Introduction

The report analyzes the market' s performance across key personal lines, providing insight into competitor strategies and the major issues affecting the market. Consumer data, offering insight into purchasing and loyalty trends, are analyzed along with the evolving dynamics of insurance distribution, and GWP forecasts for individual accident and health, private motor and household.

Scope

• Information on premium income, market size and underwriting profitability for the major insurance lines
• Insight into product distribution, consumer awareness and insurance advertising strategies
• Research into the competitive dynamics of the sector, and information on competitor market shares
• Unique growth forecasts for the major personal lines until 2011, based on primary research and in-house expertise

Report Highlights

While the total personal market managed to post a respectable 3.1 per cent gain in GWP for 2005, the commercial market struggled and returned a 0.9 per cent decline. The two lines diverged despite soft market conditions being evident in both, suggesting that conditions were harsher in the commercial sector.

If the Royal Bank of Scotland Insurance brands are counted as separate entities, Norwich Union is the largest personal lines insurer. The insurer' s personal book has benefited from good growth in both household and private motor, which rose by 23.2 and 12.9 per cent respectively between 2004 and 2005.

Four of the top 10 personal lines insurers experienced diverging results in the growth of their private motor and household books, with one declining while the other increased. For AXA, Zurich and Allianz increases in GWP from household were contrasted by decreases in premium income from private motor.

Reasons to Purchase

• Gain insight into changing consumer habits and purchase behavior.
• Access information on the dynamics of the market and view statistics on competitor market shares.
• Develop your future business plans from an informed viewpoint with Datamonitor' s GWP forecasts for the total market and each line of business.

• CHAPTER 1 EXECUTIVE SUMMARY
  • Profits slipped in the UK general insurance market in 2005, as soft market conditions took their toll on most lines of business
    • Soft market conditions were evident in many lines of business in 2005
      • The motor market led the decline with a reduction of 1.5 per cent
      • Property and accident and health also went into decline
      • Liability and pecuniary loss continued to improve
    • The general insurance market' s underwriting profit began to decline in 2005, as competition took its toll on most sectors
  • Corporate partnerships continue to grow, eroding the share of other distribution channels in private motor and household insurance
    • Corporate partnerships continue to grow their share of the private motor market, while the market share of direct players stagnated in 2005
    • The share of bancassurers and direct writers stagnated in the household insurance market in 2005, while corportate partnerships continued to rise
  • For many of the top 10 personal insurers in 2005 motor and household insurance performance pulled in different directions
    • Norwich Union achieved substantial growth in both private motor and household
    • RBSI subsidiaries broke with their strong growth traditions
    • A number of companies experienced very varied results in their private motor and household books, influencing their total personal premium income in opposite directions
      • Royal & SunAlliance achieved growth in private motor, while household premiums continued to fall
  • The personal pecuniary loss and private motor sectors are forecast to lead the personal general insurance market, with the accident and health and household sectors recording slower growth
    • The private motor and personal pecuniary loss markets will grow strongly between 2006 and 2011
    • The individual accident and health and the household markets will record slower growth between 2006 and 2011
• CHAPTER 2 INTRODUCTION
  • What is this report about?
  • Who is the target reader?
