|
|
Pricing Strategies in UK Private Motor Insurance 2004Published by: Datamonitor Published: Apr. 22, 2004 - 128 Pages Table of ContentsTABLE OF CONTENTS CHAPTER 1 EXECUTIVE SUMMARY 3 Introduction 3 Market context 3 Latest ABI figures suggest the private motor market is at the peak of its current cycle 3 Competitor performance was mixed in 2002, as some areas of business remained underpriced 3 Competitive dynamics 5 Private comprehensive business 5 Private non-comprehensive business 7 The future decoded 9 There are several factors which may delay any return to soft market conditions 9 Factors that will pull the market downwards 11 The private motor market will avoid underwriting unprofitability in 2004 12 CHAPTER 2 INTRODUCTION 25 What is this report about? 25 Who is the target reader? 25 How to use this report 26 CHAPTER 3 MARKET CONTEXT 27 Introduction 27 Key findings 27 The size and profitability of the UK private motor insurance market 28 The 10-year view 28 The market since 1998 28 Factors behind the increase in underwriting loss in 2002 30 Average premium rate movements across the private motor insurance market 31 Competitor strategies in 2002 33 Mixed underwriting performance for the top competitors in 2002 33 Underwriting profitability and portfolio rationalization were key 34 Several key players lost market share in 2002 35 CHAPTER 4 COMPETITIVE DYNAMICS 38 Introduction 38 Key findings 38 Private comprehensive 39 The average premium rate of the big six players in the private comprehensive market declined by 1.5% in 2002 40 However, claims incurred for these players fell by 2.9% 42 The major players tend to closely mirror each other in average premium rate movements 44 Profiles of six major players in the private comprehensive market by average premium, vehicle years and gross claims ratio 46 Average premium rate growth among the top 20 players 49 Groupama and MMA’s gross claims ratio increased as a result of poor performance in average premium rate growth 50 MMA, Liverpool Victoria and Esure had the cheapest average premium rates in 2001 and 2002 53 Private non-comprehensive 56 The average premium rate increase of the big six players in the private non-comprehensive market slowed to 4.4% in 2002 56 In 2001 and 2002 the average premium rate increase for these leading players did not match increases in gross claims incurred, indicating that profitability had worsened 58 The major players tend to closely mirror each others premium rate movements 60 Profiles of six major players in the private non-comprehensive market by average premium, vehicle years and gross claims ratio 62 Average premium rate growth among the top 20 players 64 Eleven of the top 20 private non-comprehensive insurers increased average premiums at a lower rate than the rise in gross claims incurred 65 MMA and Groupama were among insurers with the cheapest average premium rates in 2001 and 2002 68 CHAPTER 5 THE FUTURE DECODED 70 Introduction 70 Key findings 70 Pricing in 2003 71 Conflicting messages from pricing surveys 71 Insurance company results also reflect conflicting rate movements in 2003 73 Question marks surround the future direction of the underwriting cycle 74 Industry executives are broadly optimistic about the short-term future of pricing in the motor market 75 Factors affecting future pricing strategies of UK private motor insurers 76 Factors that have changed the structure of the insurance market and may prolong current market conditions 76 The formation of RBS Insurance 76 The current level of market consolidation 79 Would any of the top ten competitors spark a price war? 81 The increased shareholder pressure and corporate focus on profitability alongside a continued lack of investment return 85 HBOS wants Esure to breakeven in the first half of 2004 86 The shift in competition to other operational areas 87 Factors that will pull the market back to price-based competition 88 The eternal pull of the global insurance cycle 88 Ease of entry to the market and consumer acceptance of non-insurance brands 88 The motor market will avoid unprofitability until 2006 91 CHAPTER 6 APPENDIX 92 Supplementary data 92 Profiles of six major private comprehensive insurers 92 Profiles of six major non-comprehensive insurers 99 Total private motor by competitor 105 Private comprehensive by competitor 110 Private non-comprehensive by competitor 117 Definitions 123 Research methodology 124 Future readings 126 Do you need more information? 126 Datamonitor Financial Services Consulting 126 SPP writing team 128 LIST OF TABLES Table 1: Private motor GWP compared to private motor underwriting result, 1992-2002 30 Table 2: Private motor underwriting account, 1998-2002 31 Table 3: Average premium of top 20 private motor insurers compared to total private motor underwriting result, 1993-2002 33 Table 4: GEP compared to combined ratio, top 20 motor insurers, 2001-2 34 Table 5: Top 10 private motor insurers by market share, 2001-2 37 Table 6: Average private comprehensive premium rate for the six major players compared to gross claims costs, inflation, and private motor underwriting result, 1993-2002 42 Table 7: Private comprehensive average premium rate, vehicle years and gross claims incurred for the six major players, 1993-2002 43 Table 8: Average private comprehensive premium rates of the six major players, 1992-2002 45 Table 9: Vehicle years compared to average