Changing Distribution Balance in Insurance (The) - UK

Published by: Mintel International Group Ltd.

Published: Apr. 1, 2007 - 99 Pages

Table of Contents

Issues in the Market

Key issues

Abbreviations

Market in Brief

The general insurance market has seen fundamental change…

…led by motor insurance…

…and the direct writers

Loyalty becoming a major issue…

Figure 1: Switching behaviour in the motor, travel and home insurance markets, January 2007

…as are margins

Internal Market Environment

Key points:

Bank branch networks shrinking

Figure 2: UK branch networks, 1999 and 2006

The growth of the bancassurers

The emergence of direct writers

Figure 3: Timeline of the appearance of direct writers in the general insurance market, 1985-2005

Advertising key for direct writers

Retailers have also jumped onto the insurance bandwagon

Motor premiums are starting to rise again

Figure 4: AA’s British Insurance Premium Index, July 1994-January 2007

Switching activity is highest in motor insurance sector

Figure 5: General insurance switching activity, January 2007

A growing pool of potential business

Figure 6: The number of UK households and the number of cars on the road, 1995-2006

More consumers are opting to head overseas…

Figure 7: Domestic and overseas holiday volume, 2001-06

…with short breaks growing rapidly in popularity

Figure 8: Short versus long holidays, by volume, 2001-06

Travel agents are exempt from FSA regulation…for now

Broader Market Environment

Key points:

Base rate rises will put a financial strain on many households

Figure 9: Bank of England’s base rate, November 1990-January 2007

More cautious consumers will be keen to save money on their insurance

Figure 10: PDI, consumer expenditure, savings and the savings ratio, 1991-2011

Three in five adults have access to the Internet

Figure 11: British Internet penetration at home/work/place of study or elsewhere, by socio-economic group, 2001-06

More consumers arrange general insurance online than any other financial product

Figure 12: Websites browsed and purchased from, by type of financial product, 2002-06

Competitive Context

Key points:

To self-insure, or to play it safe?

Uninsured drivers a growing worry…

…while travel insurance reaches saturation point

Packaged accounts - a threat, or a new outlet?

Stripped down cover, but potentially serious implications

Strengths and Weaknesses in the Market

Strengths

Weaknesses

Market Size and Forecast

Key points:

The value of the general liability sector has more than doubled

Figure 13: General insurance business, by annual net written premiums, 2000-05

Motor insurers face underwriting deficit

Figure 14: UK motor insurance revenue account for the business and domestic market, 1993-2005

Are changing distribution patterns to blame?

Some insurers stepping back from the fray

The property insurance sector recorded a profit for the second consecutive year in 2005

Figure 15: Breakdown of domestic property insurance underwriting result, 2000-05

Travel sales up - but real premiums falling

Figure 16: The value of the travel insurance market, number of overseas holidays and average premium per overseas visit, 2001-06

Individual PMI subscriptions continue to dwindle

Figure 17: PMI subscriptions, by corporate and individual purchase, 1995-2005

Sales of pet insurance continue to grow

Figure 18: Value of the pet insurance market, by GWP, 1997-2005

Distribution Share

Key points:

Motor market reflects diminishing role of brokers…

Figure 19: Motor insurance distribution share, 1995-2006

…while intermediary share also fell in the home insurance market

Figure 20: Property insurance gross written premiums, by distribution channel, 1995-2005

Direct sales of other insurance have more than doubled over the last decade

Figure 21: Other insurance distribution share, 1995-2006

Travel insurance - agents’ market share slashed

Figure 22: Source used to obtain last policy, 2000-07

Polarisation in the PMI market

A possible resurgence for the broker channel…

…or continued decline?