  • How to use this report
• CHAPTER 3 MARKET CONTEXT
  • Introduction
  • Profits slipped in the UK general insurance market in 2005, as soft market conditions took their toll on most lines of business
    • Soft market conditions were evident in many lines of business in 2005
      • The motor market led the decline with a reduction of 1.5 per cent
      • Property and accident and health also went into decline
      • Liability and pecuniary loss continued to improve
    • Personal lines outperformed the commercial sector, which suffered in 2005
    • Private motor was the only personal market that contracted in 2005
    • The general insurance market' s underwriting profit began to decline in 2005, as competition took its toll on most sectors
  • The accident and health market declined in 2005, driven by a large fall in accident sector premium income and stagnation in the individual sector
    • Growth in the individual sector stagnated in 2005
    • Personal accident was largely behind the stagnation of the individual accident and health sector, as private medical insurance saw a resurgence of growth
    • The accident and health market recorded an underwriting profit for the sixth consecutive year in 2005, but profitability declined
  • The private and commercial motor markets contracted in 2005, as soft market conditions persisted
    • Sustained high levels of competition and sliding premium rates led to declines in GWP for both private and commercial motor
    • The non-comprehensive sector drove the decline in the private motor market
    • The motor insurance market' s losses increased, as commercial motor' s meager profits failed to offset private motor' s rising losses
    • The private motor market' s underwriting losses mounted to £232 million
  • The pecuniary loss market grew rapidly in 2005 and although profitability fell, it still returned a healthy underwriting result
    • The pecuniary loss market was worth £5.5 billion in 2005
    • Although the underwriting result dropped in 2005, pecuniary loss remains a profitable line
  • Following a significant slowdown in 2004, the total property market went into decline in 2005 due to the performance of commercial property
    • The household insurance market fared much better than the commercial property market
    • Property underwriting profits fell slightly in 2005, as the effect of increased competition began to have an impact
      • Profitability declined as growth in total outgoings outstripped growth in NWP
    • The household insurance underwriting result rose in 2005, as growth in NWP outstripped total outgoings
• CUSTOMER FOCUS
  • Introduction
  • Corporate partnerships continue to grow, eroding the share of other distribution channels in private motor and household insurance
    • Corporate partnerships continue to grow their share of the private motor market, while the market share of direct players stagnated in 2005
    • The share of bancassurers and direct writers stagnated in the household insurance market in 2005, while corportate partnerships continued to rise
      • Bancassurers and brokers have lost ground in the household market in recent years, but this decline has slowed
      • The rise of direct writers stagnated in 2005, though corporate partnerships continued to rise
  • The Internet continued to dramatically increase its role in insurance distribution in 2006
    • Face-to-face and telephone distribution are losing out to the Internet in the provision of motor insurance
    • The proportion of household insurance arranged by phone and on the Internet continues to increase at the expense of face-to-face sales
  • Spontaneous consumer awareness of providers shows that direct players that have spent heavily on advertising are usually at the forefront of consumers' minds
    • Direct Line had the highest level of spontaneous consumer awareness
    • Advertising expenditure increased by 15 per cent among the top 10 highest spenders in 2005
      • Norwich Union Direct remained the top advertiser, having won the position from Direct Line in 2004
      • Seven of the top 10 advertisers were direct players
• CHAPTER 4 COMPETITIVE DYNAMICS
  • Introduction
  • 2006 saw strong interest in mergers and acquisitions among insurers, but only one significant new entrant to the market
    • M&A activity was muted among insurers, though failed bids and speculation show insurers' continued interest
    • Only one significant new insurer attempted to enter the personal insurance market in 2006, but was bought up by an existing insurer prior to launch
      • Start-up ABC Insurance was bought by Liverpool Victoria
  • A continued focus on cost reductions led to job cuts and offshoring in 2006
    • 2006 saw a number of high profile UK job cuts as insurers continued to move jobs abroad
    • Brokers are also showing interest in offshoring
  • For many of the top 10 personal insurers in 2005 motor and household insurance performance pulled in different directions
    • Norwich Union achieved substantial growth in both private motor and household
