UK Personal General Insurance 2009

Published by: Datamonitor

Published: Oct. 29, 2009

Table of Contents

Overview

Catalyst

Summary

Executive Summary

The industry returned a respectable trading result with personal lines performing well at an overall level

A respectable profit on the face of it

Personal lines was attractive at the top level

There have been significant changes to market positions and more changes may be on their way

Lloyds Banking Group storms into the top 10

Fortis and Liverpool Victoria are set to become a much larger force in personal lines

2009 has been a challenging year however the market is set to grow between 2009 and 2013

2009 has been a challenging year so far

Total personal lines premiums are expected to grow between 2010 and 2013

Table of Contents

Table of figures

Table of tables

Market context

Introduction

Conditions are deteriorating for insurers

The market contracted in 2008 as insurers continued to compete hard

Insurers pulled capacity from suretyship insurance

Motor and property insurance continue to dominate the UK non-life insurance market

Lloyd's of London underwrites around £2 billion of UK insurance

Motor, liability, property and pecuniary loss have driven the COR up in recent years

Pecuniary loss is a strong source of underwriting profit

Insurers are being hit by falling investment income

A drop in investment income put additional pressure on insurers' margins in 2008

Insurers saw an estimated trading result of 9% of NWP in 2008

Reserve releases are propping up reported profits

Insurers propped up their reported underwriting results with around £1 billion in reserve releases

Insurers made significant reserve releases in motor and property insurance while strengthening reserves for liability insurance

Personal lines insurance is attractive, at an overall level

Personal lines continued to see muted growth but benefitted from a low COR

The personal insurance market was worth £24.7 billion in 2008

Household, A&H and personal pecuniary loss are compensating for the poor motor COR

Pecuniary loss is the largest profit pool in the personal lines sector

Insurers made significant reserve releases in personal motor insurance

Distribution

Introduction

Brokers, direct insurers and banks gained market share in the personal insurance market

Brokers continued to be the leading personal insurance distribution channel in 2008

The direct channel grew in 2008, achieving its highest market share ever

Banks increased their market share through significant increases in motor insurance sales

Affinity players' market share contracted as motor premium income fell

Other company agents and staff lost market share in 2008

Direct Line continues as the top general insurance advertiser, though Aviva has stepped up its marketing

The market leader, Direct Line, continued to invest in its brand and is likely to equal its 2008 outlays

At half year, Aviva had already spent as much as its entire 2008 marketing outlay

The aggregators have launched new campaigns in 2009 underscoring the competitive nature of the market

Confused.com is the top spending insurance aggregator brand

Comparethemeerkat.com has been a great success for aggregator-comparethemarket.com

GoCompare.com launched a new campaign with fictitious opera singer Gio Compario

Most top insurance advertisers made use of television advertising for their motor products

Television accounted for the bulk of the top 10's insurance marketing

Television advertising has allowed the largest insurance providers to reach a wide customer base and build brand awareness

Direct mail was an important secondary advertising medium for most of the top 10

Press advertising is a key secondary marketing tool for many insurers

Though spending on motor appears to be down, it remained the focus of most advertising campaigns

As the largest personal insurance line, motor attracts the highest spending

Household insurance as the second largest personal insurance market attracted a substantial amount of advertising

Competitive Dynamics

Introduction

RBS and Aviva continue to lead the market in personal lines

RBS was the largest personal lines insurer in 2008

Aviva retained its position as the UK's second largest personal general insurer in 2008

Lloyds Banking Group has doubled its presence through the acquisition of HBOS

AXA increased its GWP by 4.5% in 2008

Lloyds Banking Group doubled its insurance presence after it merged with HBOS

BUPA saw its GWP increase by 3.5% in 2008

RSA was the 6th largest personal insurance group

Zurich achieved significant growth in its personal lines premium income, which was chiefly driven by private motor

Fortis has signed a transformational deal with Tesco

Fortis has signed a transformational deal with Tesco

Munich Re grew its personal book by 4.3% due to household, pecuniary loss and accident & health lines

Allianz's personal pecuniary loss business saw significant growth

Liverpool Victoria increased its presence in personal lines with the acquisition of Highway