premium, top 20 private comprehensive motor insurers, 2001-2 52 Table 10: Change in gross claims ratio, top 20 private comprehensive motor insurers, 2001-2 53 Table 11: Average private non-comprehensive premium rate for the six major players compared to gross claims costs, inflation and private motor underwriting result, 1993-2002 58 Table 12: Private non-comprehensive average premium rate, vehicle years and gross claims incurred for the six major players, 1993-2002 59 Table 13: Average private non-comprehensive premium rates of the six major players, 1992-2002 61 Table 14: Vehicle years compared to average premium, top 20 private non-comprehensive motor insurers 2001-2 67 Table 15: Change in gross claims ratio, top 20 private non-comprehensive motor insurers, 2001-2 68 Table 1: Average private motor premium rate increases, Oct. 2002-Jan. 2004 73 Table 2: Market shares of the top players in the private motor market pre- and post-formation of RBS, pro forma 2002 78 Table 3: Market share of top ten private motor insurers, 1994, 2002 and 2002 pro forma 80 Table 4: Average premium rates for Esure, Direct Line and Churchill, 2001-2 87 Table 5: Average premium rate compared to six biggest players in the market during first year of operation for Esure, Churchill and Direct Line 91 Table 6: Comparison of GEP and gross claims ratio for comprehensive and non-comprehensive lines, 1995-2002 92 Table 7: Norwich Union: Private comprehensive business, 1999-2002 93 Table 8: Direct Line: Private comprehensive business, 1992-2002 94 Table 9: Royal & SunAlliance: Private comprehensive business, 1999-2002 95 Table 10: Zurich FS: Private comprehensive business, 1999-2002 96 Table 11: Churchill: Private comprehensive business, 1999-2002 97 Table 12: Axa: Private comprehensive business, 1999-2002 98 Table 13: Provident: Private non-comprehensive business, 1999-2002 99 Table 14: CIS: Private non-comprehensive business, 1999-2002 100 Table 15: Direct Line: Private non-comprehensive business, 1999-2002 101 Table 16: Norwich Union: Private non-comprehensive business, 1999-2002 102 Table 17: Churchill: Private non-comprehensive business, 1999-2002 103 Table 18: Fortis: Private non-comprehensive business, 1999-2002 104 Table 19: Total private motor GEP by competitor, 1998-2002 105 Table 20: Total private motor GEP by competitor, 1998-2002, cont. 106 Table 21: Total private motor GEP by competitor, 1998-2002, cont. 107 Table 22: Total private motor market share by competitor, 1998-2002 108 Table 23: Total private motor market share by competitor, 1998-2002, cont. 109 Table 24: Private comprehensive GEP by competitor, 1998-2002 110 Table 25: Private comprehensive GEP by competitor, 1998-2002, cont. 111 Table 26: Private comprehensive GEP by competitor, 1998-2002, cont. 112 Table 27: Private comprehensive market share by competitor, 1998-2002 113 Table 28: Private comprehensive market share by competitor, 1998-2002, cont. 114 Table 29: Private comprehensive vehicle years, top 20 insurers, 1998-2002 115 Table 30: Average comprehensive premium for the top 20 insurers, 1998-2002 116 Table 31: Private non-comprehensive GEP by competitor, 1998-2002 117 Table 32: Private non-comprehensive GEP by competitor, 1998-2002, cont. 118 Table 33: Private non-comprehensive GEP by competitor, 1998-2002, cont. 119 Table 34: Private non-comprehensive market share by competitor, 1998-2002 120 Table 35: Private non-comprehensive market share by competitor, 1998-2002, cont. 121 Table 36: Private non-comprehensive vehicle years, top 20 insurers, 1998-2002 122 Table 37: Average non-comprehensive premium for the top 20 insurers, 1998-2002 123 LIST OF FIGURES Figure 1: Several major players lost market share and rank in 2002 4 Figure 2: Norwich Union and Axa have had the highest average premium of the big 6, while Churchill and Direct Line have had the lowest 6 Figure 3: The major players tend to closely mirror premium rate movements, although Norwich Union, Direct Line and Churchill showed markedly below average increases in 2002 8 Figure 4: On a pro forma basis RBS assumes a substantial lead over its competitors in the major private motor lines 10 Figure 5: Declining GWP has led to severe underwriting profitability problems for the UK private motor market 29 Figure 6: Changes in the average premium of the top 20 motor insurers have directly impacted the profitability of the UK motor insurance market 32 Figure 7: Several major players lost market share and rank in 2002 36 Figure 8: The worsening of the underwriting result in 2002 came against the back drop of a reduction in average comprehensive premium rate for the big six players 41 Figure 9: Private comprehensive claims incurred for the big six fell by 2.9 per cent in 2002 43 Figure 10: The six major players tend to closely mirror each other in terms of average premium rate movements within the private comprehensive market 44 Figure 11: Norwich Union and Axa have had the highest average premium of the big 6, while Churchill and Direct Line have had the lowest 47 Figure 12: Direct Line and Churchill have had the highest claims ratios, while providers with higher average premiums have benefited from lower ratios 48 Figure 13: The average private comprehensive premium of the other 14 players in the top 20 increased by 8.5 per cent in 2002 49 Figure 14: Change in vehicle years compared to change in average comprehensive