    • RBSI subsidiaries broke with their strong growth traditions
      • Direct Line saw modest growth, outperforming its sister companies
      • UKI' s private motor book decreased in size following rapid growth in recent years
      • Churchill saw reductions in private motor, and an improvement in profitability
    • A number of companies experienced very varied results in their private motor and household books, influencing their total personal premium income in opposite directions
      • Royal & SunAlliance achieved growth in private motor, while household premiums continued to fall
      • AXA experienced an increase in household and accident and health business
      • Zurich saw growth in household, but a decline in private motor was combined with a deterioration in profitability
      • Allianz' s household book grew, while private motor declined
    • St Andrew' s and BUPA focus on just a few personal lines
      • St Andrew' s focuses on pecuniary loss and household insurance, and saw a significant increase in its household book in 2005
      • BUPA focuses on private medical insurance
  • A few personal insurers outside the top 10 are growing rapidly, heightening competition for the top players in the market
  • Of the top 10 personal lines insurers, five have large commercial books, while four are purely personal lines insurers
    • The RBSI subsidiaries and St Andrew' s focus exclusively on personal business
    • Norwich Union writes more personal than commercial business
    • For the remaining companies, commercial books outstripped personal books in 2005
  • Profitability declined in the accident and health market, driven by increases in loss ratios in particular
    • Changes in FSA reporting categories have affected accident and health ratio comparisons
    • Many accident and health insurers saw loss ratios increase in 2005, but a clear divide is emerging between PMI and accident insurance specialists
      • Norwich Union, BCWA and Legal & General all recorded double digit loss ratio growth
      • Stonebridge, SimplyHealth and Fortis achieved impressive loss ratio reductions
    • Expense ratios rose by 3.0 per cent in 2005, with accident specialists driving this increase
      • While PMI providers succeeded in reducing their expense ratios, accident and travel insurance specialists more often suffered an increase
      • PMI providers BUPA and WPA had the best expense ratios in 2005
      • Norwich Union, Legal & General and New Hampshire achieved the best expense ratio reductions
      • BCWA and Stonebridge recorded large expense ratio increases
    • The combined ratio of the top A&H providers rose by 5.3 per cent in 2005, with the majority of PMI and accident providers contributing to this performance
      • The companies with the best ratio metrics were from the accident and travel sectors, not the PMI market
      • New Hampshire, Fortis and SimplyHealth all made impressive combined ratio improvements in 2005
      • BCWA had a terrible year in 2005, however GEFI, Clinicare and Groupama all suffered big combined ratio increases as well
  • Soft market conditions led to both falling premiums and reductions in profitability for many of the top 20 motor insurers
    • The loss ratio of the top 20 motor insurers increased in 2005 and soft market conditions were evident as many companies suffered declining premium income
      • Many insurers saw worsening loss ratios and reductions in income, suggesting that some have accepted reduced premiums
      • Three companies saw a decline in premium income but improved loss ratio
      • Six companies managed to improve their loss ratios while growing their motor books
      • First Alternative was the only top 20 company that combined an increase in premium income with a growing loss ratio
    • The expense ratio of the top 20 motor insurers saw a small deterioration in 2005
      • Only a few insurers saw substantial changes to their expense ratios in 2005
    • Soft market conditions led many insurers with a combined ratio already over 100 per cent to suffer further reductions in profitability
      • 11 of the top 20 motor insurers failed to return an underwriting profit in 2005
      • Many companies combined increasing unprofitability with falling premium income, suggesting that some players have cut their premiums to maintain market share
      • 11 of the top 20 returned an underwriting loss and seven of these further increased their combined ratios in 2005
      • Nine companies recorded underwriting profits in 2005, with five of these seeing improvements on their 2004 results
      • Several players have dealt well with the soft cycle so far and are set to continue riding the cycle in the future
  • Pecuniary loss is a profitable line with an average combined ratio below 100 per cent however, high expense ratios are a problem for a sub-group of insurer
    • Changes in FSA reporting categories have affected pecuniary loss ratio comparisons
    • In general the loss ratio for pecuniary loss is lower than other lines
