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Vehicle Recovery - UK - September 2019

Covered in this report

This report covers vehicle breakdown recovery services available to 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 that 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

“The vehicle recovery market continues to expand with revenues up at £1.8 billion in 2018. Yet going forward the market faces a number of challenges. At a broader level these include the enhanced interest for consumers to acquire policies for free as a result of the purchase of other products and services. Short-term challenges also exist with the poor performance of new car sales of note.”

– Neil Mason, Retail Category Director

This report examines the following issues:

  • Profile of free and bundled policies continues to grow
  • Non-price factors are assuming heightened importance
  • Could an ‘Uber Style’ recovery policy really disrupt the market?

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Table of contents

  1. Overview

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

          • The market
            • Revenues approach £1.8 billion in 2018
              • Figure 1: Best- and worst-case forecasts of vehicle recovery market, by value, 2014-24
            • Average premiums approach £58
              • Figure 2: Average premium paid, 2014-19
            • Free and bundled recovery policies are increasingly popular
              • Figure 3: Key channels used for purchasing breakdown recovery insurance, 2013, 2015, 2017 & 2019
            • New car sales are in decline
              • Figure 4: UK new registrations of cars, 2014-19
            • Companies and brands
              • AA performs strongly on differentiation and trust
                • Figure 5: Attitudes towards and usage of selected brands, July 2019
              • AA is the dominant player in the market
                • Figure 6: Company shares of the vehicle recovery market, by membership, 2019 (est)
              • Technology is a focus for innovation
                • Investment reaches a high of £24 million in 2018
                  • Figure 7: Total above-the-line, online display and direct mail advertising expenditure on breakdown recovery, 2014-18
                • The consumer
                  • The AA is the most popular company for consumers
                    • Figure 8: Ownership of breakdown cover, by recovery organisation, June 2019
                  • Price dominates when choosing a vehicle recovery company
                    • Figure 9: Factors considered when selecting a provider of breakdown cover, June 2019
                  • 3 in 10 policy holders acquired recovery insurance with vehicle insurance
                    • Figure 10: Key means by which current breakdown cover for your main vehicle was acquired, June 2019
                  • Company websites are popular for those buying online
                    • Figure 11: Use of online channels, June 2019
                  • Email is preferred for communication with vehicle recovery companies
                    • Figure 12: Preferences towards the use of communication methods, June 2019
                  • Telematics received mixed support
                    • Figure 13: Interest in telematic vehicle recovery policies, June 2019
                  • Just over half are interested in ‘Uber Style’ recovery
                    • Figure 14: Interest in an ‘Uber style’ recovery service, June 2019
                  • What we think
                  • Issues and Insights

                    • Profile of free and bundled policies continues to grow
                      • The facts
                        • The implications
                          • Non-price factors are assuming heightened importance
                            • The facts
                              • The implications
                                • Could an ‘Uber Style’ recovery policy really disrupt the market?
                                  • The facts
                                    • The implications
                                    • The Market – What You Need to Know

                                      • Steady growth forecast for the market
                                        • Premium prices are under pressure again
                                          • Free and bundled recovery policies are increasingly popular
                                            • New car sales are in decline
                                            • Market Size and Forecast

                                              • Revenue growth slows after recent buoyancy
                                                • Figure 15: Best- and worst-case forecasts of vehicle recovery market, by value, 2014-24
                                              • Recovery membership surpasses 31 million
                                                • Figure 16: UK vehicle recovery market, membership, 2014-19
                                              • Revenues expected to surpass £2.0 billion by 2024
                                                • Figure 17: UK vehicle recovery market, by value, at current and constant prices, 2014-24
                                              • Forecast methodology
                                              • Market Segmentation

                                                • Regular membership policies dominate
                                                  • Figure 18: Segmentation of the vehicle recovery market, by value, at current prices, 2014-19
                                                • Average premiums stagnate after recent growth
                                                  • Figure 19: Average premium paid, 2014-19
                                                • Traditional comprehensive recovery policies dominate
                                                  • Figure 20: Segmentation of the vehicle recovery market (value), by policy type, 2018
                                                • Polices sold via third parties are in the ascendance
                                                  • Figure 21: Segmentation of the vehicle recovery market (value), by direct/indirect channels, 2018
                                              • Channels to Market

                                                • Growing trend to acquire insurance free or bundled
                                                  • Other channels see their importance stagnate
                                                    • Figure 22: Key channels used for purchasing breakdown recovery insurance, 2013, 2015, 2017 and 2019
                                                • Market Drivers

