UK Commercial Motor Insurance: Market Dynamics & Opportunities 2017

  • ID: 4391903
  • Report
  • Region: United Kingdom, Great Britain
  • 60 pages
  • GlobalData
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FEATURED COMPANIES

  • Ageas
  • Allianz
  • Aviva
  • AXA
  • Direct Line
  • LV=
  • MORE

UK Commercial Motor Insurance: Market Dynamics & Opportunities 2017

Summary

Commercial motor insurance market in UK grew slightly in 2016. This was a result of economic growth, which in turn increased business prosperity and therefore the investment in commercial vehicles to support business expansion. Despite growth in commercial motor, the market is heading towards unprofitable territory as it is expected that rates will begin to harden over the next few years, until further government reforms are introduced that might lower claims costs.

Key findings include in this report:

  • Gross written premiums (GWP) for the commercial motor insurance market grew by 4.5% to £4.17bn in 2016.
  • The claims environment, alongside personal motor insurance, remains in a state of uncertainty around the impact of the discount rate reduction to -0.75% and whiplash claim reforms.
  • There are concerns among industry experts around longer-term market profitability and the availability of reserves to bolster combined operating ratios (CORs), particularly if the predicted negative impacts of leaving the EU come to fruition.

The commercial motor parc continued to increase in 2016, with light goods vehicles (LGVs) and company cars driving the majority of growth. However, with the UK’s vote to leave the EU it is expected that motor parc growth will slow, as businesses will have less confidence and money to invest in new commercial vehicles until the economy begins to recover. While reforms will provide instant benefits upon implementation, telematics and driverless technology will help reduce the frequency of claims in the longer term.

Insurers should encourage customers to invest in and utilize telematics and driverless technology. Benefits will include lower claims costs, through which savings can then be passed on to customers while increasing profitability. Commercial motor insurers are facing a challenging environment with Brexit, the Ogden rate change, and whiplash reform. Insurers must continue to monitor the outcomes and design approaches accordingly.

The report "UK Commercial Motor Insurance: Market Dynamics & Opportunities 2017", analyzes the UK commercial motor insurance market, looking at market size as well as changes in premiums, claims, road casualties, the motor parc, regulations, and opportunities. It discusses competitors in the market, how the market is likely to change due to telematics and driverless cars, and provides future forecasts of market size up to 2021.

Companies mentioned in this report: RSA, Aviva, Allianz, NFU Mutual, AXA, Zurich , QBE, LV=, Direct Line, Ageas.

Scope

  • Gross written premiums for the commercial motor insurance market grew by 4.5% to £4.17bn in 2016.
  • The claims environment, alongside personal motor insurance, remains in a state of uncertainty around the impact of the discount rate reduction to -0.75% and whiplash claim reforms.
  • There are concerns among industry experts around longer-term market profitability and the availability of reserves to bolster combined operating ratios, particularly if the predicted negative impacts of leaving the EU come to fruition.

Reasons to buy

  • Benchmark yourself against the rest of the market.
  • Ensure you remain competitive as new innovations and insurance models begin to enter the market.
  • Be prepared for how regulation will impact the commercial motor insurance market over the next few years.
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FEATURED COMPANIES