    • The influence of the expense ratio or the loss ratio on pecuniary loss insurers' profitability varies depending on their main line of business
      • Insurers that mainly write personal creditor business have low loss ratios and high expense ratios
      • Insurers that specialize in commercial pecuniary loss generally have low expense ratios
      • The remainder of the top 20, with expense ratios around 40-60 per cent, underwrite a variety of pecuniary loss lines
    • Just over half of the top 20 pecuniary loss insurers recorded underwriting profits in 2005, making it a profitable business overall
      • Pecuniary loss is a profitable business for many insurers
      • However, a group of companies struggled to secure a profit
  • Property insurance operating conditions improved slightly in 2005, although many players saw their combined ratios increase
    • The loss ratio of the top 20 property insurers improved in 2005
      • Nine of the top 20 actually recorded an increase in loss ratio, with significant increases from several players
      • Ecclesiastical, Direct Line and Allianz all recorded large loss ratio increases
      • St. Andrew' s and Norwich Union all achieved big reductions in loss ratio, going against the market trend of rising claims costs
      • Liverpool Victoria' s loss ratio was the worst of the property sector' s top 20 players
    • The expense ratio of the top 20 property insurers increased by 1.8 percentage points in 2005
      • Direct writers and mutual insurance companies had the best expense ratios
      • CIS, Royal & SunAlliance and Zurich all saw significant increases in expense ratios
      • Lloyds TSB and NIG achieved large reductions in their expense ratios
    • The combined ratio of the top 20 property insurers fell marginally by 0.4 per cent in 2005, driven by the performance of just under half of this peer group
      • 11 of the top 20 property insurers recorded an increase in combined ratio
      • Reflecting softer market conditions, Legal & General moved into an underwriting loss
      • Direct Line, Allianz and Ecclesiastical saw the biggest increase in combined ratio
      • Lloyds TSB, St. Andrew' s and Norwich Union all achieved double digit figure combined ratio reductions
• CHAPTER 5 THE FUTURE DECODED
  • Introduction
  • The personal pecuniary loss and private motor sectors are forecast to lead the personal general insurance market, with the accident and health and household sectors recording slower growth
    • The private motor and personal pecuniary loss markets will grow strongly between 2006 and 2011
    • The individual accident and health and the household markets will record slower growth between 2006 and 2011
  • The private motor market is estimated to have seen very limited GWP growth in 2006, but is forecast to pick up in 2007 and reach a value of £13.1 billion by 2011
    • Rate increases are expected to lead to an improvement in operating conditions in the private motor market
    • The private motor market is forecast to be worth £13.1 billion by 2011
  • The personal pecuniary loss market is forecast to grow to a value of £7.3 billion by 2011
    • The forecast for pecuniary loss is based on historical trends
    • The personal pecuniary loss market is forecast to grow by 8.1 per cent on a compound annual basis between 2006 and 2011
  • The accident and health market will continue to record slow growth, driven by the performance of the private medical insurance market
    • The PMI market will struggle to achieve an increase in subscriber numbers, as customers continue to leave the personal sector
    • The individual accident and health market will record a compound annual growth rate of 3.8 per cent between 2006 and 2011
  • The household insurance market will see further competitive pressure and will therefore see only steady growth
    • The household market is expected to see continued high levels of competition between 2006 and 2008 due to attractive market conditions and changes in product distribution
    • The household insurance market is forecast to grow by 3.5 per cent per annum between 2006 and 2011
• CHAPTER 6 APPENDIX
  • Methodology
    • FSA Return changes
      • Major changes in FSA Return categories and their impact
    • Market size
      • Changes in market size information
      • Market size methodology
      • Lloyd' s players and underwriting result figures
    • Competitor data
      • GWP versus GEP reporting
      • Total personal and total commercial business
      • Home-Foreign, overseas and facultative reinsurance business
  • 2005 definitions for lines of business
    • Accident & health
      • Medical expenses
      • HealthCare cash plan
      • Travel
      • Personal accident or sickness
    • Motor
      • Total private motor
      • Total commercial motor
      • Private motor comprehensive
      • Private motor non-comprehensive
      • Motorcycle
      • Fleets
      • Commercial vehicles (non-fleet)
    • Property
      • Total commercial property
      • Household and domestic all risks.
