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UK Commercial Motor Insurance 2009

Datamonitor
August 18, 2009
SKU: DFMN2421648

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Countries covered: United Kingdom

Introduction

The report is an invaluable guide to the UK commercial motor insurance market, providing insight into competitor strategies, profitability and performance as well as overall market growth and trends. It examines trends in distribution and identifies the key drivers behind claims inflation. The report also provides forecasts for the size and profitability of the market up to 2013.

Scope

Obtain the latest market size and profitability analysis of the UK commercial motor insurance market
Insight into the effects of the recession on the market, including the major changes to the competitor rankings
Detailed market growth and profitability forecasts based on Datamonitor's in-house model and expertise

Highlights

When SMEs were asked which commercial products they were most likely to buy using the telephone and internet platforms, employers' liability and public liability were the two most commonly cited answers, whereas only 40.9% of SMEs would do so with their commercial motor insurance.
All of the insurers in the top 10 had at least some exposure to the commercial vehicle market in 2008, although fleet business dominates the books of the majority of these insurers. This is unsurprising given that the fleet market is much larger than that for commercial vehicle cover, allowing insurers to develop substantial books of business.

Reasons to Purchase

Analysis of the performance of the key sectors of the UK commercial motor insurance market
Benchmark your company against your competitors based on market share data and profitability ratios
Develop your future business plans from an informed viewpoint with Datamonitor's market forecast