Future Decoded

Fortis and Liverpool Victoria are on track to become bigger players in personal lines

Fortis's new deal with Tesco could transform the size of the insurer

Liverpool Victoria is aggressively growing its business

The industry trading result will be challenging in 2009

Profits are expected to dip in 2009

Investment returns will fall

Reserve releases are expected to continue in 2009

Profits are likely to be impacted by a sharp rise in the pecuniary loss COR in 2009 and 2010

The personal market size is forecast to reach £29 billion in 2013

The personal market size is expected to fall further in 2009 before growing again between 2010 and 2013

Private motor GWP is forecast to reach £12 billion in 2013

Rates will continue to harden in order to reduce the market's high underwriting losses

The UK private motor insurance market is predicted to be worth £12.0 billion in 2013

Household GWP is forecast to reach £7.6 billion in 2013

Insurers are expected to continue to raise household rates in line with inflation

The market will reach a value of £7.6 billion in 2013

The A&H market is forecast to reach £6.2 billion in 2013

Persistent claims inflation will mean PMI rates rise throughout the forecast

A&H GWP is forecast to reach £6.2 billion in 2013

The pecuniary loss market is forecast to reach a value of £3.4 billion in 2013

The personal pecuniary loss market is forecast to reach £3.4 billion in 2013

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

Suretyship insurance

Written premiums

Additional data

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

Overview

Table 1: Annual growth in general insurance market, 2000-08 (%)

Table 2: GWP by line of business, 2000-08 (£m)

Table 3: UK insurance market split by ABI members and Lloyd's of London, 2008 (£m)

Table 4: Total market combined ratio, 2004-08 (%)

Table 5: Accident year CORs by line of business, 2004-08 (%)

Table 6: Underwriting result by line of business, 1998-2008 (£m)

Table 7: Underwriting result, investment income and trading result as a percentage of NWP (worldwide business of UK insurers), 2000-08

Table 8: Underwriting result, investment income and trading result as a percentage of NWP (UK business), 2000-08

Table 9: Personal insurance market size, 2005-08 (£m)

Table 10: Accident year CORs by line of personal business, 2005-08 (%)

Table 11: Underwriting result by line of personal business, 1998-2008

Table 12: Personal general insurance GWP distribution by channel, 1999-2008

Table 13: Top 10 personal general insurance advertisers, 2007-09 H1, (£)

Table 14: Top 10 personal general insurance advertisers' spend by media, 2007-09 H1 (£000)

Table 15: Top 10 personal general insurance advertisers' spend by product, 2007-09 H1 (£000)

Table 16: GWP and market share of the top 10 UK personal general insurance groups, 2007-08

Table 17: Forecast of personal general insurance GWP, 2009-13

Table 18: Key variables affecting private motor insurance GWP, 2009-13

Table 19: Forecast of private motor insurance GWP, 2009-13 (£m)

Table 20: Key variables affecting household insurance GWP, 2009-13

Table 21: Forecast of household insurance GWP, 2009-13 (£m)

Table 22: Key variables affecting A&H GWP, 2009-13

Table 23: Forecast of A&H GWP, 2009-13

Table 24: Forecast of personal pecuniary loss GWP, 2009-13 (£m)

Table 25: Total UK pecuniary loss underwriting account, 1998-2008

Table 26: Total UK property underwriting account, 1998-2008

Table 27: Total UK household underwriting account, 1998-2008

Table 28: Total UK commercial property underwriting account, 1998-2008

Table 29: Total UK motor underwriting account, 1998-2008

Table 30: Total UK personal motor underwriting account, 1998-2008

Table 31: UK commercial motor underwriting account, 1998-2008

Table 32: UK liability underwriting account, 1998-2008

Table 33: UK accident & health underwriting account, 1998-2008

List of Figures

Figure 1: The industry has experienced slow or negative growth in recent years due to strong competition

Figure 2: Increases in the liability and property sectors were offset by falls in motor, A&H and pecuniary loss