      • Consequential loss (i.e. business interruption)
    • Financial/Pecuniary loss business
      • Total personal financial loss business
      • Total commercial financial loss business
      • Legal expenses
      • Fidelity and contract guarantee
    • Liability business
      • Employers liability (including the employers liability part of mixed liability packages but excluding mixed commercial packages)
      • Professional indemnity (including directors' and officers' liability and errors and omissions liability)
      • Public and products liability
      • Mixed commercial package
    • Total personal
    • Total commercial
  • Pre-2005 definitions for lines of business
    • Accident and health
      • Individual accident and health
      • Group accident and health
    • General liability
    • Motor
    • Pecuniary loss
      • Total pecuniary loss figures
    • Property
  • Premium income measures
    • Earned premiums
    • Gross Premium
    • Net Premium
    • Written premiums
  • Current readings
  • Future readings
  • Do you need more information?
  • SPP writing team
  • List of Tables
    • Table 1: Total general insurance GWP by line of business 2001-5
    • Table 2: Personal GWP split by line of business, 2001-5
    • Table 3: Total general insurance underwriting result, by line of business, 1995-2005
    • Table 4: Accident & health GWP split between individual and group, 2001-5
    • Table 5: Accident and health GWP by sector, 2001-5
    • Table 6: Total accident and health underwriting result, 1995-2005
    • Table 7: Total motor market GWP by private and commercial segment, 2001-5
    • Table 8: Motor market GWP by line of business, 2001-5
    • Table 9: Total motor underwriting account, 2001-5
    • Table 10: Private motor underwriting account, 1995-2005
    • Table 11: Pecuniary loss market GWP by line of business, 2001-5
    • Table 12: Pecuniary loss underwriting account, 2001-5
    • Table 13: Property insurance GWP split between household and commercial business, 2001-5
    • Table 14: Property underwriting account, 1995-2005
    • Table 15: Household underwriting account, 1995-2005
    • Table 16: Distribution of private motor insurance, 2001-5
    • Table 17: Distribution of household insurance, 2001-5
    • Table 18: Distribution of private motor insurance by platform, 2001-6
    • Table 19: Distribution of household insurance, by platform, 2001-6
    • Table 20: Spontaneous consumer awareness of insurance providers, 2005
    • Table 21: Top ten general insurance advertisers, 2003-5
    • Table 22: Top 10 personal insurance competitors by GWP and market share, 2005
    • Table 23: GWP of selected fast growing personal insurance players ranked 11-20
    • Table 24: Split between personal and commercial business for the top 10 personal insurers, 2005
    • Table 25: Premium income compared to loss ratio, top 20 A&H insurers, 2004-5
    • Table 26: Expense ratio of the top 20 A&H insurers, 2004-5
    • Table 27: Premium income compared to combined ratio, top 20 A&H insurers, 2004-5
    • Table 28: Loss ratio compared to premium income for the top 20 motor insurers, 2004-5
    • Table 29: Expense ratio compared to premium income for the top 20 motor insurers, 2004-5
    • Table 30: Premium income compared to combined ratio for the top 20 motor insurers, 2004-5
    • Table 31: Loss and expense ratios compared to GWP for the top 20 pecuniary loss insurers, 2005
    • Table 32: Combined ratio compared to GWP for the top 20 pecuniary loss insurers, 2005
    • Table 33: Premium income compared to loss ratio, top 20 property insurers, 2004-5
    • Table 34: Expense ratio of the top 20 property insurers, 2004-5
    • Table 35: Premium income compared to combined ratio, top 20 property insurers, 2004-5
    • Table 36: 10 year trend personal general insurance forecasts, 2001-2011f
    • Table 37: Private motor market GWP by line, 2001-2011f
    • Table 38: Personal pecuniary loss GWP, 2001-11
    • Table 39: Forecast of individual accident and health GWP, 2001-11
    • Table 40: Forecast of household GWP, 2001-11f
  • List of Figures
    • Figure 1: Soft market conditions were evident in many lines in 2005
    • Figure 2: Soft market conditions were evident in many lines in 2005
    • Figure 3: The private motor market declined in 2005
