Report Summary
Providing the most comprehensive and up-to-date information and analysis of the UK Motor Insurance market, including the behaviours, preferences and habits of the consumer.
63% of policyholders say they find shopping around for a new car insurance deal rewarding. Understanding the psychology behind the desire of getting a deal is important for insurers to consider as they approach the FCA’s new pricing regime. Moving forwards discounts for new customers might not be quite as financially rewarding but policyholders can still be won over by offers and deals that provide a sense of reward and achievement.
While the market has held up during the COVID-19 pandemic, the crisis has highlighted the benefits of more flexible types of insurance cover. Consumers have been forced to change their driving habits, some of which will have a lasting impact. 52% of policyholders say being able to adjust their policy to reflect changing personal circumstances is a priority.
Adapting to the FCA’s new pricing regulations will be a focus for providers in 2021. The new rules will heighten uncertainty for a period in terms of customer retention and pricing. This will prompt insurers to adjust their strategies as the new rules are implemented and create opportunities for brands to develop new propositions that reward loyalty, provide more flexibility and move away from the focus on price.
Subscription-style policies have the potential to fundamentally change the approach to insurance. This type of policy will gain more traction in the next few years due to the new pricing regulations, as well as the growing consumer demand for subscription services. This should lead to the development of more brands and providers that cater for specific needs and a move away from more generic, one-size-fits-all policies. This will increase the need for a strong brand presence and propositions that stand out among their target audience.
Read on to discover more details or take a look at all of our UK Automotive market research.
Quickly understand
- Market performance, including the impact of COVID-19 and a five-year market forecast.
- Competitive strategies and recent market developments.
- Car insurance ownership by policy type.
- Paying for car insurance – annual vs monthly premiums and renewal behaviour.
- Attitudes towards car insurance including interest in flexible cover and approach to renewal.
- Brand research covering consumer perceptions towards selected brands operating in the sector.
- UK motor insurance market share.
- UK motor insurance market statistics.
Covered in this report
Brands: Direct Line, Admiral, LV=GI (Liverpool Victoria General Insurance), AVIVA, Hastings Group, Ageas, AXA, Markerstudy, esure Insurance, Co-operative Group, Tesco, AA, Veygo, Marmalade, Cuvva, By Miles, Flow, RAC Insurance, Pay by Mile, Tempcover, Vitality, Caura, Amazon, gocompare.com, Moneysupermarket.com, Saga, MotorEasy, NFUEasy, Churchill.
Expert analysis from a specialist in the field
This report, written by Deborah Osguthorpe, a leading analyst in the Financial sector, delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.
Adapting to the FCA’s new pricing regulations will be a focus for providers in 2021. The new rules will heighten uncertainty for a period in terms of customer retention and pricing. This will prompt insurers to adjust their strategies as the new rules are implemented and create opportunities for brands to develop new propositions that reward loyalty, provide more flexibility and move away from the focus on price.
Deborah Osguthorpe
Category Director, UK Financial Services
Table of Contents
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Overview
- Key issues covered in this Report
- COVID-19: market context
- Economic and other assumptions
- Products covered in this Report
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Executive Summary
- Impact of COVID-19 on motor insurance
- Figure 1: Short, medium and long-term impact of COVID-19 on motor insurance, April 2021
- The market
- Market size and forecast
- Figure 2: Forecast of gross written personal motor insurance premiums (UK domestic business only), 2015-25
- New rules on unfair pricing set to shake up the market
- Whiplash reforms to be implemented in May 2021
- Growth of alternative fuel vehicles creates opportunities for insurers
- Companies and brands
- Admiral grows motor insurance policies by 9% in 2020
- Aviva brand finally launches on PCWs
- COVID-19 drives more development of flexible policies
- Pricing strategies will come to the fore in 2021
- The consumer
- Car insurance ownership holds up amid COVID-19 disruption
- Figure 3: Car insurance ownership, 2019 and 2020
- Almost twice as many people opt to pay premium annually
- Figure 4: Car insurance payment methods, November 2020
- Shop-around behaviour is ingrained
- Figure 5: Planned renewal behaviour, November 2020
- COVID-19 drives policy adjustments
- Figure 6: Interactions with car insurance providers over the last 12 months, November 2020
- 63% of policyholders find shopping around a rewarding process
- Figure 7: Attitudes towards car insurance, November 2020
- Impact of COVID-19 on motor insurance
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Issues and Insights
- COVID-19 increases the focus on product flexibility
- Subscription-style policies will increase market segmentation
