Payment Cards in France 2007

Overview 1
Catalyst 1
Summary 1
Executive Summary 2
The UK private motor insurance market started to harden at the end of 2006 2
Private motor insurance GWP contracted by 0.9% in 2006 as the market only hardened late in the year 2
Underwriting losses expanded in 2006, driven by high costs and lower net revenue 2
Distribution of personal lines insurance shifted towards partnerships with banks and brands in 2006 2
The partnership channel gained market share from brokers in the motor insurance market in 2006 2
The telephone remained the largest platform for arranging a motor policy in 2007 but the internet platform is growing fast 2
Conditions remained competitive in 2006, leading some to exit the market 3
The competitive nature of the private motor market caused some insurers to exit the market 3
Market leader RBSI maintained its grip on the private motor market in 2006 3
The market is forecast to reach �12.5 billion by 2012 and regain profitability in 2009 4
The UK private motor insurance market is forecast to be worth �12.5 billion in 2012 4
The private motor insurance market is forecast to reach profitability in 2009 4
Table of Contents 5
Table of figures 6
Table of tables 7
Market Context 8
Introduction 8
The UK private motor insurance market started to harden at the end of 2006 and grew in 2007 8
The market hardened late in 2006, which led to strong gains in premium income for 2007 8
UK private motor insurance GWP increased to an estimated �10.1 billion in 2007 as the market hardened 8
Private motor insurance GWP contracted by 0.9% in 2006 as the market only hardened late in the year 8
The comprehensive and non-comprehensive segments both declined in 2006, but rebounded in 2007 9
Comprehensive motor GWP suffered the worst contraction of the three private lines in 2006 9
Non-comprehensive premium income suffered as fewer motorists chose this cover 10
The motorcycle market was the only part of private motor to increase in 2006, although it contracted in 2007 12
Late rises in premium rates and low growth in private car numbers depressed GWP in 2006 14
Private motor insurance premium rates recovered late in 2006 and have climbed in 2007 14
Comprehensive premium rates grew towards the end of 2006 and continued to increase in 2007 14
Non-comprehensive premium rates increased significantly in 2006, but trailed the comprehensive market in 2007 14
The UK private vehicle parc continued to grow slowly in 2006 18
Private car numbers increased in 2006, although the rate of growth has slowed 18
New registrations for private cars declined in 2006 18
Although the private car parc is aging it remains mostly modern in composition 20
Motorcycle numbers continue to climb, although growth has slowed 22
Underwriting losses expanded in 2006, driven by high costs and lower net revenue 23
The private motor underwriting result deteriorated in 2006 23
Increases in total outgoings were driven by higher commissions and reserving, despite lower claims costs 25
Commissions and expenses rose 3.1% in 2006, while insurers reserved more than they released 25
Net claims costs fell in 2006, moderating the increase in total outgoings 26
Claims inflation continue to plague the market, but accident and theft rates have fallen 27
Overall claims inflation increased significantly in 2006 27
Bodily injury claims are more expensive than other claims 28
Falling road traffic accident rates will have given insurers some respite on their claims bills 30
Road traffic accident numbers have declined over the last nine years 30
Road traffic accidents have declined even as car numbers have increased, representing a fall in frequency 31
Casualty rates have fallen steadily, mirroring the decline in road traffic accidents in 2006 33
Theft rates continue to fall, representing a positive trend for private motor insurers 34
A number of initiatives aimed at cost savings were undertaken in 2006 and 2007 36
The IFB has been very active in the investigation of professional fraud over the year it has been in operation 36
The tightening up of MID requirements should drive down uninsured driving leading to savings for insurers 37
Insurers remain divided over whether rehabilitation offers real savings on claims costs 37
With the arrival of Copart, recycled parts can assist insurers in curbing repair costs 38
Insurers have pushed online distribution of motor insurance certificates and could save up to �11m a year 38
Commercial motor GWP declined in 2006, but the market increased its underwriting profit 38
The commercial motor market contracted slightly more than the private market in 2006 38
The total motor market's underwriting loss increased marginally to �204m in 2006 39
Despite being in a soft market, commercial motor improved its profitability in 2006 41
Customer Focus 44
Introduction 44
Distribution of personal lines insurance shifted towards partnerships with banks and brands in 2006 44
The partnership channel gained market share from brokers in the motor insurance market in 2006 44
Aggregators have become important to motor insurance distribution 45
The telephone remained the largest platform for arranging a motor policy in 2007 but the internet platform is growing fast 46
The telephone and face-to-face platforms have been declining steadily 46
More consumers are turning to the internet to arrange their motor policies 46
Retention rates vary by age of consumer and platform used to arrange insurance 48
The majority of motor consumers will stay with the same provider at the time of renewal 48
