Market Developments in UK Private Motor Insurance 2007
Datamonitor, February 2008, Pages: 66
The brief analyzes the UK private motor insurance markets performance in 2006 and 2007, providing insight into market growth and profitability. The report concludes with forecasts for the size and profitability of the private motor market under three different scenarios up to 2012.
Scope
- Analysis of the performance of the key sectors of the UK private motor insurance market
- Detailed market forecasts based on The in-house model and interviews with leading insurers
Highlights of this title
Premium income from private non-comprehensive policies decreased due to consumers shifting away from this type of cover, as non-comprehensive premium rates rose on average over the year. Consumers have found it much easier in recent years to obtain comprehensive coverage and so have naturally opted for the better cover.
Key reasons to purchase this title
- Obtain the latest market size and profitability analysis of the UK private motor insurance market
- Develop your future business plans from an informed viewpoint with The market forecasts under three different scenarios
Overview 1
Catalyst 1
Summary 1
Market Context 2
Introduction 2
The UK private motor insurance market started to harden at the end of 2006 and grew in 2007 2
The market hardened late in 2006, which led to strong gains in premium income for 2007 2
UK private motor insurance GWP increased to an estimated £10.1 billion in 2007 as the market hardened 2
Private motor insurance GWP contracted by 0.9% in 2006 as the market only hardened late in the year 2
The comprehensive and non-comprehensive segments both declined in 2006, but rebounded in 2007 3
Comprehensive motor GWP suffered the worst contraction of the three private lines in 2006 3
Non-comprehensive premium income suffered as fewer motorists chose this cover 4
The motorcycle market was the only part of private motor to increase in 2006, although it contracted in 2007 6
Late rises in premium rates and low growth in private car numbers depressed GWP in 2006 8
Private motor insurance premium rates recovered late in 2006 and have climbed in 2007 8
Comprehensive premium rates grew towards the end of 2006 and continued to increase in 2007 8
Non-comprehensive premium rates increased significantly in 2006, but trailed the comprehensive market in 2007 8
The UK private vehicle parc continued to grow slowly in 2006 12
Private car numbers increased in 2006, although the rate of growth has slowed 12
New registrations for private cars declined in 2006 12
Although the private car parc is aging it remains mostly modern in composition 14
Motorcycle numbers continue to climb, although growth has slowed 16
Underwriting losses expanded in 2006, driven by high costs and lower net revenue 17
The private motor underwriting result deteriorated in 2006 17
Increases in total outgoings were driven by higher commissions and reserving, despite lower claims costs 19
Commissions and expenses rose 3.1% in 2006, while insurers reserved more than they released 19
Net claims costs fell in 2006, moderating the increase in total outgoings 20
Claims inflation continue to plague the market, but accident and theft rates have fallen 21
Overall claims inflation increased significantly in 2006 21
Bodily injury claims are more expensive than other claims 22
Falling road traffic accident rates will have given insurers some respite on their claims bills 24
Road traffic accident numbers have declined over the last nine years 24
Road traffic accidents have declined even as car numbers have increased, representing a fall in frequency 25
Casualty rates have fallen steadily, mirroring the decline in road traffic accidents in 2006 27
Theft rates continue to fall, representing a positive trend for private motor insurers 28
A number of initiatives aimed at cost savings were undertaken in 2006 and 2007 30
The IFB has been very active in the investigation of professional fraud over the year it has been in operation 30
The tightening up of MID requirements should drive down uninsured driving leading to savings for insurers 31
Insurers remain divided over whether rehabilitation offers real savings on claims costs 31
With the arrival of Copart, recycled parts can assist insurers in curbing repair costs 32
Insurers have pushed online distribution of motor insurance certificates and could save up to £11m a year 32
Commercial motor GWP declined in 2006, but the market increased its underwriting profit 32
The commercial motor market contracted slightly more than the private market in 2006 32
The total motor markets underwriting loss increased marginally to £204m in 2006 33
Despite being in a soft market, commercial motor improved its profitability in 2006 35
Future Decoded 38
Introduction 38
Private motor GWP is forecast to reach £12.5 billion by 2012 under neutral market conditions 38
A hardening market in 2008 and 2009 should result in significant premium rate growth 38
The UK private motor insurance market is predicted to be worth £12.5 billion in 2012 39
The private motor insurance market is forecast to reach profitability in 2009 41
Under optimal conditions the private motor market will reach £12.9 billion by 2012 43
Less competition could allow for greater price increases in 2008 and 2009 43
The market will grow by over 10% in 2008 allowing it to reach a value of £12.9 billion in 2012 44
With less competitive pricing the market will produce three years of profits 46
In the pessimistic scenario GWP will only reach £12.4 billion in 2012 as competition keeps premium inflation down in 2008 48
More intense competition will keep premium rate increases low according to the pessimistic scenario 48
The private motor insurance market will only reach a value of £12.4 billion in 2012 in the pessimistic scenario 49
Underwriting losses will continue throughout the forecast period in the pessimistic scenario 51
The total motor market, under neutral conditions, will reach a value of £16.6 billion in 2012 53
The total motor market is forecast to grow at 4.3% a year in the forecast period 53
The total market is forecast to return an underwriting profit in 2008 55
APPENDIX 59
Supplementary data 59
