Author: Mintel Group Ltd.
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Vehicle Recovery: Inc Impact of COVID-19 - UK - September 2020
Overview
 
Online registers a high degree of importance when it comes to purchasing vehicle recovery insurance. Mintel’s research shows almost one in three consumers purchase vehicle recovery insurance online placing it second behind those who acquired their policies for free or as part of another product or service, therefore offering good opportunities for engagement with customers. For those going online, there is strong appeal for the use of company websites with 53% of purchases. 

While COVID-19 is expected to have an effect on the market for vehicle recovery services, its impact is not expected to be as great as for some other sectors such as car retailing. The fact that regular policies are purchased annually as well as the importance of sales to existing car owners will result in revenues falling by only 7% in 2020 compared with 2019. 

Price competition remains an ever-present threat to the sector. Although many in the market are working to emphasise non-price factors, while also offer innovations in the services offered, the research shows the overwhelming importance of price amongst consumers. A competitive price is the single most important factor for those who already have cover while discounts are noted separately as a major feature when it comes to choosing a new breakdown recovery provider.

Looking forward, innovation remains an important opportunity for the market and especially in raising premiums. Although there is evidence that they are recovering, being able to offer added value products and services and change for these is essential if the sector is to move away from being just a provider of reactive, emergency support.     

Key issues covered in this Report
●	The impact of COVID-19 on the vehicle recovery services market.
●	How COVID-19 and other factors will likely impact on the future of the market.
●	Use of channels for the purchase of vehicle recovery policies.
●	Key players operating in the market and a review of the main competitive strategies employed.
●	A review of the main brands and their perception.
●	Preferences towards particular styles of policy offered as well as different levels of service.

COVID-19: Market context
The first COVID-19 cases were confirmed in the UK at the end of January, with a small number of cases in February. The government focused on the ‘contain’ stage of its strategy, with the country continuing to operate much as normal. As the case level rose, the government ordered the closure of non-essential stores on 20 March. 

A wider lockdown requiring people to stay at home except for essential shopping, exercise and work ‘if absolutely necessary’ followed on 23 March. Initially, a three-week timeframe was put on the measures, which was extended in mid-April for another three weeks. 

The Health Protections Regulations 2020 came into effect on 15 June allowing the reopening of all non-essential stores in England as well as the mandatory use of face coverings on public transport. Pubs, restaurants, hotels and hairdressers were able to reopen on 4 July, with many beauty businesses following on 13 July.

From 24 July, it became mandatory to wear face coverings in shops and supermarkets. From 15 August more leisure businesses were able to reopen, including casinos, bowling alleys and indoor play areas. A local lockdown was placed on the city of Leicester on 29 June, and subsequent localised restrictions have been placed on different parts of the country with rising COVID-19 cases.

Economic and other assumptions
Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its July 2020 Fiscal Sustainability Report. The scenario suggests that UK GDP could fall by 12.4% in 2020, recovering by 8.7% in 2021, and that unemployment will reach 11.9% by the end of 2020, falling to 8.8% by the end of 2021. 

The current uncertainty means that there is wide variation on the range of forecasts however, and this is reflected in the OBR’s own scenarios. In its upside scenario, economic activity returns to pre-COVID-19 levels by Q1 2021. Its more negative scenario, by contrast, would mean that GDP does not recover until Q3 2024.

Products 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 directly 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.

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