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The Market – Key Takeaways
- Premium income declines in 2020 as claims costs plummet
- New rules on unfair pricing set to shake up the market
- Growth of alternative fuel vehicles creates opportunities for insurers
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Market Size and Forecast
- Impact of COVID-19 on motor insurance
- Figure 8: Short, medium and long-term impact of COVID-19 on motor insurance, April 2021
- GWP declined for the third consecutive year in 2020
- Figure 9: Gross written personal motor insurance premiums (UK domestic business only), 2016-20
- Premiums expected to decline again in 2021
- Figure 10: Forecast of gross written personal motor insurance premiums (UK domestic business only), 2015-25
- Figure 11: Market size and forecast of gross written personal motor insurance premiums, 2015-25
- Market drivers and assumptions
- Figure 12: Key drivers affecting Mintel’s market forecast, 2015-25
- Learnings from the last recession
- Figure 13: Gross written personal motor insurance premiums (UK domestic business only), 2007-12
- Forecast methodology
- Impact of COVID-19 on motor insurance
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Claims and Underwriting Performance
- Claims notified fell by 28% in 2020…
- Figure 14: Total number of claims notified and claims frequency, private cars, 2010-20
- …but average costs increased
- Figure 15: Average claims costs of settled claims for private car insurance, Q1 2019-Q4 2020
- Bodily injury claims declined by 33% in 2020
- Figure 16: Claims notified for private cars, by category, 2017-20
- Underwriting performance to be boosted in 2020
- Figure 17: Underwriting result for domestic motor insurance, 2015-19
- Claims notified fell by 28% in 2020…
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Market Drivers
- COVID-19 disruption but prospects have improved due to vaccine rollout
- Total miles driven decline significantly during pandemic
- Figure 18: Rolling annual total of miles driven by cars in Great Britain, Q1 2019-Q3 2020
- Average premiums fall sharply due to COVID-19 lockdowns
- Figure 19: Average premium for comprehensive car insurance policies, quarterly data, Q1 2017-Q1 2021
- Limited car parc growth in 2020 but share of alternative fuel types is growing
- Figure 20: Number of licensed cars, Great Britain, 2010-20
- New and used car sales fell sharply in 2020…
- …but it was a record year for new electric car sales
- Figure 21: New and used car registrations, 2013-20
- Telematics stalls but more personalised cover is emerging
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Regulatory and Legislative Changes
- FCA publishes findings from its pricing practices study…
- …with the new rules due to be implemented by the end of 2021
- Whiplash reforms to be implemented in May 2021
- FCA issued guidance on treating customers fairly during pandemic
- Drivers to EU need Green Card but trade deal should limit any increase in Brexit-related costs
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Companies and Brands – Key Takeaways
- Admiral grows motor insurance policies by 9% in 2020
- Aviva brand finally launches on PCWs
- COVID-19 drives more development of flexible policies
- Pricing strategies will come to the fore in 2021
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Market Share
- Direct Line and Admiral continue to lead the market
- Acquisition activity at LV=GI
- Aviva brand finally launches on PCWs
- Markerstudy boosts share through Co-op Insurance acquisition
- Tesco Underwriting divests from Ageas
- Figure 22: Top insurance providers of domestic motor insurance (ABI members), by GWP, 2018 and 2019
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Competitive Strategies
- Pricing strategies are the key focus for 2021
- Insurers commit to supporting customers during the COVID-19 pandemic
- Admiral offers refunds to all policyholders
- Direct Line develops its Mileage Moneyback initiative
- Motor insurers also rally to support NHS workers
- Young drivers continue to be a focus for product development
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Launch Activity and Innovation
- Flexibility remains in the spotlight
- Motor insurers are embracing mobile apps
- Well-known brands extend into car insurance
- Vitality launches VitalityCar
- Amazon enters the motor insurance market in India
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Advertising and Marketing Activity
- Car insurance adspend increased by 11% in 2020/21
- Figure 23: Total above-the-line, online display and direct mail advertising expenditure in car insurance, breakdown recovery, motorcycle insurance and van insurance, 2016/17-2020/21
- Price comparison websites continue to increase their spending
- Figure 24: Total above-the-line, online display and direct mail advertising expenditure in car insurance, by top 10 advertisers, 2018/19-2020/21
- LV= General Insurance uses digital channels to promote Flow
- Direct Line launches a new campaign starring iconic heroes
- TV dominates advertising expenditure
- Figure 25: Total above-the-line, online display and direct mail advertising expenditure in car insurance, by media type, 2020/21
- Nielsen Ad Intel coverage
- Car insurance adspend increased by 11% in 2020/21
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Brand Research
