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.

• 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.

The first COVID-19 cases were confirmed in the UK at the end of January 2020, with a small number of cases in February. Rapidly rising case numbers led to the first national lockdown, starting on 23 March. It wasn't until 15 June that non-essential stores were allowed to reopen, followed by pubs, restaurants, hotels and hairdressers on 4 July and many beauty businesses on 13 July.

By September, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a month-long lockdown from 5 November and Scotland introducing a new five-level system of coronavirus restrictions.

Despite these restrictions, however, case numbers continued to increase. All four UK nations tightened restrictions further in January 2021, effectively leading to a full UK-wide lockdown.

On 22 February, Boris Johnson announced the roadmap to an easing of restrictions in England, starting with the reopening of schools on 8 March, followed by easing of restrictions on outdoor gatherings on 29 March and with a hoped end to all restrictions by 21 June. The Welsh and Scottish governments also gave more details on their plans to ease restrictions, with both nations taking a slightly more cautious approach to the one planned for England.

The UK’s vaccination programme started on 8 December 2020, with the Pfizer-BioNTech, Moderna and Oxford-AstraZeneca vaccines licensed for use in the UK. The government aims to offer a first dose of the vaccine to all adults by the end of July, having reached its target of offering one to all over-50s and in priority groups (a total of 32 million people) by mid-April.

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its March 2021 Economic and Fiscal Outlook report. After the fall of 9.9% over the course of 2020, the scenario suggests that UK GDP will grow by 4% in 2021 and 7.3% in 2022.

GDP isn’t expected to return to pre-COVID-19 levels until Q2 2022, although this is six months earlier than the OBR forecast in November 2020, mainly because of the faster-than-expected rollout of vaccines.

Unemployment is expected to peak at 6.5% in Q4 2021. As with GDP, this is more positive than the OBR’s November forecast, but the OBR does raise the prospect of long-term scarring on employment, especially in the more exposed retail and hospitality sectors.

This Report examines the domestic UK motor insurance market, focusing primarily on car insurance. The terms motor and car insurance are used interchangeably throughout the Report, although these terms have specific definitions with regards to the data used in the Report (see below).

For the purposes of the data contained in this Report, Mintel has used the following ABI definitions:

Motor insurance – insurance obligations which cover all liabilities arising out of the use of motor vehicles operating on land and insurance obligations which cover all damage to or loss of land vehicles.

Domestic motor insurance – where the primary purpose of each vehicle insured on the contract is to transport: nine or fewer non-fare-paying persons and each motor vehicle insured on the contract is individually rated; nine or fewer non-fare-paying persons, the persons insured are not a body corporate or partnership, and the number of vehicles insured on the contract is three or less; 10 or more non-fare-paying persons, the persons insured are not a body corporate or partnership and each motor vehicle insured on the contract is individually rated.

Private car insurance – includes domestic (personal) motor policies. Vans, motorcycles, caravans, etc. Any commercial business is excluded.

Commercial vehicles and commercial insurance are excluded from the scope of this Report.