Table of Contents
Executive Summary
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- Impact of COVID-19 on the general insurance market
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- Figure 1: Short, medium and long-term impact of COVID-19 on general insurance, January 2020
- The market
- Premium income is expected to decline by 3% in 2020
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- Figure 2: General insurance revenue – retail products – UK risks, by gross written premiums, 2016-20
- Car insurance premiums fall…
- …while there is an increase in interest and ownership of PMI
- Home improvements have increased since the outbreak
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- Figure 3: Trends in activities done over the last three months, January-November 2020
- Insurers will be forced to review how they are charging existing customers
- Companies and brands
- Personal premiums suffer in the first half of 2020
- LV= adds greater flexibility to the marker
- Travel insurers take a varied approach to offering cover for COVID-19
- Advertising expenditure on general insurance falls in 2019/20
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- Figure 4: Total above-the-line, online display and direct mail advertising expenditure on general insurance, 2015/16-2019/20
- The consumer
- Car and home insurance are the most widely held products
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- Figure 5: Types of insurance owned, September 2020
- Only car and home insurance are switched regularly
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- Figure 6: Insurance account switching and opening activity, September 2020
- Increasing premiums is the key driver for switchers
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- Figure 7: Reason for switching or opening a new insurance product, September 2020
- A lack of need is the key driver behind insurance cancellations
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- Figure 8: Reason for insurance policy cancellation, September 2020
- Over 50% intend to shop around in the next 12 months
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- Figure 9: Planned insurance activities over the next 12 months, September 2020
- A quarter would pay for more for greater convenience
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- Figure 10: Interest in general insurance innovations, September 2020
- Providers face reputational difficulties due to COVID-19 response
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- Figure 11: Attitudes towards general insurance, September 2020
Issues and Insights
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- Policies and providers will face greater scrutiny post-COVID-19
- Even the promise of a fair deal will not convince regular switchers
- Subscription style policies can add value and convenience to the younger market
The Market – Key Takeaways
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- A marginal decline in the general insurance market is expected in 2020
- Covid-19 will transform the travel insurance market
- Regulatory scrutiny will force a change to market dynamics
Market Size
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- Impact of COVID-19 on general insurance market
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- Figure 12: Short, medium and long-term impact of COVID-19 on general insurance, January 2020
- Gross written premiums estimated to fall by 3% in 2020
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- Figure 13: General insurance revenue – retail products – UK risks, by gross written premiums, 2016-20
- Learnings from the last recession
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- Figure 14: Value general insurance revenue – retail products – UK risks, by gross written premiums, 2007-11
- Market Segmentation The motor insurance market is expected to have grown in 2020…
- …while home and health insurance markets declined
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- Figure 15: Gross written premiums for general insurance, by insurance type, 2016-20
- Underwriting result improved in the property market…
- …but falls for motor insurance in 2019
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- Figure 16: Underwriting result, 2015-19
- Figure 17: Claims ratio, 2015-19
- COVID-19 transforms the travel insurance market
Market Drivers
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- Fast recovery in GDP would see a strong return to growth
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- Figure 18: Annual GDP, 2015-25 (central forecast)
- A fall in unemployment may lead to people cutting costs
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- Figure 19: Annual unemployment rate, 2015-25
- Brexit changes will impact the market in 2021
- Overview of Brexit changes for specific sectors
- Motor insurance premiums fall in 2020
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- Figure 20: Average motor insurance premium, Q4 2019-Q3 2020
- Dramatic rise in interest in private medical insurance
- Spending priorities have changed in 2020
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- Figure 21: Trends in activities done over the last three months, January-November 2020
- Consumers remain reluctant to book a holiday
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- Figure 22: Trends in activities planned over the next three months, January-November 2020
Regulatory and Legislative Changes
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- Final proposals on the loyalty penalty are set out
- FCA demands firms review the value of their products following the impact of COVID-19
- Test case on business interruption could cause reputational issues
Companies and Brands – Key Takeaways
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- The largest insurers see their income decline in 2020
- More emphasis on flexibility will add value to customers
- Travel insurers adapt to the COVID-19 outbreak
Summary of Impact of COVID-19 on Leading General Insurers
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- Ageas
- Allianz
- Aviva
- AXA
- Direct Line
- RSA
Competitive Strategies and Innovation
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- Greater emphasis on flexibility and efficiency
- LV=’s new subscription-based ‘Flow’ service
- And further pay-as-you-go motor insurance solutions
