Table of Contents
Introduction and Abbreviations
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- Market definitions
- Key sources
- Global information and research
- Consumer research
- ACORN
- Abbreviations
Premier Insight
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- The importance of trend watching
- More and more policies are being arranged online
- A different approach to advertising
- Balancing consumers’ needs with those of the industry
- Knowing who your targets are
Executive Summary
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- Growth in the UK car parc begins to slow
- Still underwriting at a loss
- As the claims frequency reaches ten-year low, the cost of claims continues to soar
- The Internet continues to gain importance
- Advertising plays crucial role in new customer acquisition
- Policyholders have favourable views towards their motor insurers
- Still in the red…for now
Market Drivers
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- As consumer expenditure slows, so will sales of new cars
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- Figure 1: PDI and consumer expediture, 1996-2011
- As new car registrations begin to lag…
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- Figure 2: UK new car registrations, 1995-2007
- …growth in the UK car parc also begins to slow
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- Figure 3: UK car parc, 1995-2005
- More and more older consumers refuse to give up driving
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- Figure 4: Full driving licence holders, by age group, 1975-2004
- The proportion of two-car households continues to grow
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- Figure 5: Household ownership of cars, 1998-2005
- The greying of the population may present opportunities
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- Figure 6: UK adult population trends, 1996-2011
- Internet penetration is slowly but surely on the rise
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- Figure 7: British Internet penetration, at home/work/place of study or elsewhere, 2002-06
Market Size and Trends
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- Still underwriting at a loss
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- Figure 8: UK motor insurance revenue account for all business and domestic market, incorporating investment income, 1994-2005
- Investment income
- Illustration of market deficit
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- Figure 9: Illustration of NWP and outgoing payments vs the underwriting result for the business and domestic market, 1994-2005
- Domestic motor insurance exposure
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- Figure 10: Domestic motor insurance exposure, gross written premiums and average premium rates, at current and constant prices, 2000-05
- Motor insurance is clearly a mass-market product
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- Figure 11: Estimate of the number of live motor insurance policies, 2005
- Proportion of cars with comprehensive cover is rising
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- Figure 12: Proportion of cars covered with comprehensive and non-comprehensive cover, 1995-2005
Claims Experience
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- Handling of claims to take a consumer-centric approach
- Claims frequency reaches 10-year low
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- Figure 13: Total number of private motor insurance claims and claims frequency, 1996-2005
- The average cost of a comprehensive claim has risen steadily over the last decade
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- Figure 14: Value of comprehensive, non-comprehensive and total claims, 1994-2004
- Pilot scheme to speed up the bodily injury claims process
- The average motor theft claim costs £1,363
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- Figure 15: Motor theft claims, by volume, cost, and average claim, 1995-2005
- Insurers try to keep repair costs under control
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- Figure 16: Price indices for car replacement parts, windscreens, paint prices and garage charge-out rates compared with RPI, 1994-2004
- Bumper troubles
- Recycled spare parts
Premium Pricing
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- Premium index suggests a decline in the average comprehensive premium
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- Figure 17: Illustration of the AA’s British premium Index, 1994-2006
- Shoparound premiums increase slightly in April 2006
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- Figure 18: AA shoparound premiums, for buildings, contents, comprehensive, non-comprehensive cover, April 2005-April 2006
- Uninsured driving also affects premium pricing
Key Underwriters
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- RBS and Aviva hold almost half the market
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- Figure 19: Top 15 insurers for private motor risks, by GWP, 2004
- Company profiles
- RBS
- Aviva
- Zurich Financial Services
- Royal & SunAlliance
- Fortis
- New entrants increase pressure on pricing
- Sheila’s Wheels
- Swiftcover.com
- Yesinsurance.co.uk
Distribution and the Internet
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- From when brokers ruled supreme….
- …to the emergence of direct writers…
- …to the high street invasion
- Brokers’ share of market continues to shrink
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- Figure 20: Distribution channel used to purchase motor insurance, 2001-06
- One in five drivers bought their last policy online
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- Figure 21: Method used to arrange most recent motor insurance policy, 2001-06
- Two in three consumers who purchased policy online obtained 3+ quotes
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- Figure 22: Number of quotes received before purchasing last policy, by those who used the internet to purchase last policy, February 2006
Non-standard Risk
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- As the number of speeding convictions increases, so does the number of non-standard drivers
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- Figure 23: All speed limit offences, speeding offences detected by camera, 1951-2004
- Choice of car can affect risk classification
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- Figure 24: UK new car registrations, by segment, 2000-04
- Direct writers are encroaching on the traditional turf of brokers
Advertising and Promotion
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- General insurance sector commands largest proportion of adspend
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- Figure 25: Advertising expenditure on financial services, by sector, 2001/02-2005/06
- Motor insurers cannot afford to focus on customer retention
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- Figure 26: Advertising expenditure in the general insurance sector, by area, 2001/02-2005/06
- The AA is the leading advertiser of motor insurance
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- Figure 27: Top ten advertisers of motor insurance, 2001/02-2005/06
- Nearly £80 million spent on TV adverts alone
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- Figure 28: Advertising expenditure on motor insurance, by media type, 2005/06
- Switch now and save £££s off your motor insurance!