Overview: Catalyst; Summary
Executive Summary: The commercial motor insurance market is under pressure from the recession and claims inflation; The recession is likely to have a depressing impact on commercial motor insurance GWP; Bodily injury claims are typically more expensive than the average claim; The market continued to contract in size in 2008 as GWP declined in both market segments; The market is estimated to have contracted by approximately 3.1% in 2008; Average premium rates across both fleet and commercial vehicle have declined; Fleet policies decreased while other commercial motor insurance vehicle years increased in 2008; Large national brokers continue to dominate commercial motor insurance distribution; Commercial motor insurance distribution is considered to be most at risk from the direct channel; Brokers remained the dominant distribution channel targeting SMEs in 2008; Only 40.9% of SMEs would buy their motor insurance over the telephone or internet; RSA and Aviva remained the leading commercial motor insurers in 2008; Aviva retained its position as the market leader in 2008; Zurich recorded a large increase in market share in 2008; Allianz, RSA and Zurich beat the market average COR; Allianz, Tradex, Aviva Zurich, RSA, and NFU recorded reported year CORs below 100% in 2008; The commercial motor market is forecast to reach £3.7 billion by 2013 as premium rates rise; The UK commercial motor insurance market is forecast to reach a value of £3.7 billion in 2013; The commercial motor insurance market is forecast to improve its underwriting performance throughout the forecast period
Market Issues: Introduction; The acquisition of Westminster by Tradex has created a new top 10 player; The new combined commercial motor insurer is a black cab market powerhouse; Tradex is adept at using multiple channels to deliver its specialist commercial motor insurance policies; Westminster was a specialist in the competitive London taxi market; The recession is likely to have a depressing impact on commercial motor insurance GWP; Lower turnover and GDP will mean that few companies will be looking to expand their motor fleets; Insurers exposed to the motor trade are likely to suffer, as this sector faces falling sales; More company insolvencies will mean premium growth will not be generated by increases in volume; An increase in crime brought on by unemployment could increase claims costs for motor insurers; The commercial motor parc is likely to experience slower growth due to the recession; High claims costs and inflation have been reducing commercial motor insurers' margins; Bodily injury claims are typically more expensive than the average claim; Legal costs inflation has been identified as a key driver of claims inflation, particularly for smaller personal injury motor claims; Medical inflation is a major driver for larger personal injury claims costs; Insurers need to speed up the claims settlement process to eliminate unnecessary bills from credit hire companies on third-party non-fault claimants; An increase in uninsured driving and fraudulent claims is placing increasing pressure on UK insurers
Market Context: Introduction; The market continued to contract in size in 2008 as GWP declined in both market segments; The market is still highly competitive and experiencing soft premium rates; The market is estimated to have contracted by approximately 3.1% in 2008; Lloyd's market insurers have a significant presence in the UK motor market; Fleet insurance policies account for the bulk of the GWP in the commercial motor insurance market; Policies in force and premium rates have led to a contraction in GWP in the market; Average premium rates across both fleet and commercial vehicle have declined; There were a total of 4.4 million commercial motor policies in force in 2008; Fleet policies decreased while other commercial motor insurance vehicle years increased in 2008; The commercial motor parc grew by 2.7% in 2008; The total number of vehicles in the commercial motor parc continued to grow in 2008; There has been only a marginal shift in segmentation as the proportion of other vehicles increased; The company car parc remained broadly stable as a proportion of both the total car parc and overall vehicles; Claims costs continue to increase keeping pressure on margins; Gross claims costs for commercial motor insurers were estimated to have increased by 2.7% in 2008; Claims inflation continues to plague the market due to escalating bodily injury claims and credit hire costs; Claims frequency deteriorated in 2008, although the overall trend in recent years has been positive; Insurers are benefiting from improving accident rates; Falling road traffic accident rates mean fewer opportunities for expensive personal injury claims to arise; Road traffic accident numbers fell in 2008, continuing a trend from previous years; Road traffic accidents declined even as car numbers increased, signifying a fall in frequency; Casualty rates have fallen steadily, mirroring the continuous decline in road traffic accidents; The combined ratio for the commercial motor market peaked in 2007 but has started to improve; Commercial motor insurance losses improved in 2008; The total motor insurance and commercial motor insurance COR should continue reducing in the coming years; The industry made substantial reserve releases in 2008