More than a third of consumers who purchased their motor insurance online switched provider at renewal 50
Consumers purchasing their motor policies face-to-face, by phone or via post are unlikely to change provider 51
Switching providers is more prevalent among younger consumers 52
Price remained the main reason for taking out a motor policy across platforms and ages 54
Consumers purchasing a policy via the internet are more likely to be motivated by cheaper quotes than others 54
Consumers over the age of 55 are less sensitive to price than younger consumers 56
The way in which consumers seek information about motor insurance varies relative to age 58
Previous experience is the most popular source of information and is used more as a consumer gets older 58
Younger consumers are more likely to use web sources 59
Television advertisements are used by 14% of consumers overall 59
Mailshots, brochures and broker advice are mainly used by older people 59
Advertising for motor insurance products remained dominated by the television campaigns of direct insurers in 2006 62
Motor insurance advertising increased by 2.3% in 2006 to almost �200 million 62
Advertising is dominated by insurers, but brokers narrowed the gap in 2006 62
Most of the top 10 motor advertisers in 2006 are direct insurers 65
The spend of the top 10 grew slightly in 2006, driven mainly by the substantial increases of four motor insurance advertisers 65
The top 10 motor advertisers focus on television advertising, reflecting the need for direct insurers in particular to build up brand awareness 66
Most of the largest motor advertisers spent the majority of their budgets on television advertising in 2006 66
Direct mail advertising is used by most of the top 10 to complement their television campaigns 66
Press, outdoor and radio advertising were used sparingly by the top 10 motor insurance advertisers in 2006 67
The smaller advertising budgets of advertisers ranked 11-20 were more evenly split between television and direct mail 68
The list of advertisers ranked 11-20 contains a more varied mix of providers 68
Direct mail was the most favored medium among advertisers ranked 11-20 68
Television advertising was also very important to competitors ranked 11-20 in 2006 69
Advertisers ranked 11-20 spent smaller amounts on marketing in radio, the press and outdoor 69
Television remains the most important medium for motor insurance providers 71
Direct mail remains an important advertising medium, having increased as a proportion of motor insurers budgets 72
Direct Line remains the leader in brand awareness in 2007 73
Competitive Dynamics 77
Introduction 77
Two insurers exited the private motor market in 2006 and 2007 77
Provident sold its motor book to GMAC in May 2007 77
Legal & General ceased underwriting new private motor policies in 2006 77
The top 10 private motor insurers lost market share in 2006, although the market remained highly consolidated 77
Market leader RBSI maintained its grip on the private motor market in 2006 77
The top 10 private motor insurers lost market share in 2006 79
A number of the largest private motor insurers grew market share in 2006, despite competitive conditions 81
Direct Line's GWP remained stable in 2006 81
Royal & SunAlliance raised its market share and increased premium income in 2006 81
Fortis grew its private motor insurance market share in 2006 due to an increase in policy numbers 82
NIG grew its presence in the motor insurance market, gaining market share and GWP in 2006 82
Competitive conditions resulted in some top 10 players losing market share in 2006 82
The market leader, Norwich Union, lost the most market share of the top 10 in 2006 82
Churchill lost market share in 2006 as its non-comprehensive book contracted severely 82
Zurich's private motor GWP declined in 2006, leading to a contraction in market share 83
CIS's market share contracted in 2006 due to lower premium income 83
Two players, UKI and esure, saw no change in market share between 2005 and 2006 83
esure joined the top 10 private motor insurers despite decreasing private motor premium income 83
UKI saw its market share increase in 2006, though premium income declined 83
Mid-tier private motor insurers retained market share overall in 2006 84
Only a few private motor insurers in the 11-20 bracket managed to increase market share in 2006 84
AXA's private motor book rebounded in 2006 increasing by a substantial 43.5% in GWP terms 84
The NFU Mutual experienced modest premium income growth in 2006 85
Aioi Motor & General increased market share and premium income in 2006 85
Five mid-tier insurers lost market share in 2006 85
LV's market share declined by 0.3 percentage points in 2006 as it allowed premium income to contract 85
Provident's book continued to contract in 2006 as it sought to exit the UK private motor market 85
Groupama's private motor insurance book declined in 2006 86
HSBC experienced a decline in its private motor account in 2006 86
Allianz's GWP declined by more than 10% in 2006 86
Two mid-tier insurers saw minor declines in premium income but maintained market share in 2006 86
Highway's private motor book experienced a contraction in 2006, but maintained market share 86
MMA's market share remained stable although GWP reduced by 3.3% in 2006 87
Most of the top 10 insurers write some non-comprehensive and commercial business 89
Comprehensive premium income dominated the books of the largest private motor insurers 89
