Sector Insight: Motor insurance

Motor insurance
Motor insurance

The advent of price-comparison websites is levelling the playing field as motor insurance providers compete for market share.

The way we buy motor insurance has changed significantly over the past few years. Thanks to the advent of price-comparison websites, three-quarters of drivers shop around before renewing their policy, according to research by Ipsos/MORI, and almost half get up to three quotes before making a decision.

The consequence of this is signi­ficantly lower levels of loyalty. The proportion of consumers who have been with their existing provider for five years or more has dropped from 31% in 2001 to 23% in 2009. Older drivers tend to be more loyal, while those in the 17- to 34-year-old age group switch more frequently.

Brand identity is also poor in this sector, as differentiation and trust are not easily achieved: frequently, consu­mer choice comes down to premiums.

Total net written premiums (NWP) were £7.8bn in 2007 and an estimated £8.1bn in 2008, according to Mintel - an upward trend that will continue. Yet the industry continues to suffer from a lack of profitability, recording an underwriting loss of £398m in 2007, though this is estimated to have improved to a £288m loss in 2008.

Average premiums have shot up since 2007 as insurance companies look to get the market back to underwriting profitability. Meanwhile, the number of private car-insurance claims fell to 4m in 2008, a drop of 7% compared with 2007. Yet while the volume of claims fell, their costs have risen: incr­easing 14% between 2003 and 2007.

The industry is also seeing a bigger number of personal-injury claims. Due to the higher cost of processing as well as legal expenses, this may have a knock-on effect of raising premium costs.

As it is a legal obligation to have car insurance to drive, the sector is relatively recession-proof. The only way it can be hit is if high numbers of drivers give up their cars.

One problem is the number of uninsured drivers on the road: it is estimated there are 1.6m vehicles in the UK being driven without insur­ance, at a cost to the companies of £500m a year, or an extra £30 per premium. The police have managed to clamp down on uninsured drivers, using automatic number plate-recognition technology, and the government is now consider­ing making it tougher for people to keep an uninsured vehicle.

While car manufacturers are struggling, the number of cars in the UK has increased steadily over the past few years as a result of multiple car ownership and population growth.

Comprehensive insurance is the most common type taken out, accounting for more than 90% of vehicles in 2008, according to the Association of British Insurers.

Insurance brokers used to be the sole route for multiple comparisons but online price-comparison sites have changed this. Direct sales grew from 29% in 2000 to almost 50% in 2007.

RBS is the leading provider of motor insurance in this country, accounting for about a third of the market by gross written premiums (GWP) in 2007. The top five players, which also include Aviva, RSA, Zurich and Fortis, account for 66%, with a total GWP of £5.4bn.

Norwich Union has just rebranded as Aviva with a high-profile ad campaign. One of its points of difference is that named drivers can earn their own no-claims discounts with its comprehen­sive insurance. Last year it withdrew its products from aggregator sites and launched its own comparison service.

Over the next five years, Mintel predicts there will be a gradual return to underwriting profitability as insurers make a combined effort to improve market conditions, so that by 2014 it will be £67m and NWP will be £9.9bn.



Top 10 motor insurers   by gross written premiums
Provider (parent company)  2008 2007 2006
£m  £m  £m 
1 RBS 2557 2717 2910
2 Aviva 1033 1171 1388
3 RSA (Royal Sun Alliance) 628 572 546
4 Zurich Financial Services 524 477 430
5 Fortis NV 459 468 398
6 HBOS 449 329 281
7 Munich Re 363 384 371
8 AXA 307 273 211
9 LV= (Liverpool Victoria) 259 215 230
10 NFU Mutual (Nat Farmers) 203 195 183
Total market  8206* 8182 9178
*Note: 2008 data are incomplete. At the time of writing, S&P had not finished processing all motor insurance providers' 2008 FSA Returns (although these did appear to be complete for the top 10). Nonetheless, total market and rest of market data for 2008 is incomplete and likely to change as more returns are processed. The data supplied by Standard & Poor's has been extracted from the SynThesys Non-Life database, which utilises the FSA annual return regulatory data. The data is as reported and Mintel/Standard & Poor's do not guarantee the accuracy, adequacy, or completeness of any information, and are not responsible for any errors or omissions or the result obtained from the use of such information.    Source: Standard & Poor's SynThesys Non-Life/Mintel
Private claims   by number and frequency
Exposure Total number of claims  Claims frequency 
(vehicle years*) m m  % 
2000 17.38 3.37 19.4
2001 19.34 3.72 19.3
2002 20.64 3.9 18.9
2003 20.94 3.96 18.9
2004 21.94 4.11 18.7
2005 23.56 4.26 18.1
2006 24.56 4.41 18
2007 24.48 4.3 17.6
2008 23.87 4 16.8
*Note: The vehicle year is the number of vehicles covered multiplied by the duration in years for which the insurer is exposed to risk.   Source: ABI
Household car ownership   by number of vehicles
2008 2007 2005 2003 % point change 
%  %  %  %  (2003-08) 
One car 38.9 40.4 38.9 39.7 -0.8
Two cars 34 34 32.8 31.8 2.2
Three or more cars 5 4.8 5.2 4.7 0.3
None 22.1 20.8 23.1 23.8 -1.7
Base: all households   Taken from the TGI survey of about 25,000 adults aged 15+    
Source: GB TGI, BMRB Winter 2002/03, 2004/05, Q1 2006-09 (Oct-Sep)/Mintel





Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus
Brand Republic Jobs

subscribe now


Waitrose boosts content strategy with 'Weekend Kitchen with Waitrose' C4 tie-up
Hottest virals: Cute puppies star in Pedigree ad, plus Idris Elba and Fruyo
Amnesty International burns candles to illuminate new hope
Toyota achieves the impossible by calming angry Roman drivers
Tom of Finland's 'homoerotic' drawings made into stamps
YouTube reveals user habits to appeal to 'older' marketers
Ex-M&S marketing chief Steven Sharp consulting at WPP
Wolff Olins reveals new CEO after Apple poaches Karl Heiselman
Glasgow offers £30,000 prize to best digital idea for 2014 Commonwealth Games
Google's revenues surge but shares drop as it grapples with transition to mobile
Facebook beats Twitter to most 'marketing friendly' social media site crown, says DMA
Fableists believe children like Finn should be outdoors enjoying life
Homebase, Baileys and Camelot join the line-up at Media360
MasterCard renews Rugby World Cup sponsorship to push cashless message
Lynx unleashes £9m 'Peace invasion' campaign
Social Brands 100 Youth: Pizza Hut most social youth brand in UK
Cheryl Cole is wild and arresting in new L'Oreal work
Morrisons told not to show alcohol ads during YouTube nursery rhymes
O2 head of brand Shadi Halliwell departs after 23 years at company in restructure
Tesco hit by further sales decline as it turns to digital Clubcard and social network
Branding guru Wally Olins dies aged 83
Duracell short film captures epic Transatlantic voyage
Ash runs Tinder experiment to show smokers are less desirable to opposite sex
British Airways teams up with Gerry Cottle Jnr for summer of rooftop film screenings
Arklu says 'girls can be superheroes too' with doll design competition
Coke enters squash market with Oasis Mighty Drops
Virgin Galactic signs up Land Rover as space flight sponsor
Motorola marketer Andrew Morley departs as Google gears up for sale to Lenovo
US Airways apologises after tweeting obscene image at a customer
Mumsnet admits users' emails and passwords accessed via Heartbleed bug