Market Developments in UK Commercial Motor Insurance 2007

Published by: Datamonitor

Published: Feb. 14, 2008 - 62 Pages

Table of Contents

DATAMONITOR VIEW

CATALYST

SUMMARY

MARKET CONTEXT

Introduction

The commercial motor market declined in 2006, before growing marginally in 2007

Commercial motor GWP contracted to £3.37 billion in 2006 before a modest recovery in 2007

Commercial motor premium income contracted by 1% in 2006, driven by premium rate decreases

The commercial motor insurance market grew slightly in 2007 and was worth an estimated £3.4 billion

Fleet premium income contracted in 2006 but rebounded slightly in 2007

The commercial vehicle market declined slightly in 2006 before increasing by an estimated 1.3% in 2007

GWP was influenced by declines in premium rates and slow growth in vehicle numbers in 2006 and 2007

The commercial motor parc grew in 2006, though the number of company cars fell

Company cars declined as a proportion of the commercial motor parc

Company cars fell as a proportion of the total car parc

New registrations were down in 2006 as fewer new goods vehicles, buses and coaches were registered

New company car registrations also declined as a proportion of car registrations in 2006

Competitive pressures have forced down premium rates in both segments of the commercial motor market

Fleet premium rates saw declines in 2006 and 2007 due to competitive pressure

Commercial vehicle premium rates have come under pressure from insurers targeting SME business

Commercial motor underwriting profits unexpectedly rose in 2006 as outgoings fell

Underwriting profits increased to £244 million in 2006, despite the soft market

The drop in total outgoing was caused by a decrease in claims incurred, as commissions and expenses grew

Claims incurred dropped as a proportion of total outgoings in 2006

Growth in commissions and expenses constrained the growth in profits

Claims inflation remains dominated by rising personal injury costs, though falling accident rates have given insurers some respite

Overall claims inflation increased significantly in 2006

Bodily injury claims are more expensive than other claims

Falling road traffic accident rates will have given insurers some respite on their claims bills

Road traffic accident numbers have declined over the last nine years

Road traffic accidents have declined even as car numbers have increased, representing a fall in frequency

Casualty rates have fallen steadily, mirroring the decline in road traffic accidents in 2006

Theft rates continue to fall, representing a positive trend for private motor insurers

Insurers have tried a variety of solutions to limit the cost and volume claims caused by traffic accidents

Some early adopters have begun using telematics to control fleet claims costs

Smart Drive and online training have also been used to correct bad driving behavior

Insurers remain divided over whether rehabilitation offers real savings on claims costs

The commercial and private motor market both contracted in 2006 but diverged in terms of profits

The private motor market contracted along with the commercial market in 2006

The total motor market's underwriting loss increased marginally to £204 million in 2006

Despite both being in a soft market, the private and commercial markets record very different underwriting results

FUTURE DECODED

Introduction

The commercial motor market is forecast to harden in 2008 and reach £4.1 billion by 2012

Premium rate increases are expected to lead to an improvement in the commercial motor market

The UK commercial motor insurance market is forecast to reach a value of £4.1 billion in 2012

Commercial motor underwriting profits are forecast to reach a height of £327 million in 2010

More competitive pricing will depress future commercial motor market performance

In the pessimistic scenario, competitive pricing will depress premium income growth

The market will reach a value of £3.9 million in 2012 under more competitive conditions

The market will make a loss of £17m in 2012, the last year of the forecast period

The pessimistic scenario results in £44 million less profit for insurers

The total motor market, under neutral conditions, will reach a value of £16.6 billion in 2012

The total motor market is forecast to grow at 4.3% a year in the forecast period

The total market is forecast to return an underwriting profit in 2008

APPENDIX

Supplementary data

Motor vehicles registered by taxation class

Definitions

Premium income measures

Earned premiums

Gross Premium

Net Premium

Written premiums

Definitions of ABI terms

Brokers

National brokers

Other intermediaries & brokers

Chain brokers & telebrokers

Direct

Other company agents

Utilities/retailers/affinity groups

Company staff

Banks/building societies

SME

2005-06 definitions for line of business

Motor

Total private motor

Total commercial motor

Private motor comprehensive

Private motor non-comprehensive

Motorcycle

Fleets

Commercial vehicles (non-fleet)

Pre-2005 definitions for lines of business

Motor

Methodology

Primary and secondary research

Market size

Changes in market size information

Market size methodology

Lloyd's players and underwriting result figures

Competitor data

CIS

Home-foreign, overseas and facultative reinsurance business

UK commercial broker survey H2 2007

Datamonitor's SME Insurance Survey Q1 2007

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: Commercial motor GWP, 2002-07e (£m)