                                                  • New and used car purchasing softens
                                                    • Figure 23: New and used car market volumes, 2014-19
                                                  • New car market in serious difficulty
                                                    • Figure 24: UK new registrations of cars, 2014-19
                                                  • There’s more to life than the ‘B’ word
                                                    • Over half of adults plan to buy a car in the next 3 years
                                                      • Figure 25: Intention to purchase a car in the next three years, November 2018
                                                    • Trend towards owning older cars increasing
                                                      • Figure 26: Age structure of the UK car parc in years, 2014-18
                                                    • Car ownership varies across the country
                                                      • Figure 27: Household car ownership by region (England), 2006/07 and 2016/17
                                                    • Increase in second car ownership offers opportunities for the market
                                                      • Figure 28: Percentage of households with car availability, England, 2007-17
                                                    • Stabilisation in IPT at 12% is helpful for policies
                                                      • Figure 29: Insurance premium tax rates, 1997-2017
                                                    • Owning a car is increasingly becoming expensive
                                                      • Figure 30: Consumer expenditure on car purchasing, servicing and repair and motoring expenses, seasonally adjusted at current prices, 2014-18
                                                    • London leads with growing restrictions on using vehicles in cities
                                                      • Growth in the UK’s population should prove helpful for the market
                                                        • Figure 31: Trends in the age structure of the UK population, 2013-23
                                                    • Companies and Brands – What You Need to Know

                                                      • RAC sees a resurgence in its profile
                                                        • Financial promotions are important for the largest service providers
                                                          • Technology remains a major focus for innovation
                                                            • Television dominates advertising expenditure
                                                              • AA delivers the strongest attitudes although is similar to rival RAC in
                                                              • Market Share

                                                                • UK market continues to fragment
                                                                  • RAC performing strongest within the big three
                                                                    • Figure 32: Company shares of the vehicle recovery market, by membership, 2013-19
                                                                  • Not all smaller players are seeing growth
                                                                    • Figure 33: Share of others in the market, by UK membership, 2015, 2017 and 2019
                                                                  • AA is the clear leader by revenue
                                                                    • Figure 34: Company shares of the vehicle recovery market, by value, 2018
                                                                • Competitive Strategies

                                                                  • Service options are a key competitive differentiator
                                                                    • Matrix pricing used by some to offer a bespoke package
                                                                      • Geographic and call out limitations also offer discounts
                                                                        • Monthly payment options join annual, reclaim and PAYU
                                                                          • Financial promotions popular with largest players
                                                                            • Figure 35: Key short term offers from vehicle recovery companies, July 2019
                                                                          • Use of partnerships to extend market coverage
                                                                            • Retailers
                                                                              • Financial institutions
                                                                                • Figure 36: Packaged current accounts that offer breakdown cover, July 2019
                                                                              • Vehicle manufacturers
                                                                              • Launch Activity and Innovation

                                                                                • AA’s Smart Breakdown offers second generation support for drivers
                                                                                  • Figure 37: Smart Breakdown and the AA app
                                                                                • RAC launches new lightweight EV charger
                                                                                  • Video analysis offered for problem solving
                                                                                    • Figure 38: RAC remote technician service
                                                                                • Advertising and Marketing Activity

                                                                                  • Investment reaches a high of £24 million in 2018
                                                                                    • Figure 39: Total above-the-line, online display and direct mail advertising expenditure on breakdown recovery, 2014-18
                                                                                  • Advertisers shift investment to earlier in the year
                                                                                    • Figure 40: Recorded above-the-line, online display and direct mail total advertising expenditure on breakdown recovery, by month, 2017 and 2018
                                                                                  • AA dominates the market
                                                                                    • Figure 41: Recorded above-the-line, online display and direct mail total advertising expenditure on breakdown recovery, by advertiser, 2014-18
                                                                                  • Television is increasingly the preferred media for advertisers
                                                                                    • Figure 42: Recorded above-the-line, online display and direct mail total advertising expenditure on breakdown recovery, by media type, 2014-18
                                                                                  • Nielsen Ad Intel coverage
                                                                                  • Brand Research

                                                                                      • AA leads on trust and differentiation from other major rivals
                                                                                        • Figure 43: Differentiation and trust towards selected brands, July 2019
                                                                                      • Key brand metrics
                                                                                        • Figure 44: Key metrics for selected brands, July 2019
                                                                                      • Brand attitudes: key brands reflect specific attitudes
                                                                                        • Figure 45: Attitudes, by brand, July 2019
                                                                                      • Brand personality: AA and RAC have similar macro brand personalities
                                                                                        • Figure 46: Brand personality – macro image, July 2019
                                                                                      • Micro personalities reinforce view that AA and RAC have similar market positioning
                                                                                        • Figure 47: Brand personality – micro image, July 2019
                                                                                    • The Consumer – What You Need to Know

                                                                                      • Market is consolidating once again
                                                                                        • Price dominates although some buyers look at different factors
                                                                                          • A growing number of policies are being acquired with a vehicle
                                                                                            • Company websites are the preferred online route
                                                                                              • Digital methods of communication are broadening
                                                                                                • Mixed interest towards telematics
                                                                                                  • Good opportunities exist for an ‘Uber Style’ recovery service
                                                                                                  • Presence of Breakdown Recovery Organisations

