Market Developments in UK Private Motor Insurance 2007

Published by: Datamonitor

Published: Feb. 7, 2008 - 66 Pages

Table of Contents

Overview

Catalyst

Summary

Market Context

Introduction

The UK private motor insurance market started to harden at the end of 2006 and grew in 2007

The market hardened late in 2006, which led to strong gains in premium income for 2007

UK private motor insurance GWP increased to an estimated £10.1 billion in 2007 as the market hardened

Private motor insurance GWP contracted by 0.9% in 2006 as the market only hardened late in the year

The comprehensive and non-comprehensive segments both declined in 2006, but rebounded in 2007

Comprehensive motor GWP suffered the worst contraction of the three private lines in 2006

Non-comprehensive premium income suffered as fewer motorists chose this cover

The motorcycle market was the only part of private motor to increase in 2006, although it contracted in 2007

Late rises in premium rates and low growth in private car numbers depressed GWP in 2006

Private motor insurance premium rates recovered late in 2006 and have climbed in 2007

Comprehensive premium rates grew towards the end of 2006 and continued to increase in 2007

Non-comprehensive premium rates increased significantly in 2006, but trailed the comprehensive market in 2007

The UK private vehicle parc continued to grow slowly in 2006

Private car numbers increased in 2006, although the rate of growth has slowed

New registrations for private cars declined in 2006

Although the private car parc is aging it remains mostly modern in composition

Motorcycle numbers continue to climb, although growth has slowed

Underwriting losses expanded in 2006, driven by high costs and lower net revenue

The private motor underwriting result deteriorated in 2006

Increases in total outgoings were driven by higher commissions and reserving, despite lower claims costs

Commissions and expenses rose 3.1% in 2006, while insurers reserved more than they released

Net claims costs fell in 2006, moderating the increase in total outgoings

Claims inflation continue to plague the market, but accident and theft rates have fallen

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

A number of initiatives aimed at cost savings were undertaken in 2006 and 2007

The IFB has been very active in the investigation of professional fraud over the year it has been in operation

The tightening up of MID requirements should drive down uninsured driving leading to savings for insurers

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

With the arrival of Copart, recycled parts can assist insurers in curbing repair costs

Insurers have pushed online distribution of motor insurance certificates and could save up to £11m a year

Commercial motor GWP declined in 2006, but the market increased its underwriting profit

The commercial motor market contracted slightly more than the private market in 2006

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

Despite being in a soft market, commercial motor improved its profitability in 2006

Future Decoded

Introduction

Private motor GWP is forecast to reach £12.5 billion by 2012 under neutral market conditions

A hardening market in 2008 and 2009 should result in significant premium rate growth

The UK private motor insurance market is predicted to be worth £12.5 billion in 2012

The private motor insurance market is forecast to reach profitability in 2009

Under optimal conditions the private motor market will reach £12.9 billion by 2012

Less competition could allow for greater price increases in 2008 and 2009

The market will grow by over 10% in 2008 allowing it to reach a value of £12.9 billion in 2012

With less competitive pricing the market will produce three years of profits

In the pessimistic scenario GWP will only reach £12.4 billion in 2012 as competition keeps premium inflation down in 2008

More intense competition will keep premium rate increases low according to the pessimistic scenario

The private motor insurance market will only reach a value of £12.4 billion in 2012 in the pessimistic scenario

Underwriting losses will continue throughout the forecast period in the pessimistic scenario

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

New registrations of cars and light goods vehicles by taxation class

Definitions

Premium income measures

Earned premiums

Gross Premium

Net Premium

Written premiums

Other definitions

Channel

Direct insurer/writer

Brokers

Bancassurers

Brandassurers

Platform

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

GWP versus GEP reporting

Home-Foreign, overseas and facultative reinsurance business

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: UK private motor insurance premium income, 2002-06, (£m)

Table 2: Comprehensive/non-comprehensive split of the UK private car parc, 1996-2006e

Table 3: UK private motor insurance premium income by line of business 2002-07e, (£m)

Table 4: Average quarterly premiums for UK comprehensive and non-comprehensive insurance, 2002-07

Table 5: Cars licensed in Great Britain by body type, 1996-2006

Table 6: New private car registrations in Great Britain by body type as a percentage of the total private car parc, 2002-06

Table 7: Age composition of 2006 car parc, 2006

Table 8: Number of motorcycles and new registrations in Great Britain, 2002-06, (000s)

Table 9: UK private motor underwriting result, 1996-2006, (£m)

Table 10: Detailed private motor underwriting account in the UK, 2002-06, (£m)

Table 11: UK net claims as a proportion of total outgoings, 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 UK road traffic accidents, 2002-06

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

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

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

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

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

Table 22: UK private motor insurance GWP forecast, neutral scenario, 2002-12f

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

Table 24: Key variables affecting private motor insurance GWP, optimistic scenario, 2002-12f

Table 25: UK private motor insurance GWP forecast, optimistic scenario, 2002-12f

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

Table 27: Key variables affecting private motor insurance GWP, pessimistic scenario, 2002-12f

Table 28: UK private motor insurance GWP, pessimistic scenario, 2002-12f

Table 29: UK private motor insurance underwriting account forecast, pessimistic scenario, 2002-12f, (£m)

Table 30: Total UK motor insurance GWP 2002-12f, neutral scenario, 2002-12f

Table 31: UK total motor insurance underwriting account, 2002-12f (£m)

Table 32: Cars and light goods vehicles registered by taxation class, 1996-2006, (000s)

List of Figures

Figure 1: The UK private motor insurance market grew in 2007 as premium rates hardened

Figure 2: Fewer vehicles had non-comprehensive cover in the UK in 2006

Figure 3: The main UK private motor lines once again declined in 2006 before recovering in 2007

Figure 4: Both sectors of the UK private motor market experienced significant premium rate inflation in 2007

Figure 5: UK comprehensive premium rates increased significantly in 2007

Figure 6: New private cars in Great Britain have declined in number since 2002

Figure 7: Less than a third of the UK car parc was older than 12 years old in 2006

Figure 8: In Great Britain, growth in motorcycle numbers has been slowing since 2005

Figure 9: The UK underwriting result deteriorated sharply in 2006

Figure 10: Average motor claims costs have risen every year since 2002 in the UK

Figure 11: The average UK claims cost for bodily injury claims was higher than for other claim types in 2006

Figure 12: UK road accidents peaked in 1997 and have fallen ever since

Figure 13: Accidents in the UK have fallen despite a steady increase in the number of vehicles

Figure 14: Casualties continued to decline across all categories in 2006

Figure 15: Theft of and from motor vehicles continued to decline in 2006/7

Figure 16: Commercial motor was the weaker market in 2006 declining more than private motor

Figure 17: The UK motor insurance market reported a loss of £204m in 2006

Figure 18: The UK private and commercial motor underwriting results diverged after 2001

Figure 19: Private motor GWP is forecast to grow significantly in 2008 and 2009

Figure 20: Private motor is forecast to make a small profit in 2009

Figure 21: Less competition allows for a stronger rally in comprehensive premium income and higher private motor GWP in the optimistic scenario

Figure 22: In the optimistic scenario stronger premium growth results in three years of underwriting profits

Figure 23: In the pessimistic scenario, GWP growth is expected to be subdued from 2008 onwards

Figure 24: In the pessimistic scenario, the market fails to reach a profit in the forecast period

Figure 25: After four years of declines, the total motor market is expected to begin growing again in 2008

Figure 26: The UK motor market is forecast to be profitable for a total of four years starting in 2008

Figure 27: New cars and light goods have declined again as a proportion of the total parc

Abstract

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