Table 2: Commercial motor GWP, by line of business, 2002-07e (£m)

Table 3: Commercial motor parc in Great Britain by body type, 2002-06 (000s)

Table 4: Commercial motor parc in Great Britain by body type, 2005-06 (000s)

Table 5: Company car parc's share of total car parc, 2002-06 (000s)

Table 6: New commercial vehicle registrations in Great Britain by body type, 2002-06 (000s)

Table 7: Company cars new registrations in Great Britain, 2002-06 (000s)

Table 8: Commercial motor underwriting account, 1996-2006 (£m)

Table 9: Net claims as proportion of total outgoings, 2002-06 (£m)

Table 10: Total commercial motor gross claims costs, 2002-06 (£m)

Table 11: Detailed commercial motor underwriting account, 2002-06 (£m)

Table 12: Average motor claims costs, 2002-06, (£)

Table 13: UK average claims cost of bodily injury claims notified two years previous, 2002-06, (£)

Table 14: Total number of road accidents in the UK, 1996-2006 (000s)

Table 15: Road traffic accidents relative to registered vehicles in Great Britain 1996-2006 (000s)

Table 16: Deaths, seriously and slightly injured casualties resulting from road traffic accidents, 2002-06

Table 17: Theft of and from motor vehicles, 1996-2006/7

Table 18: UK motor insurance GWP, 2002-06 (£m)

Table 19: UK motor insurance underwriting account 1996-2006 (£m)

Table 20: Private and commercial motor underwriting results, 1996-2006 (£m)

Table 21: Key variables affecting commercial motor insurance GWP, neutral scenario, 2002-12f

Table 22: UK commercial motor insurance GWP forecast, neutral scenario, 2002-12f (£m)

Table 23: UK commercial motor insurance underwriting account forecast, neutral scenario, 2002-12f (£m)

Table 24: Key variables affecting commercial motor insurance GWP, pessimistic scenario, 2002-12f

Table 25: UK commercial motor insurance GWP forecast, pessimistic scenario, 2002-12f (£m)

Table 26: UK commercial motor insurance underwriting account forecast, pessimistic scenario, 2002-12f (£m)

Table 27: UK commercial motor underwriting result forecast, neutral and pessimistic scenarios, 2002-12f (£m)

Table 28: Total motor insurance GWP forecast, neutral scenario, 2002-12f (£m)

Table 29: UK total motor insurance underwriting account, 2002-12f (£m)

Table 30: Motor vehicles registered by taxation class, 2002-06 (000s)

Table 31: New motor vehicle registrations by taxation class, 2002-06 (000s)

Table 32: Q: What business sector are you involved in?

Table 33: Q: How large is your company in terms of number of employees?

Table 34: Q: How large is your company in terms of turnover?

List of Figures

Figure 1: Commercial motor premium income grew slightly in 2007 after three years of declines

Figure 2: The commercial motor market declined in 2006 but saw a small increase in 2007

Figure 3: Commercial motor vehicles continued to increase in number in 2006

Figure 4: Light goods vehicles and company cars account for most of the commercial motor parc

Figure 5: The company car parc has remained largely stable as a proportion of the overall car parc

Figure 6: New registrations of commercial motor vehicles fell in 2006

Figure 7: New registrations for company cars declined after a rally in 2005

Figure 8: Despite falling NWP, the market attained its highest underwriting profit in 2006

Figure 9: Average motor claims costs have risen every year since 2002 in the UK

Figure 10: The average UK claims cost for bodily injury claims was higher than for other claim types in 2006

Figure 11: Road accidents peaked in 1997 and have fallen ever since

Figure 12: Accidents in the UK have fallen despite a steady increase in the number of vehicles

Figure 13: Casualties continued to decline across all categories in 2006

Figure 14: Theft of and from motor vehicles continued to decline in 2006/7

Figure 15: Commercial motor GWP declined slightly more than private motor in 2006

Figure 16: The UK motor insurance market reported a loss of £204 million in 2006

Figure 17: The private and commercial motor underwriting results diverged after 2001

Figure 18: The commercial motor market is predicted to harden in 2008, resulting in an increase in GWP

Figure 19: The market is forecast to return underwriting profits between 2008 and 2012

Figure 20: Future market size is constrained by more competitive pricing in the pessimistic scenario

Figure 21: Underwriting profits are forecast to decline quickly after 2009 in the pessimistic scenario

Figure 22: The forecast underwriting results of the two scenarios diverge after 2009

Figure 23: After four years of declines, the total motor market is expected to begin growing again in 2008

Figure 24: The motor market is forecast to be profitable for a total of four years starting in 2008

Abstract

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