  • Ageas
  • Allianz
  • Aviva
  • AXA
  • Direct Line
  • LV=
  • MORE
1. EXECUTIVE SUMMARY
1.1. Future growth continues to be linked to economic prosperity and the ability to respond to market dynamics
1.2. Key findings
1.3. Critical success factors
2. MARKET DYNAMICS
2.1. Introduction
2.2. Commercial motor GWP grew slightly in 2016
2.2.1. The total motor insurance market grew by 10.3% in 2016
2.2.2. The commercial motor insurance market grew to £4.17bn in 2016
2.2.3. Lloyd’s of London accounts for 7.7% of the commercial motor market
2.3. Excluding IPT, commercial motor insurance premiums remained flat over 2016
2.3.1. IPT has been increased to 12%
2.3.2. The IPT increase kept premiums in check in 2016
2.3.3. Premium rates will have to rise in addition to IPT if the market is to remain profitable
2.4. Claims costs are putting pressure on profitability
2.4.1. The discount rate was changed from 2.5% to -0.75%
2.4.2. Insurers’ profits have been hit by the rate change
2.4.3. The Ogden rate change cost has impacted profitability
2.4.4. The MoJ is consulting on how the Ogden discount rate should be set going forward
2.5. Claims frequency is down but severity is increasing
2.5.1. CMCs have consolidated following LASPO
2.5.2. The ABI reports that the number of commercial claims notified remained flat in 2016
2.5.3. Personal injury motor claims have risen for the past two years
2.5.4. Whiplash claims account for up to 80% of motor personal injury claims numbers
2.5.5. Fraud remains a significant issue
2.5.6. Motor personal injury claims remain high, while RTA claims are in decline
2.5.7. Most RTA casualties are car occupants, but these are the least vulnerable road users
2.5.8. The number of RTA casualties continues to fall across all road user types
2.5.9. The number of pedal cyclist casualties has reached a five-year low
2.5.10. Larger commercial vehicles are colliding with pedal cyclists
2.6. The UK commercial motor parc continues to grow in a positive economic outlook
2.6.1. The commercial motor parc increased by 3.9% against 2015 figures
2.6.2. Company cars and LGVs are the most common commercial vehicle types
2.6.3. The number of newly licensed commercial vehicles rose slightly in 2016
2.6.4. The majority of commercial vehicles continue to be licensed in the South East
2.6.5. Road usage continues to rise as a result of a growing motor parc and cheaper fuel
3. COMPETITOR DYNAMICS
3.1. RSA, Aviva, and Allianz lead the commercial motor market
3.1.1. RSA has been the top commercial motor insurer for the past three years
3.1.2. Aviva is the second-largest commercial motor insurer
3.1.3. Allianz and LV= are combining to form a joint venture
3.1.4. NFU Mutual specializes in insuring agricultural and specialist commercial vehicles
3.1.5. AXA’s commercial business is growing through its mid-market proposition
3.1.6. Other developments from commercial motor insurers
4. THE MARKET GOING FORWARD
4.1. The Civil Liability Bill aims to reform personal injury motor claims
4.1.1. The benefits of LASPO did not fully materialize
4.1.2. Initial proposals aimed to increase the small claims track limit and remove general damages for minor soft tissue injuries
4.1.3. The MoJ has published its first response to the consultation on reforms
4.1.4. The Prisons and Courts Bill was scrapped due to the snap general election
4.1.5. The Queen’s Speech following the election introduced a Civil Liability Bill
4.1.6. There has been a split reaction to the Civil Liability Bill
4.1.7. Estimates suggest the Civil Liability Bill will save customers £35 on motor insurance premiums
4.1.8. The small claims limit will increase to £5,000 for RTA claims
4.1.9. A tariff system is being introduced for RTA-related soft tissue injury claims
4.1.10. Claims will not be settled without a MedCo medical evidence report
4.2. Proposed reforms will impact motor insurance profitability
4.2.1. Tariffs and the small claims track limit increase will have a significant impact
4.2.2. The increase in the small claims track could affect 70-80% of claims
4.2.3. Legal costs could be reduced by up to 50%
4.2.4. The introduction of tariffs could reduce whiplash claims costs by £1bn
4.2.5. The success of reforms will be dependent on how and when the market responds
4.3. The size of the commercial motor market will depend on rates
4.3.1. The future of the commercial motor insurance market is reliant upon three main factors
4.3.2. The dynamics of growth for the commercial motor insurance market will shift in the next few years
4.3.3. The economy will continue to dictate growth of the commercial motor parc
4.3.4. Rates may rise in response to claims inflation, but may fall due to new government reforms
4.3.5. IPT rises continue to drive costs for insurers and customers alike
4.4. Vehicle technology will reduce claims costs in the long term
4.4.1. Usage of telematics and safety features are increasing in the commercial motor market
4.4.2. 65% of businesses are using telematics in their vehicles
4.4.3. Some aspects of vehicle technology usage will have longer-term benefits
4.4.4. The government is supporting the development of driverless technology
4.4.5. Motorists with driverless cars will be required to have dual insurance policies
4.4.6. Autonomous car manufacturers are entering the insurance market for driverless cars
4.4.7. Motor insurers are looking to partner with driverless car manufacturers
4.4.8. More than half of new UK cars are now sold with autonomous features
4.4.9. The need for personal car insurance could diminish, causing the commercial market to grow
4.4.10. Driverless technology is being developed to create autonomous delivery services
4.4.11. Improved vehicle technologies have business benefits outside of insurance
4.5. Implications of other legislation under consideration
4.5.1. Implications of the Vnuk ruling
4.5.2. Environmental improvements promised through Clean Air Strategy
5. APPENDIX
5.1. Abbreviations and acronyms
5.2. Bibliography
5.3. Further reading

List of Tables
Table 1: UK motor insurance market GWP (£m), 2012-16
Table 2: Licenced commercial vehicles by body type (000s), 2012-16
Table 3: New vehicle registrations by body type (000s), 2012-16
Table 4: Road traffic usage by vehicle type (billion vehicle miles), 2012-16
Table 5: New tariff amounts for RTA soft tissue injury claims compared to 2015 average payment for PSLA, by injury duration

List of Figures
Figure 1: Private and commercial motor recorded similar rates of growth over the last five years
Figure 2: The number of claims notified remained level in 2016 despite exposure increasing
Figure 3: Personal injury motor claims settled are above pre-LASPO levels
Figure 4: The number of RTAs has been in long-term decline but is beginning to stabilize
Figure 5: The majority of RTA casualties are car occupants
Figure 6: The UK commercial motor parc continues to grow
Figure 7: Company cars and LGVs make up the majority of new licensed commercial vehicles
Figure 8: The South East has the largest share of licensed commercial vehicles
Figure 9: Brexit caused the value of sterling to drop, causing petrol prices to rise
Figure 10: The top five motor insurers account for 54.8% of the total market
Figure 11: The introduction of the Civil Liability Bill will deliver significant cost savings for motor personal liability claims
Figure 12: The size of the commercial motor market will be dependent on how rates change
Figure 13: UK GDP is expected to dip as Brexit takes effect, but then slowly recover after 2018
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  • RSA
  • Aviva
  • Allianz
  • NFU Mutual
  • AXA
  • Zurich
  • QBE
  • LV=
  • Direct Line
  • Ageas
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