- GoCompare partners with Snoop to help people save on their home and motor insurance
- A greater focus on mental health within the health insurance market
- Travel insurance adapts to the new COVID-19 environment
- Providers take a varied approach
- While Skyscanner and COVER Genius offer a COVID-19 specific policy
Advertising and Marketing Activity
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- Total advertising spend falls sharply in 2019/2020
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- Figure 23: Total above-the-line, online display and direct mail advertising expenditure on general insurance, 2015/16-2019/20
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- Figure 24: Total above-the-line, online display and direct mail advertising expenditure on general insurance, by product category, 2018/19-2019/20
- Direct Line is the largest spender…
- …while PCWs increase their spending
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- Figure 25: Leading spenders on above-the-line, online display and direct mail advertising expenditure on general insurance, 2018/19-2019/20
- Providers respond to the COVID-19 outbreak
- Ad Intel coverage
The Consumer – Key Takeaways
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- Policyholders will continue to shop around despite regulatory changes
- Subscription style policies could replace insurance as part of packaged accounts
- COVID-19 challenges will increase consumer scrutiny
Impact of COVID-19 on Consumer Behaviour
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- Consumers maintain a cautious approach to expenditure
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- Figure 26: Expected expenditure over the next month 26 March-19 November
- 30% are worse off compared to 12 months ago
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- Figure 27: Trends in financial situation compared to a year ago, January-November 2020
- Concern about the impact of COVID-19 on lifestyle increases during second wave
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- Figure 28: Level of concern about COVID-19 effecting lifestyle, 26 March-19 November
Insurance Ownership
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- Car and home insurance are the most widely held
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- Figure 29: Types of insurance owned, September 2020
- Travel and mobile phone insurance top list of packaged account insurance products
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- Figure 30: Packaged insurance ownership, September 2020
- Most only hold one type of insurance as part of a packaged account
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- Figure 31: Repertoire of types of insurance policies held as part of a packaged insurance product, September 2020
Insurance Switching Activity
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- Outside or home or motor insurance, people are unlikely to switch
- Just 27% of home insurance owners have switched
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- Figure 32: Insurance account switching and opening activity, September 2020
Reasons for Switching
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- Increased premiums are main driver of switching
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- Figure 33: Reason for switching or opening a new insurance product, September 2020
- Greater flexibility will help retain younger policyholders
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- Figure 34: Reason for switching or opening a new insurance product, September 2020
Insurance Policy Cancellations
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- Despite economic uncertainty, relatively few have cancelled policies
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- Figure 35: Insurance policy cancellation, September 2020
- A lack of need is the key driver behind travel insurance cancellations…
- …while increasing premiums and a lack of affordability are factors in the health insurance market
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- Figure 36: Reason for insurance policy cancellation, September 2020
General Insurance Plans over the Next Year
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- Shopping around is an integral part of the general insurance market…
- …but less than a quarter intend to switch providers
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- Figure 37: Planned insurance activities over the next 12 months, September 2020
- Travel insurance owners are the most likely to say they will switch to a new provider
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- Figure 38: Planned insurance activities over the next 12 months, by ownership, September 2020
Interest in General Insurance features
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- Offering greater flexibility can prevent cancellations
- Almost a third are interested in a COVID specific policy
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- Figure 39: Interest in general insurance innovations, September 2020
- One in four would pay more for a greater level of convenience…
- …particularly more well-off Millennials
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- Figure 40: Consumers and general insurance – CHAID – Tree output, October 2020
- Those who plan to switch provider are unlikely to change their behaviour
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- Figure 41: Interest in general insurance innovations, by plans over the next year, September 2020
Attitudes towards General Insurance
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- Providers must take steps to repair their reputations…
- …while policies will be subject to increased scrutiny
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- Figure 42: Attitudes towards general insurance, September 2020
- Subscription style policies can act as an alternative to packaged accounts
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- Figure 43: Response to the statement, ‘Insurance policies which come as part of a packaged account rarely offer value for money’, September 2020
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
- CHAID methodology
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- Figure 44: Consumers and general insurance – CHAID – Table output, October 2020
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