    • Figure 4: While accident & health and household insurance have grown since 2001, the private motor market has stagnated
    • Figure 5: The underwriting profit of the general insurance market deteriorated in 2005 as the market slipped off its peak
    • Figure 6: The group accident and health sector picked up in 2005, recording strong GWP growth
    • Figure 7: Individual and group accident and ' other' accident and health business GWP fell in 2005
    • Figure 8: The accident and health underwriting result declined in 2005, but the market still returned a comfortable profit
    • Figure 9: Both private and commercial motor GWP continued to decline and have stagnated since 2001
    • Figure 10: The non-comprehensive sector leads the private motor market' s GWP decline
    • Figure 11: Motor underwriting loses increased in 2005
    • Figure 12: Private motor continued its slide into unprofitability in 2005, however, the current cycle is not as steep as previous cycles
    • Figure 13: Pecuniary loss is a profitable line, and the profit recorded in 2005 is near the record for the decade
    • Figure 14: Commercial property GWP declined in 2005, having slowed significantly in 2004
    • Figure 15: Profits fell slightly in 2005, as the effect of increased competition began to have an impact
    • Figure 16: The household insurance market recorded an impressive underwriting result in 2005
    • Figure 17: Corporate partnerships continue to win market share, leading to a decline in the broker channel, while the direct channel has stagnated in 2005
    • Figure 18: Corporate partnerships have increased over the last five years taking business away from many other distribution channels
    • Figure 19: Most motor insurance is arranged by phone but the Internet is rapidly growing in importance
    • Figure 20: The influence of the phone and the Internet have increased at the expense of face-to-face distribution in the household sector
    • Figure 21: Direct players dominate in terms of spontaneous consumer awareness
    • Figure 22: Norwich Union Direct spend the most on general insurance advertising in 2005
    • Figure 23: The top 10 personal lines insurers accounted for 54.5 per cent of the market in 2005
    • Figure 24: Four of the companies ranked 11-20 experienced fast growth in personal lines in 2005
    • Figure 25: Six of the top personal lines insurers in 2005 also had large commercial books, while four of the 10 were purely personal insurers
    • Figure 26: Many PMI players in the accident and health sector recorded an increase in their loss ratio
    • Figure 27: Expense ratio changes varied in the accident and health sector in 2005, but many PMI providers' ratios deteriorated slightly
    • Figure 28: Softening market conditions clearly affected the loss ratio of the top motor insurers
    • Figure 29: Most motor insurers saw only relatively small changes to their expense ratios in 2005
    • Figure 30: The four largest motor insurers have combined ratios below the top 20 average
    • Figure 31: Pecuniary loss insurers generally have low loss ratios, but expense ratios vary by line of business
    • Figure 32: On average property insurers increased premium income in 2005, but also saw their loss ratios rise
    • Figure 33: With the exception of a few companies like Lloyds TSB, NIG and Ecclesiastical, most property insurance providers saw expense ratios rise in 2005
    • Figure 34: Key to the relative importance of forecast variables
    • Figure 35: The private motor market is forecast to achieve strong GWP growth between 2006 and 2011
    • Figure 36: Factors affecting the private motor market , 2006-2011
    • Figure 37: Strong growth is forecast for private motor GWP after 2006
    • Figure 38: The personal pecuniary loss market would grow to a value of £7.3 billion by 2011, if it grows in line with historical trends
    • Figure 39: Key variables influencing GWP in the individual accident and health market, 2006-11
    • Figure 40: Growth in the individual accident and health market is slow between 2007 and 2008
    • Figure 41: Key variables influencing GWP in the household insurance market, 2006-11
    • Figure 42: Competition and changes in product distribution place downward pressure on premium rates during 2006 and 2008