Distribution Dynamics: Introduction; Large national brokers continue to dominate commercial insurance distribution; Independent insurance intermediaries of all types retain their leading market share in 2008; Direct players account for a small but growing portion of the commercial general insurance market; Corporate partnerships have maintained only a small presence in the commercial insurance market; Banks and building societies distribute negligible amounts of commercial general insurance; Commercial motor insurance distribution is considered to be most at risk from the direct channel; The broker channel continues to dominate the SME market with retention levels high; Brokers remained the dominant distribution channel targeting SMEs in 2008; The internet is the least common platform for SMEs purchasing commercial insurance; The majority of SMEs remain satisfied with their insurance provider; Long-standing relationships are important to SMEs purchasing commercial insurance; SMEs purchasing their insurance through a bank or a broker value advice from their insurance providers the most; Price is important to many SMEs choosing an insurance provider; A significant proportion of SMEs are open to purchasing their insurance via the internet or phone; The convenience factor of the phone is appealing to many SMEs considering a telephone purchase; Many SMEs are unwilling to purchase their insurance over the telephone; Over a third of SMEs would consider a purchase online; Only 40.9% of SMEs would buy their motor insurance over the telephone or internet
Competitor Focus: Introduction; RSA and Aviva remained the leading commercial motor insurers in 2008; Aviva retained its position as the market leader in 2008; RSA's market share increased by 0.5 percentage points; Zurich, Allianz, NFU, AXA and QBE gained market share in 2008; Zurich recorded a large increase in market share in 2008; Allianz's market share grew in 2008; NFU Mutual grew its market share by 0.4 percentage points in 2008 and achieved growth of 3.3% in GWP; AXA continued to grow, increasing its market share by 0.2 percentage points in 2008; RBS' market share remained at 4.1% in 2008; QBE achieved growth and possesses the largest commercial vehicle book among the top 10 commercial motor insurers; Two insurers, Tradex and Liverpool Victoria, gained market share through acquisitions in 2008; Liverpool Victoria Group gained a significant presence in the commercial motor market after its acquisition of Highway in 2008; Tradex's commercial motor insurance book experienced significant gains in 2008 due to organic and inorganic growth; Mid-sized commercial motor insurers gained 2.0 percentage points of market share in 2008; Brit, Groupama, HSBC and Fortis all increased their exposure to the commercial motor insurance market in 2008; Brit Insurance recorded the largest growth in GWP among the top 20 commercial motor insurers; Groupama grew its market share by 0.3 percentage points and achieved growth of 20.0% in GWP; HSBC increased the amount of its commercial motor insurance book that it underwrote in 2008; Fortis recoded the largest growth in GWP among the top 20 commercial motor insurers in 2008; Travelers, commercial motor book increased by 12.29% in 2008; AIG, CIS and FIM Holding's market shares were reduced in 2008; AIG's commercial market share declined by 0.5 percentage points; CIS's market share in commercial motor declined by 0.3 percentage points in 2008; FIM Holdings declined by 16.8% resulting in a lower commercial motor market share; MMA and Allchurches had relatively stable market shares in 2008; All of the top 10 commercial motor insurance groups have mixed motor insurance portfolios; Most of the top 10 commercial motor insurers' books were dominated by fleet business in 2008; Allianz, RSA and Zurich recorded accident year CORs much lower than the market average; All of the leading commercial motor insurance groups had an unprofitable year on an accident year basis; Allianz, RSA and Zurich beat the market average COR; Allianz, Tradex, Aviva, Zurich, RSA and NFU Mutual achieved an underwriting profit on a reported year basis; The top 10 commercial motor insurers have relied on reserve releases in recent years to lower their CORs; Allianz, Tradex, Aviva Zurich, RSA, and NFU recorded reported year CORs below 100% in 2008
Future Decoded: Introduction; The commercial motor market is forecast to reach £3.7 billion by 2013 as premium rates rise; Premium rate increases will be the primary factor driving growth in the commercial motor insurance market; The UK commercial motor insurance market is forecast to reach a value of £3.7 billion in 2013; The fleet motor insurance market will be worth £3.1 billion in 2013; The commercial motor insurance market is forecast to improve its underwriting performance throughout the forecast period
APPENDIX: Definitions; ABI members; Accident year combined ratio; Bancassurers; Brokers; Brandassurers; Channel; Direct insurer/writer; Earned premiums; Gross premium; Net premium; Platform; Reported year combined ratio; Reserve development; Written premiums; Methodology; Datamonitor's Commercial Broker Survey H1 2009; Datamonitor's SME Insurance Survey Q1 2008; Further reading; Ask the analyst; Datamonitor consulting; Disclaimer
List of Tables: Table 1: New car registrations in the UK, 2000-09f; Table 2: UK company liquidations, 2003-08p; Table 3: Commercial motor theft claims cost and number; Table 4: UK unemployment, Q4 2004 to Q4 2008; Table 5: New commercial vehicle registrations in Great Britain by body type, 2004-08 (000s); Table 6: UK average cost of bodily injury claims notified two years previously, 2003-07 (£); Table 7: Change in average premium rates and total commercial motor market size, 1996-2008e*; Table 8: UK motor insurance NWP split between ABI members and Lloyd's, 2007 (£m); Table 9: Commercial motor GWP by line of business, 2005-08e (£m); Table 10: Fleet and commercial vehicle average per vehicle premium rate changes, 2005-08e; Table 11: Motor policies in force, 1998-2008 (000s); Table 12: Commercial motor parc in Great Britain by body type, 2004-08 (000s); Table 13: Commercial motor parc in Great Britain by body type, 2007-08; Table 14: Company car parc's share of total car parc, 2004-08 (000s); Table 15: Commercial motor gross claims costs, 2002-08e (£000); Table 16: Average motor claim costs, 2003-07 (£); Table 17: Commercial motor claims volume and frequency, 1998-2008; Table 