New registrations of cars and light goods vehicles by taxation class 59
Definitions 60
Premium income measures 60
Earned premiums 60
Gross Premium 60
Net Premium 60
Written premiums 60
Other definitions 61
Channel 61
Direct insurer/writer 61
Brokers 61
Bancassurers 61
Brandassurers 61
Platform 61
2005-06 definitions for line of business 61
Motor 61
Total private motor 61
Total commercial motor 62
Private motor comprehensive 62
Private motor non-comprehensive 62
Motorcycle 62
Fleets 63
Commercial vehicles (non-fleet) 63
Pre-2005 definitions for lines of business 63
Motor 63
Methodology 64
Primary and secondary research 64
Market size 64
Changes in market size information 64
Market size methodology 64
Lloyds players and underwriting result figures 64
GWP versus GEP reporting 65
Home-Foreign, overseas and facultative reinsurance business 65
Further reading 66
Ask the analyst 66
Our consulting 66
Disclaimer 66
List of Tables
Table 1: UK private motor insurance premium income, 2002-06, (£m) 3
Table 2: Comprehensive/non-comprehensive split of the UK private car parc, 1996-2006e 6
Table 3: UK private motor insurance premium income by line of business 2002-07e, (£m) 7
Table 4: Average quarterly premiums for UK comprehensive and non-comprehensive insurance, 2002-07 11
Table 5: Cars licensed in Great Britain by body type, 1996-2006 12
Table 6: New private car registrations in Great Britain by body type as a percentage of the total private car parc, 2002-06 14
Table 7: Age composition of 2006 car parc, 2006 15
Table 8: Number of motorcycles and new registrations in Great Britain, 2002-06, (000s) 17
Table 9: UK private motor underwriting result, 1996-2006, (£m) 19
Table 10: Detailed private motor underwriting account in the UK, 2002-06, (£m) 20
Table 11: UK net claims as a proportion of total outgoings, 2002-06, (£m) 20
Table 12: Average motor claims costs, 2002-06, (£) 22
Table 13: UK Average claims cost of bodily injury claims notified two years previous, 2002-06, (£) 23
Table 14: Total number of road accidents in the UK, 1996-2006, (000s) 25
Table 15: Road traffic accidents relative to registered vehicles in Great Britain 1996-2006, (000s) 27
Table 16: Deaths, seriously and slightly injured casualties resulting from UK road traffic accidents, 2002-06 28
Table 17: Theft of and from motor vehicles in the UK, 1996-2006/7 30
Table 18: UK motor insurance premium income, 2002-06, (£m) 33
Table 19: UK motor insurance underwriting account 1996-2006, (£m) 35
Table 20: UK private and commercial motor underwriting results, 1996-2006, (£m) 37
Table 21: Key variables affecting private motor insurance GWP, neutral scenario, 2002-12f 39
Table 22: UK private motor insurance GWP forecast, neutral scenario, 2002-12f 41
Table 23: UK private motor insurance underwriting account forecast, neutral scenario, 2002-12f, (£m) 43
Table 24: Key variables affecting private motor insurance GWP, optimistic scenario, 2002-12f 44
Table 25: UK private motor insurance GWP forecast, optimistic scenario, 2002-12f 46
Table 26: UK private motor insurance underwriting account forecast, optimistic scenario, 2002 -12f, (£m) 48
Table 27: Key variables affecting private motor insurance GWP, pessimistic scenario, 2002-12f 49
Table 28: UK private motor insurance GWP, pessimistic scenario, 2002-12f 51
Table 29: UK private motor insurance underwriting account forecast, pessimistic scenario, 2002-12f, (£m) 53
Table 30: Total UK motor insurance GWP 2002-12f, neutral scenario, 2002-12f 55
Table 31: UK total motor insurance underwriting account, 2002-12f (£m) 57
Table 32: Cars and light goods vehicles registered by taxation class, 1996-2006, (000s) 60
List of Figures
Figure 1: The UK private motor insurance market grew in 2007 as premium rates hardened 3
Figure 2: Fewer vehicles had non-comprehensive cover in the UK in 2006 5
Figure 3: The main UK private motor lines once again declined in 2006 before recovering in 2007 7
Figure 4: Both sectors of the UK private motor market experienced significant premium rate inflation in 2007 9
Figure 5: UK comprehensive premium rates increased significantly in 2007 10
Figure 6: New private cars in Great Britain have declined in number since 2002 13
Figure 7: Less than a third of the UK car parc was older than 12 years old in 2006 15
Figure 8: In Great Britain, growth in motorcycle numbers has been slowing since 2005 16
Figure 9: The UK underwriting result deteriorated sharply in 2006 18
Figure 10: Average motor claims costs have risen every year since 2002 in the UK 21
Figure 11: The average UK claims cost for bodily injury claims was higher than for other claim types in 2006 23
Figure 12: UK road accidents peaked in 1997 and have fallen ever since 24
Figure 13: Accidents in the UK have fallen despite a steady increase in the number of vehicles 26
Figure 14: Casualties continued to decline across all categories in 2006 28
Figure 15: Theft of and from motor vehicles continued to decline in 2006/7 29
Figure 16: Commercial motor was the weaker market in 2006 declining more than private motor 33
Figure 17: The UK motor insurance market reported a loss of £204m in 2006 34
Figure 18: The UK private and commercial motor underwriting results diverged after 2001 36
Figure 19: Private motor GWP is forecast to grow significantly in 2008 and 2009 40
Figure 20: Private motor is forecast to make a small profit in 2009 42
Figure 21: Less competition allows for a stronger rally in comprehensive premium income and higher private motor GWP in the optimistic scenario 45
Figure 22: In the optimistic scenario stronger premium growth results in three years of underwriting profits 47
Figure 23: In the pessimistic scenario, GWP growth is expected to be subdued from 2008 onwards 50
Figure 24: In the pessimistic scenario, the market fails to reach a profit in the forecast period 52
Figure 25: After four years of declines, the total motor market is expected to begin growing again in 2008 54
Figure 26: The UK motor market is forecast to be profitable for a total of four years starting in 2008 56
Figure 27: New cars and light goods have declined again as a proportion of the total parc 59
Copart, Inc.
Fortis
The Automobile Association Limited (AA, The)
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