Companies and Products

Key points:

Spanning the channels

Account aggregators expanding their scope

Adapting products to fit new opportunities

Insurers

The Royal Bank of Scotland

Aviva

Zurich Financial Services

Royal & SunAlliance

Fortis

AXA

Other players

Swinton

Moneysupermarket.com

Confused.com (Admiral Group)

Brand Communication and Promotion

Key points:

High levels of adspend on general insurance

Figure 33: Advertising expenditure in financial services, by top five sectors, 2001/02-2005/06

Adspend reflects high levels of customer churn

Figure 34: Advertising expenditure on general insurance, by sector, 2001/02-2005/06

Home insurers take a different approach

Travel cover goes against trend

Online adspend is also concentrated on motor insurance

Figure 35: Online advertising expenditure, by sector, 2001/02-2005/06

Direct Line is the leading advertiser of general insurance

Figure 36: Top ten advertisers of general insurance, 2001/02-2005/06

Figure 37: Advertising expenditure on general insurance, by media outlet, 2005/06

Channels to Market

Key points:

Shift from brokers to direct changes consumer behaviour

Something gained, something lost

Figure 38: Advantages and disadvantages of various insurance distribution platforms, 2007

One in four drivers arrange their motor insurance policy online

Figure 39: Distribution platform used to arrange motor insurance, 2001-07

Face-to-face sales play greater role in home insurance

Figure 40: Method of arranging most recent home contents policy, 2004-06

Travel moves online

Figure 41: Channel used to arrange travel insurance, January 2007

Private medical insurance - signs of change

Pushing customers online

Channel variety key for mainstream operators

The Consumer - Assessing the Need For a New Distribution Balance

Key points:

Assessing the online population

Figure 49: Characteristics of Internet and broadband users, January 2007

Juggling work - and finances

Figure 50: Access to financial services, January 2007

Direct channels key for 25-44-year-olds

Figure 51: Access to financial services, by gender, age and socio-economic group, January 2007

Making time for the kids

Figure 52: Access to financial services, by marital status, lifestage and age of children in household, January 2007

High earners turn to the Net

Figure 53: Access to financial services, by working status, gross annual household income and tenure, January 2007

Mixing the Web and finance

Figure 54: Access to financial services, by region, Internet usage and daily newspaper readership, January 2007

The Consumer - Sales, Loyalty and Renewals

Key points:

Motor insurance leads the way

Figure 55: General insurance purchasing activity, January 2007

Youngest consumers swapping the mouse for the phone

Figure 56: General insurance purchasing activity, by gender, age and socio-economic group, January 2007

Migrating online

Figure 57: General insurance purchasing activity, by ACORN group and media usage, January 2007

Third agers adjust to the new environment

Figure 58: General insurance purchasing activity, by marital status, lifestage, age of children and Mintel’s Special Groups, January 2007

Online insurance sales - a useful shortcut?

Figure 59: General insurance purchasing activity, by working status, tenure and TV region, January 2007

Motor insurance and the Internet - paying the price for churn

Figure 60: Renewal and switching behaviour in the motor insurance industry, by distribution channels used, January 2007

Is home insurance following suit?

Figure 61: Renewal and switching behaviour in the home insurance industry, by distribution channels used, January 2007

Travel churn reflects purchasing habits

Figure 62: Renewal and switching behaviour in the travel insurance industry, by distribution channels used, January 2007

The benefits of a branch network

Early adopters polarising the market?

A mobile market…

Figure 63: Attitudes towards buying general insurance, January 2007

…but some loyalty still evident

Young and thrifty…

Figure 64: Attitudes towards buying general insurance, by age, January 2007

…or just comfortable with the Net?

The affluent looking to shift online

Figure 65: Attitudes towards buying general insurance, by socio-economic status, January 2007

Heavy Internet users focus on price

Figure 66: Attitudes towards buying general insurance, by Internet usage, January 2007

Abstract

The key theme within this report is the way in which the continued growth of the direct insurers and of the direct sales channels is generally accompanied by high levels of churn and commoditisation, with policies increasingly assessed on price alone. Mintel examines ways in which insurers can try to increase customer retention and margins, while still remaining competitive in the market.

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