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- Figure 29: Recent advertising end lines from a selection of motor insurance providers, 2006
Consumer Financial Activity
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- The mood of the consumer seems uncertain
- Relationship with the main financial services providers
- Overall activity levels should be high
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- Figure 30: Savings, investment, borrowing and debt repayment – consumers’ expected activity, September 2004-December 2005
- Middle earners are becoming more active
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- Figure 31: Expected financial activity, by socio-demographic and income groups, December 2005 and average for the last 16 quarters
- Pension management and saving will be the main activities
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- Figure 32: Leading financial activities planned in the next six months, December 2004-December 2005
- Subdued time for the property market
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- Figure 33: Intended mortgage and property purchase activity, December 2003-December 2005
- HSBC gains in terms of MFSP share
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- Figure 34: Leading main financial services providers: market shares, December 2004-December 2005
- HSBC will build up the level of its deposits in 2006
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- Figure 35: Saving, investment and lending market sizes, by expected customer demand and brand leaders (overall % intending to undertake activity in brackets), December 2005
- HSBC will have the most active customer base
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- Figure 36: Activity levels of main financial providers’ customer bases, December 2005
- Halifax, HSBC and Nationwide BS have the highest proportion of savers
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- Figure 37: Activity intentions and current household financial situation, by MFSP, December 2005
The Consumer and Product Ownership
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- Penetration of comprehensive cover is increasing
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- Figure 38: Penetration of motor insurance, 2004-06
- Two thirds of ABs have a comprehensive policy
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- Figure 39: Motor insurance coverage, by gender, age, socio-economic group and region, February 2006
- Affluence plays a key role
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- Figure 40: Motor insurance coverage, by working status, gross annual household income and tenure, February 2006
- The majority of policyholders buy direct from the insurer
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- Figure 41: Distribution channel used to purchase last policy, February 2006
- Direct writers appeal to most segments
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- Figure 42: Distribution channel used to arrange most recent policy, by gender, age, socio-economic group and region, February 2006
- Brokers may suit needs of the more affluent
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- Figure 43: Distribution channel used to arrange most recent policy, by working status, gross annual household income and tenure, February 2006
- Waitrose shoppers buy their policies direct from the insurer
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- Figure 44: Distribution channel used to buy most recent insurance policy, by newspaper readership, new technology, internet usage, daily TV commercial viewing and supermarket usage, February 2006
- The majority of customers still prefer the phone
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- Figure 45: Method used to arrange most recent motor insurance policy, February 2006
- Branches attract the over-65s
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- Figure 46: Distribution channel used, by gender, age, socio-economic group and region, February 2006
- Working status has impact on how consumers arrange motor insurance
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- Figure 47: Distribution channel used, by working status, gross annual household income and tenure, February 2006
- One in three heavy Internet users arranged their last policy online
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- Figure 48: Method used to arrange most recent policy, by newspaper readership, new technology, Internet usage, daily TV commercial viewing and supermarkets, February 2006
- Over half of consumers who used a broker did so via the telephone
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- Figure 49: Method used to arrange most recent motor insurance policy, by distribution channel used, February 2006
- Shopping around activity stays virtually the same over last five years
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- Figure 50: Number of quotes obtained, 2001-06
- Younger consumers seem most keen to shop around
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- Figure 51: Number of quotes received, by gender, age, socio-economic group and region, February 2006
- Who is keenest to get a good deal?
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- Figure 52: Number of quotes received, by working status, gross annual household income and tenure, February 2006
- Internet shoppers are the most likely to keep an eye out for a good deal
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- Figure 53: Number of quotes obtained, by method used to arrange last policy, February 2006
- Good deals to be had on the high street
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- Figure 54: Number of quotes obtained, by where last policy was arranged, February 2006
Consumer Attitudes and Targeting Opportunities
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- Are consumers less loyal nowadays?
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- Figure 55: Length of time with current provider, 2001-06
- Confirming assumptions about loyalty
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- Figure 56: Length of time with current provider, by gender, age, socio-economic group and region, February 2006
- Retirees are faithful to providers
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- Figure 57: Length of time with current provider, by working status, gross annual household income and tenure, February 2006
- Are heavy Internet users also heavy switchers?
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- Figure 58: Length of time with current provider, by newspaper readership, new technology, Internet usage, daily TV commerical viewing and supermarket usage, February 2006
- ‘Loyal’ consumers don’t shop around
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- Figure 59: Number of quotes obtained before purchasing last policy, by number of years with existing provider, February 2006
- Policyholders think highly of their motor insurance providers
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- Figure 60: Words associated with financial services providers in general, and specifically with motor insurance providers, February 2006
- ABs have super-positive opinion of their motor insurance provider
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- Figure 61: Attitudes towards motor insurers, by method used to arrange last policy, February 2006
- Loyal customers have positive views of provider
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- Figure 62: Attitudes towards motor insurers, by number of years with provider, February 2006
- Are supermarkets up to scratch?
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- Figure 63: Attitudes towards motor insurers, by where last policy was purchased, February 2006
- Method used to arrange policy does not affect how policyholders view provider
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- Figure 64: Attitudes towards motor insurers, by method used to arrange last policy, February 2006
- CHAID analysis identifies who is most likely to arrange their policy online
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- Figure 65: CHAID analysis, February 2006
Industry Views
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- The growing popularity of arranging policies online
- Brokers –what of them?
- Premium pricing and product innovation
- Emotion…is it an issue?
- Today’s challenges…
- …and tomorrow’s
The Future
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- Bad times less bad, good times less good
- Pricing pressure to continue
- Cautious consumers no longer as keen on new cars
- Broadband abounds
- Direct writers now target non-standard drivers
- Telematics could be the way of the future
Forecast
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- Figure 66: Forecast of private motor insurance market, 2005-11
- Factors used in the forecast
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