                                                                                                    • AA is the clear market leader
                                                                                                      • Figure 48: Ownership of breakdown cover, by recovery organisation, June 2019
                                                                                                    • Older adults less bothered about going with a well-known provider
                                                                                                      • Presence of recovery companies is also skewed geographically
                                                                                                        • Certain providers have strong appeal with higher socio-economic groups
                                                                                                          • AA has strong links with new car buyers
                                                                                                            • RAC and Green Flag register recent improvement as position of others falters
                                                                                                              • Figure 49: Ownership of breakdown cover, by recovery organisation, 2014-19
                                                                                                          • Selecting a Recovery Provider

                                                                                                            • Price dominates when selecting a provider
                                                                                                              • Figure 50: Factors considered when selecting a provider of breakdown cover, June 2019
                                                                                                            • Price and technology split the sexes
                                                                                                              • Old and young adults want different things …
                                                                                                                • … as do those living in towns and villages
                                                                                                                  • New and used car owners want different things
                                                                                                                    • AA members are strongly focused on brand attributes
                                                                                                                      • Non-price factors appear to be assuming increased importance
                                                                                                                        • Figure 51: Factors considered when selecting a provider of breakdown cover, 2017 and 2019
                                                                                                                    • How Cover is Acquired

                                                                                                                      • Acquiring as part of vehicle insurance leads
                                                                                                                        • Figure 52: Key means by which current breakdown cover for your main vehicle was acquired, June 2019
                                                                                                                      • Buying alongside vehicle insurance is important for young adults
                                                                                                                        • Online is popular for rural policy holders
                                                                                                                          • Traditional sales channels popular with those on lower incomes
                                                                                                                            • Dealers are important channels for new car buyers
                                                                                                                              • Certain channels are more important for members of some organisations
                                                                                                                                • Links with insurance providers and dealers both strengthen
                                                                                                                                  • Figure 53: Key means by which current breakdown cover for your main vehicle was acquired, 2017 and 2019
                                                                                                                              • Preferences towards Online Channels

                                                                                                                                • Company websites are the most preferred route online
                                                                                                                                  • Figure 54: Use of online channels, June 2019
                                                                                                                                • Direct contact with company appeals more to men
                                                                                                                                  • Affluent adults are also likely to purchase direct
                                                                                                                                    • Websites dominate for those going online
                                                                                                                                      • Figure 55: Ways by which breakdown cover was purchased online, June 2019
                                                                                                                                    • Development of apps should be of interest to women
                                                                                                                                    • Preferences towards Communication Methods

                                                                                                                                      • Digital communication methods dominate with email the most preferred
                                                                                                                                        • Figure 56: Preferences towards the use of communication methods, June 2019
                                                                                                                                      • Young adults are most amenable to newer electronic methods …
                                                                                                                                        • … as are those living in cities
                                                                                                                                          • Presence of children impacts on use newer electronic methods
                                                                                                                                            • RAC members appear least interested in new methods of communication
                                                                                                                                            • Interest in Telematic Vehicle Recovery Policies

                                                                                                                                              • Vehicle owners split when it comes to interest in telematics
                                                                                                                                                • Figure 57: Interest in telematic vehicle recovery policies, June 2019
                                                                                                                                              • Young and old represent different markets
                                                                                                                                                • City dwellers also record high interest
                                                                                                                                                  • Older women are more likely to be unsure
                                                                                                                                                    • New car owners have much stronger interest in telematic technology
                                                                                                                                                      • Little change in interest
                                                                                                                                                        • Figure 58: Interest in telematic vehicle recovery policies, June 2016 and 2019
                                                                                                                                                    • Interest in an ‘Uber Style’ Recovery Service

                                                                                                                                                      • Nearly a quarter of vehicle owners are very interested
                                                                                                                                                        • Figure 59: Interest in an ‘Uber style’ recovery service, June 2019
                                                                                                                                                      • Young men show strong interest
                                                                                                                                                        • Urban areas appear well suited
                                                                                                                                                          • Pricing might not be an issue
                                                                                                                                                            • New car owners…
                                                                                                                                                              • … and members of the certain companies show strong interest in this idea
                                                                                                                                                              • Appendix – Data Sources, Abbreviations and Supporting Information

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

                                                                                                                                                                        • Market sizing and segment performance
                                                                                                                                                                          • Forecast methodology
                                                                                                                                                                            • Forecast Data
                                                                                                                                                                              • Figure 60: Forecast of UK vehicle recovery market (value) – best- and worst-case scenarios, 2019-24

                                                                                                                                                                          Vehicle Recovery - UK - September 2019

                                                                                                                                                                          £1,995.00 (Excl.Tax)