18: Total number of road accidents in the UK, 1998-2008* (000s); Table 19: Road traffic accidents relative to registered vehicles in Great Britain, 1998-2008 (000s); Table 20: Deaths, seriously and slightly injured casualties resulting from UK road traffic accidents, 2004-08*; Table 21: Accident and reported year COR, commercial motor market, 2005-08 (%); Table 22: Market share of distribution channels in the commercial general insurance market, 2004-08e; Table 23: Q: ""How important is it to receive advice on an ongoing basis from your insurance provider?""; Table 24: Gross written premium and market share of the top 10 UK commercial motor insurance groups, 2007-08; Table 25: Gross written premium and market share of the top 11-20 UK commercial motor insurance groups, 2007-08; Table 26: Top 10 commercial motor insurers' fleet and commercial vehicle books, 2007-08; Table 27: Accident year combined ratio and underwriting profit/loss for commercial motor business, top 10 motor insurance groups, 2008; Table 28: Reported year combined ratio and underwriting profit/loss for commercial motor business, top 10 commercial motor insurance groups, 2008; Table 29: Key variables affecting commercial motor insurance GWP, 2008e-13f; Table 30: UK commercial motor insurance GWP forecast, 1996-2013f (£m); Table 31: Commercial motor GWP by line of business, 2005-13f (£m); Table 32: Commercial motor accident year profitability ratio, 2005-2013f (%); Table 33: Q: ""What business sector are you involved in?""; Table 34: Q: ""How large is your company in terms of number of employees?""; Table 35: Q: ""How large is your company in terms of turnover?""
List of Figures: Figure 1: The 2007 average UK motor claim cost for bodily injury was notably higher than in previous years; Figure 2: SMEs are equally likely to buy motor cover over the internet or telephone; Figure 3: The combined commercial motor insurance books of Tradex and Westminster gave them a market share of 2.7%; Figure 4: The British economy has been contracting since mid-2008; Figure 5: UK company liquidations have already begun increasing; Figure 6: New commercial vehicle registrations slowed in 2008 and are expected to contract further in 2009; Figure 7: The 2007 average UK motor claim cost for bodily injury was notably higher than in previous years; Figure 8: The commercial motor insurance market continued to contract due to lower premium rates; Figure 9: Lloyd's syndicates underwrote £1 billion of motor insurance business in 2007; Figure 10: Premium income from both commercial motor lines was expected to have contracted in 2008; Figure 11: Premium rate growth in the commercial motor insurance market remained negative in 2008; Figure 12: Fleet policies make up the majority of the commercial motor market; Figure 13: The share of policies for commercial vehicles is much reduced from even five years ago; Figure 14: Commercial motor vehicles continued to increase in 2008 although at a lower rate; Figure 15: Light goods vehicles and company cars account for most of the commercial motor parc; Figure 16: The company car parc remained broadly stable while the total car parc grew gradually; Figure 17: The average motor claim cost continued to rise rapidly in 2007 at 14.1%; Figure 18: Commercial motor claims volume and frequency increased in 2008; Figure 19: The number of UK road accidents has continued to fall since 1998; Figure 20: Accidents in the UK have fallen despite a steady increase in the number of vehicles; Figure 21: Casualties continued to decline across all categories in 2008; Figure 22: The commercial motor insurance accident year COR appears to be recovering; Figure 23: The combined ratio for commercial motor has begun to improve; Figure 24: Commercial motor insurers continued to make reserve releases in 2008 to improve their reported year COR; Figure 25: Brokers are the dominant route to market for commercial insurers in the UK; Figure 26: Commercial motor is considered to be at most risk from the direct channel; Figure 27: Most SMEs purchase their commercial insurance through the broker channel; Figure 28: Most SMEs purchase their insurance through face-to-face contact with their insurance provider; Figure 29: Most SMEs are satisfied with the service they have received from their insurance providers; Figure 30: A large proportion of SMEs have been with their insurance provider for more than 10 years; Figure 31: Receiving ongoing advice from their insurance provider is important to most SMEs; Figure 32: Many SMEs consider the price of an insurance premium to be the most important factor when choosing a commercial insurance provider; Figure 33: The convenience factor appeals to many SMEs prepared to purchase insurance over the phone; Figure 34: A significant proportion of SMEs would not consider a telephone purchase because they simply prefer face-to-face; Figure 35: A significant proportion of SMEs who would consider a purchase online think price is an important factor; Figure 36: SMEs show only a moderate inclination to purchase motor insurance via the telephone or internet; Figure 37: Most top 10 commercial insurers gained market share in 2008; Figure 38: Most of the 11-20 commercial motor insurers gained market share in 2008; Figure 39: Most of the top 10 commercial motor insurers underwrite primarily in the fleet market; Figure 40: Allianz, RSA and Zurich recorded CORs that were lower than the market average; Figure 41: Allianz, Tradex, Aviva, Zurich, RSA and NFU Mutual recorded CORs below 100% in 2008 after reserve releases; Figure 42: Growth in premium income is forecast to turn around in 2009; Figure 43: The market will continue to be based primarily on fleet policy income and will turn to growth; Figure 44: Underwriting losses are forecast to decline

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UK Commercial Motor Insurance 2009

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