- Brand map
- AA Insurance leads the way on trust and differentiation
- Figure 26: Attitudes towards and usage of selected brands, February 2021
- AA Insurance and Admiral are the most used brands
- Figure 27: Key metrics for selected brands, February 2021
- Admiral and Co-op Insurance are associated with good customer service
- Figure 28: Attitudes, by brand, February 2021
- Churchill is seen as a fun brand
- Figure 29: Brand personality – Macro image, February 2021
- Admiral, Churchill and Co-op Insurance stand out as honest and progressive
- Figure 30: Brand personality – Micro image, February 2021
- Brand analysis
- Co-op and AA Insurance can capitalise on their prominence in other sectors
- Churchill’s ‘fun’ image is key, while Admiral stands out for affordability and accessibility
- People struggle to understand what Saga, Hastings and esure stand for
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The Consumer – Key Takeaways
- Car insurance ownership holds up amid COVID-19 upheaval
- Age-related preferences will influence the development of subscription-style policies
- Ingrained renewal behaviour will limit short-term impact of FCA pricing rules
- Understanding the psychology of shopping around for car insurance
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Impact of COVID-19 on Consumer Behaviour
- Household finances have largely weathered the COVID-19 storm
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- Figure 31: Financial confidence, January 2015-February 2021
- Financial impact will become more apparent in 2021
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- Figure 32: Impact of COVID-19 on household finances, 28 February-13 March 2021
- 55% of car insurance holders driving less than pre-pandemic
- Driving less could lead people to question the value of insurance
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- Figure 33: Driving activity over the last 12 months, November 2020
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Car Insurance Ownership and Use of Short-term Cover
- Car insurance ownership remains stable
- Telematics policy ownership stalls at 2%
- Figure 34: Car insurance ownership, 2019 and 2020
- 32% of Gen Z and Younger Millennials turned to temporary cover in the last year
- Figure 35: Use of short-term car insurance over the last 12 months, November 2020
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Paying for Car Insurance – Annual vs Monthly Payment
- Almost twice as many people opt to pay premium annually
- Lockdown savings could increase annual payments
- Subscription-style policies to challenge the status quo
- 17% of Gen Z drivers have premiums paid by someone else
- Figure 36: Car insurance payment methods, November 2020
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Behaviour at Last Renewal
- Renewal behaviour is ingrained limiting short-term impact of FCA pricing rules
- Auto-renewal rules could have limited impact on switching
- Switching could reduce in the longer term
- Figure 37: Last car insurance renewal behaviour, 2018-20
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Planned Renewal Behaviour
- 80% expect to shop around at their next renewal
- Figure 38: Planned renewal behaviour, November 2020
- A third who didn’t shop around at last renewal are unlikely to do so at their next renewal
- Figure 39: Planned renewal behaviour, by last renewal behaviour, November 2020
- 80% expect to shop around at their next renewal
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Confidence in Current Deal
- One in four policyholders are very confident in their insurance deal
- Figure 40: Confidence in current car insurance deal, November 2020
- 70% of those who didn’t shop around are confident they are getting a good deal
- Figure 41: Confidence in current car insurance deal, by behaviour at last renewal, November 2020
- One in four policyholders are very confident in their insurance deal
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Adjusting or Amending Car Insurance Policy in the Last Year
- 30% of policyholders adjusted their policy in the last 12 months
- Figure 42: Interactions with car insurance providers over the last 12 months, November 2020
- Policyholders are satisfied with insurer response to their issues…
- Figure 43: Satisfaction with providers’ response, November 2020
- …but satisfaction isn’t strengthening loyalty
- Figure 44: Likelihood to shop around at next renewal, by satisfaction with providers’ response, November 2020
- 30% of policyholders adjusted their policy in the last 12 months
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Attitudes towards Car Insurance
- Price promises appeal…
- …but people enjoy shopping around for a deal
- Figure 45: Attitudes towards car insurance, November 2020
- Young dads are most likely to leave their renewal until the last minute
- Figure 46: Motor Insurance – CHAID – Tree output, November 2020
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Appendix – Data Sources, Abbreviations and Supporting Information
- Abbreviations
- Consumer research methodology
- Methodology
- Figure 47: Motor Insurance – CHAID – Table output, November 2020
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Appendix – Market Size and Forecast
- Forecast methodology
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