28: Insurance premium tax rates, 1997-2017
                                              • Trips taken each year are down if walking is excluded
                                                • Figure 29: Trips, distance travelled and time taken, England, 2007-17
                                              • A growing, and ageing, population should present opportunities
                                                • Figure 30: Trends in the age structure of the UK population, 2012-22
                                            • Companies and Brands – What You Need to Know

                                              • AA performing the best of the larger service providers
                                                • Consolidation evident amongst others in the market
                                                  • Service packages are a major differentiation strategy
                                                    • Increased expenditure from the AA helps to boost advertising and promotional investment
                                                      • AA has the most positive brand characteristics of the big three
                                                      • Market Share

                                                        • Three biggest names all suffer a fall in membership
                                                          • Membership nears 30 million
                                                            • Figure 31: Company shares of the vehicle recovery market, by UK membership, 2012-18
                                                          • Consolidation evident amongst others in the market
                                                            • Figure 32: Share of others in the market, by UK membership, 2016 and 2018
                                                        • Competitive Strategies

                                                          • Service options are a key competitive differentiator
                                                            • Matrix pricing becomes the norm
                                                              • Ways of keeping premiums down
                                                                • Roadside assistance is a key competitive battleground
                                                                  • Figure 33: Review of roadside assistance prices and packages, July 2018
                                                                • Different methods of payment
                                                                  • Promotions popular with big three
                                                                    • Figure 34: Key short term offers from vehicle recovery companies, July 2018
                                                                  • Use of partnerships to extend market coverage
                                                                    • Retailers
                                                                      • Financial institutions
                                                                        • Figure 35: Packaged current accounts that offer breakdown cover, July 2018
                                                                      • Vehicle manufacturers
                                                                        • Figure 36: Selected car manufacturer-branded breakdown cover on new purchases, July 2018
                                                                    • Advertising and Marketing Activity

                                                                      • Advertising grows in 2017 on the back of investment by the AA
                                                                        • Figure 37: Total above-the-line, online display and direct mail advertising expenditure on breakdown recovery, 2013-17
                                                                      • Majority of expenditure occurs during the summer months
                                                                        • Figure 38: Recorded above-the-line, online display and direct mail total advertising expenditure on breakdown recovery, by month, 2016 and 2017
                                                                      • Singing baby helps raise AA’s share of spend
                                                                        • Figure 39: Recorded above-the-line, online display and direct mail total advertising expenditure on breakdown recovery, by advertiser, 2013-17
                                                                      • Television and direct mail continue to dominate as key channels
                                                                        • Figure 40: Recorded above-the-line, online display and direct mail total advertising expenditure on breakdown recovery, by media type, 2013-17
                                                                      • Nielsen Ad Intel coverage
                                                                      • Brand Research

                                                                          • AA has the strongest differentiation and trust from consumers
                                                                            • Figure 41: Attitudes towards and usage of selected brands, June 2018
                                                                          • Key brand metrics
                                                                            • Figure 42: Key metrics for selected brands, June 2018
                                                                          • Brand attitudes: personality, trust and value typify attitudes towards main brands
                                                                            • Figure 43: Attitudes, by brand, June 2018
                                                                          • Brand personality: Each of the big three players has contrasting features
                                                                            • Figure 44: Brand personality – Macro image, June 2018
                                                                          • AA is viewed as prestigious and desirable whilst Green Flag is affordable
                                                                            • Figure 45: Brand personality – Micro image, June 2018
                                                                        • The Consumer – What You Need to Know

                                                                          • The AA leads overall
                                                                            • Competitive pricing is the most important factor sought
                                                                              • Online is the most popular channel for acquiring insurance
                                                                                • Nearly half (46%) of policy holders shop around when renewing
                                                                                  • New styles of insurance fail to dent dominance of traditional policies
                                                                                    • Ways of reducing cost are popular as innovations
                                                                                    • Presence of Breakdown Recovery Organisations

                                                                                      • AA dominates the market
                                                                                        • Figure 46: Ownership of breakdown cover, by recovery organisation, July 2018
                                                                                      • AA has greatest affinity with young adults
                                                                                        • AA is also prominent with wealthier adults and those in cities
                                                                                          • Links with dealers helps boost the profile of the AA and RAC
                                                                                            • Interest in the AA continues despite the challenge from smaller providers
                                                                                              • Figure 47: Ownership of breakdown cover, by recovery organisation, 2013-18
                                                                                          • Selecting a Breakdown Recovery Provider