Figure 3: Motor and property continue to be the two largest lines of business

Figure 4: Lloyd's of London underwrites around 5% of the UK insurance market

Figure 5: The combined ratio for the total market bottomed out in the years 2004-06 but it has increased to 108% in 2008

Figure 6: Motor, liability, property and pecuniary loss have seen increasing CORs

Figure 7: Pecuniary loss and A&H are a steady source of profits

Figure 8: Investment income as a percentage of premiums fell to an all time low in 2008 due to the financial crisis

Figure 9: The trading result for UK business fell in 2008 however it was broadly in line with the across-the-cycle trading result

Figure 10: Insurers have bolstered reported profits with massive reserve releases in the years 2005-08

Figure 11: Insurers made significant reserve releases in motor and property insurance while strengthening reserves for liability

Figure 12: Growth has been subdued in personal lines in recent years as the personal lines COR has been relatively low

Figure 13: Personal motor is the largest line in the personal market

Figure 14: A high COR in personal lines motor is balanced out by attractive CORs in personal pecuniary loss, household and A&H

Figure 15: Pecuniary loss and A&H have been a consistent source of underwriting profits

Figure 16: Insurers released over £400m of prior years' reserves in order to improve the reported underwriting result in personal motor insurance

Figure 17: Brokers have recaptured some of the market share they have lost since 1999

Figure 18: Aviva was the second largest advertiser in the market as it rolled out an extensive rebranding campaign

Figure 19: Television campaigns were the largest expense for most top insurance advertisers

Figure 20: Motor insurance received the lion's share of insurance advertising funds in the first half of 2009

Figure 21: Zurich has invested heavily in marketing campaigns promoting its direct insurance products in 2009

Figure 22: The merger with HBOS boosted the share held by Lloyds Banking Group

Figure 23: Liverpool Victoria's acquisition of Highway has increased its share of the personal market to 2.3%

Figure 24: Insurers are likely to see a sharp rise in the pecuniary loss COR judging from the effects of the last recession in 1990

Figure 25: The personal market is expected to contract in 2009 as the creditor market shrinks

Figure 26: Private motor insurance GWP will grow strongly over the forecast period

Figure 27: Household GWP will rise at an average annual rate of 3%, reaching £7.6 billion in 2013

Figure 28: The A&H sector is forecast to reach £6.2 billion in GWP by 2013

Figure 29: Personal pecuniary loss GWP will dip in 2009 as the creditor market contracts before seeing growth thereafter

Abstract

Introduction

This unique report provides an unrivalled analysis of the UK general insurance market with a specific focus on the personal lines sector. It segments the market by line of business and assesses underwriting profits and investment income. The research also includes an in-depth analysis of the distribution and competitive landscape and forecasts the personal lines market size to 2013.

Scope

• Data on the size, structure and profitability of the total non-life market and the personal lines sector.
• Insight into the different methods of distributing personal lines insurance products and the changes in the landscape.
• Analysis of the total premiums and market share for the largest personal lines insurance groups.
• A discussion of the main factors affecting the general insurance market in the future along with forecasts of market size to 2013.

Highlights

The merger of Lloyds TSB and HBOS has meant that the newly formed Lloyds Banking Group becomes the fourth largest personal lines group following the combination of a number of insurance companies owned by the group including Lloyds TSB General Insurance, esure and St Andrew's.

Against the backdrop of an increasing COR for the total non-life market, the personal lines sector shone out at an overall level. Datamonitor's analysis of FSA Returns shows the personal lines sector (which we take to be PL motor, household, accident & health and personal financial loss) returned a COR of 103%, net of reserve developments.

Reasons to Purchase

• Understand the segmentation of the UK general insurance market and the differing profitability by class of business.
• Benchmark your premium income against that of your competitors and understand the drivers of growth in their business.
• Gain insight into the future development of the market in terms of competitors, major issues and market size.

Get Full Details About This Report >>

About MarketResearch.com
MarketResearch.com is an online aggregator selling over 300,000 market research reports, company profiles and country profiles from over 700 research firms. Our reports will provide you with the critical business and competitive intelligence you need for strategic planning and marketing research. Coverage includes the US, UK, Europe, Asia and global markets.