premium, top 20 insurers, 2001-2 51 Figure 15: Liverpool Victoria, CIS, MMA and Esure have had the cheapest average private comprehensive premiums between 2000 and 2002 55 Figure 16: Gross claims incurred in the private non-comprehensive market increased by 12.2 per cent in 2002, while the average premium rate of the leading six players increased by only 4.4 per cent 57 Figure 17: Non-comprehensive claims incurred increased by 7.2 per cent for the six major players in 2002, compared to only a 4.4 per cent increase in average premium 59 Figure 18: The major players tend to closely mirror premium rate movements, although Norwich Union, Direct Line and Churchill showed markedly below average increases in 2002 60 Figure 19: Norwich Union and CIS have had the highest average premium of the big 6, while Provident and Fortis have had the lowest 63 Figure 20: High premiums have not benefited Norwich Union and CIS, which have both suffered with high claims ratios 64 Figure 21: The average private non-comprehensive premium of the other 14 players in the top 20 increased by 20.3 per cent in 2002 65 Figure 22: Change in vehicle years compared to change in average non-comprehensive premium, top 20 insurers, 2001-2 66 Figure 23: MMA, Groupama, and New Hampshire have had the cheapest average private non-comprehensive premiums between 2000 and 2002 69 Figure 1: The AA premium rate index shows slow and steady premium rate increases during 2003 72 Figure 2: Where next for the underwriting cycle? 74 Figure 3: Interviewees were broadly optimistic about the short-term future of the motor insurance market 75 Figure 4: On a pro forma basis RBS assumes a substantial lead over its competitors in the major private motor lines 77 Figure 5: The motor market has dramatically consolidated since the peak of the last underwriting cycle 80 Figure 6: Esure entered with a cheaper proposition and achieved greater volume success in its first year of operation than Direct Line or Churchill 90 Figure 7: Norwich Union’s private comprehensive claims ratio increased as the average premium rate increase slowed in 2002 93 Figure 8: Direct Line’s private comp. average premium fell in 2002, although its claims ratio continued to improve 94 Figure 9: Royal & SunAlliance’s private comp. claims ratio declined while vehicle years fell and average premium increased in 2002 95 Figure 10: Zurich FS private comp. claims ratio declined while vehicle years fell and average premium increased in 2002 96 Figure 11: Churchill’s claims ratio decreased while vehicle years and average premium increased in 2002 97 Figure 12: Axa’s private comp. claims ratio declined while vehicle years fell and average premium increased in 2002 98 Figure 13: Provident’s gross claims ratio increased as average premium rate increases slowed 99 Figure 14: CIS’ gross claims ratio improved while vehicle years and average premium showed strong increases 100 Figure 15: Direct Line’s gross claims ratio improved while vehicle years and average premium increased 101 Figure 16: Norwich Union’s gross claims ratio increased following portfolio rationalization 102 Figure 17: Churchill’s gross claims ratio increased as average premium rate slowed dramatically 103 Figure 18: Fortis maintained status quo in its private non-comprehensive business 104 AbstractIntroductionIs the private motor market about to embark on another period of fierce price-based competition without ever having recovered fully from the last soft market? This report examines data on rate pricing for the top private motor insurers in the UK and provides insight into future rate movements in this highly price-competitive market Scope Data on leading UK private motor insurers' books of business, including average premium rates, volumes of business and gross claims ratio Analysis on the likely future direction of the underwriting cycle and the strategies of the major competitors in this sector Assessment of the impact of structural market changes which could alter the nature of competition in the private motor sector Report Highlights Direct Line and Churchill have had the cheapest average comprehensive premium of the top 6 players since 2001, for which they have paid the price with higher average claims ratios. However, both companies have benefited from their lower cost bases to keep overall combined ratios down RBS has acquired a 23.6 per cent share of the private motor market on a pro forma basis. With such dominance of this sector, pricing strategies will be largely dependent on moves made by the RBS Group Interviews with senior motor industry executives ascertained what likely premium rate movements will occur throughout 2004. Approximately 53 per cent of the market in terms of premium income categorically stated to Datamonitor that they will increase premiums in line with claims inflation, or will not reduce premiums in the face of any price war Reasons to Purchase Understand the future pricing movements in the private motor sector and identify which are the most aggressive players in this market Plan your future motor insurance strategy with confidence based on in-depth understanding of the future profitability of this sector Benchmark your performance against your competitors in terms of premium rate increases and technical profitability using in-depth data and analysis Get Full Details About This Report >> |
|
|||
|
About MarketResearch.com
|
||||