                                                                                            • Price is key when selecting a company
                                                                                              • Figure 48: Factors considered when selecting a provider of breakdown cover, July 2018
                                                                                            • Young and old look for different features
                                                                                              • Wealthy are more interested in non-price factors
                                                                                                • Oldest adults want stability
                                                                                                  • Used car owners look for price benefits
                                                                                                    • Green Flag members less bothered about brand and image
                                                                                                    • How Cover is Acquired

                                                                                                      • Buying online leads as the main way to acquire cover
                                                                                                        • Figure 49: Key means by which current breakdown cover for your main vehicle was acquired, July 2018
                                                                                                      • Purchasing with car insurance popular with younger adults
                                                                                                        • Older adults retain interest in traditional purchase methods
                                                                                                          • New car buyers are more likely to have free cover from their dealer
                                                                                                            • Green Flag records success in the use of online for purchasing
                                                                                                            • Choosing a Breakdown Recovery Provider

                                                                                                              • Loyalty is an important feature of the market
                                                                                                                • Figure 50: Action taken last time renewed breakdown recovery, July 2018
                                                                                                              • Middle-aged adults and city dwellers want to check out the market
                                                                                                                • Older adults are amongst the most loyal
                                                                                                                  • Green Flag has success in attracting those who shop around at time of renewal
                                                                                                                    • Two thirds are likely to renew with their existing provider
                                                                                                                      • Figure 51: Likelihood of renewing with your existing provider, July 2018
                                                                                                                    • Over half of those aged 65+ are likely to renew…
                                                                                                                      • …while middle-aged adults appear more uncertain
                                                                                                                        • Less affluent also record a high degree of loyalty…
                                                                                                                          • …as do owners of new cars
                                                                                                                            • Loyalty breeds loyalty
                                                                                                                            • Interest in Different Types of Policy

                                                                                                                              • Traditional insurance policies dominate
                                                                                                                                • Figure 52: Interest in different types of vehicle recovery insurance policy, July 2018
                                                                                                                              • Young and old want different types of traditional policy
                                                                                                                                • Older adults – An opportunity?
                                                                                                                                  • Policies with restrictions popular with city dwellers
                                                                                                                                    • Traditional insurance without restrictions are popular with those purchasing vehicle insurance
                                                                                                                                      • Shopping around encourages interest in policies with restrictions
                                                                                                                                        • Traditional insurance back in fashion?
                                                                                                                                          • Figure 53: Interest in different types of vehicle recovery insurance policy, 2017and 2018
                                                                                                                                      • Attitudes towards Breakdown Recovery Insurance

                                                                                                                                        • Financial discounts lead over other factors
                                                                                                                                          • Figure 54: Factors considered when selecting a provider of breakdown cover, July 2018
                                                                                                                                        • Young adults are more likely to be interested in new services
                                                                                                                                          • Discounts popular with older women
                                                                                                                                            • Those looking at alternative policy styles focus in on specific features
                                                                                                                                            • Attitudes towards Vehicle Recovery Insurance – CHAID Analysis

                                                                                                                                              • Methodology
                                                                                                                                                • Used car owners and those with children are a target group for discounts
                                                                                                                                                  • Figure 55: Vehicle recovery interest – CHAID – Tree output, July 2018
                                                                                                                                                  • Figure 56: Vehicle recovery interest – CHAID – Table output, July 2018
                                                                                                                                              • Appendix – Data Sources, Abbreviations and Supporting Information

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

                                                                                                                                                      • Data Sources
                                                                                                                                                        • Market sizing and segment performance
                                                                                                                                                          • Forecast Methodology
                                                                                                                                                            • Forecast Data
                                                                                                                                                              • Figure 57: Forecast of UK vehicle recovery market (value) – best- and worst-case scenarios, 2018-23

                                                                                                                                                          Vehicle Recovery - UK - September 2018

                                                                                                                                                          US $2,693.85 (Excl.Tax)