Six of the top 10 private motor insurers also write commercial motor insurance 91
The largest private motor insurers also tend to be the largest total motor insurers 93
The average loss ratio among the top 10 UK motor insurance providers declined in 2006 with AXA, Norwich Union and Churchill recording the biggest improvements 94
In 2006, the average loss ratio of the top 10 UK motor insurers fell by 3.3 percentage points to 71.1% 94
AXA, Norwich Union and Churchill recorded the strongest loss ratio reductions 94
Four insurers recorded loss ratio deterioration 95
The average expense ratio of the top 10 UK motor insurers declined by 0.7 percentage points in 2006, with Churchill, AXA, NIG and Royal & SunAlliance recording above-average reductions 97
The average expense ratio of the top 10 UK motor insurers declined by 0.7 percentage points in 2006 97
Churchill, AXA, NIG and Royal & SunAlliance recorded above-average expense ratio decline 97
Norwich Union, Zurich and NFU Mutual recorded the highest increases in their expense ratios 98
The average combined ratio of the top 10 motor insurers fell by four percentage points in 2006, with AXA and Churchill seeing significant declines 100
The average combined ratio of the top 10 motor insurers declined by four percentage points in 2006 100
AXA and Churchill recorded significant reductions in combined ratio in 2006 101
NIG, Direct Line and Zurich recorded combined ratio increases 101
Future Decoded 104
Introduction 104
Private motor GWP is forecast to reach �12.5 billion by 2012 under neutral market conditions 104
A hardening market in 2008 and 2009 should result in significant premium rate growth 104
The UK private motor insurance market is predicted to be worth �12.5 billion in 2012 105
The private motor insurance market is forecast to reach profitability in 2009 107
Under optimal conditions the private motor market will reach �12.9 billion by 2012 109
Less competition could allow for greater price increases in 2008 and 2009 109
The market will grow by over 10% in 2008 allowing it to reach a value of �12.9 billion in 2012 110
With less competitive pricing the market will produce three years of profits 112
In the pessimistic scenario GWP will only reach �12.4 billion in 2012 as competition keeps premium inflation down in 2008 114
More intense competition will keep premium rate increases low according to the pessimistic scenario 114
The private motor insurance market will only reach a value of �12.4 billion in 2012 in the pessimistic scenario 115
Underwriting losses will continue throughout the forecast period in the pessimistic scenario 117
The total motor market, under neutral conditions, will reach a value of �16.6 billion in 2012 119
The total motor market is forecast to grow at 4.3% a year in the forecast period 119
The total market is forecast to return an underwriting profit in 2008 121
APPENDIX 124
Supplementary data 124
New registrations of cars and light goods vehicles by taxation class 124
Definitions 125
Premium income measures 125
Earned premiums 125
Gross Premium 125
Net Premium 125
Written premiums 125
Other definitions 126
Channel 126
Direct insurer/writer 126
Brokers 126
Bancassurers 126
Brandassurers 126
Platform 126
2005-06 definitions for line of business 126
Motor 126
Total private motor 126
Total commercial motor 127
Private motor comprehensive 127
Private motor non-comprehensive 127
Motorcycle 127
Fleets 128
Commercial vehicles (non-fleet) 128
Pre-2005 definitions for lines of business 128
Motor 128
Methodology 129
Primary and secondary research 129
Market size 129
Changes in market size information 129
Market size methodology 129
Lloyd's players and underwriting result figures 129
Competitor data 130
CIS 130
GWP versus GEP reporting 130
Home-Foreign, overseas and facultative reinsurance business 131
Advertising statistics 131
Isis MORI methodology and contacts 131
Sample design 132
Further reading 132
Ask the analyst 133
Datamonitor consulting 133
Disclaimer 133
List of Tables
Table 1: UK private motor insurance premium income, 2002-06, (�m) 9
Table 2: Comprehensive/non-comprehensive split of the UK private car parc, 1996-2006e 12
Table 3: UK private motor insurance premium income by line of business 2002-07e, (�m) 13
Table 4: Average quarterly premiums for UK comprehensive and non-comprehensive insurance, 2002-07 17
Table 5: Cars licensed in Great Britain by body type, 1996-2006 18
Table 6: New private car registrations in Great Britain by body type as a percentage of the total private car parc, 2002-06 20
Table 7: Age composition of 2006 car parc, 2006 21
Table 8: Number of motorcycles and new registrations in Great Britain, 2002-06, (000s) 23
Table 9: UK private motor underwriting result, 1996-2006, (�m) 25
Table 10: Detailed private motor underwriting account in the UK, 2002-06, (�m) 26
Table 11: UK net claims as a proportion of total outgoings, 2002-06, (�m) 26
Table 12: Average motor claims costs, 2002-06, (�) 28
Table 13: UK Average claims cost of bodily injury claims notified two years previous, 2002-06, (�) 29
Table 14: Total number of road accidents in the UK, 1996-2006, (000s) 31
Table 15: Road traffic accidents relative to registered vehicles in Great Britain 1996-2006, (000s) 33
Table 16: Deaths, seriously and slightly injured casualties resulting from UK road traffic accidents, 2002-06 34
Table 17: Theft of and from motor vehicles in the UK, 1996-2006/7 36
Table 18: UK motor insurance premium income, 2002-06, (�m) 39
Table 19: UK motor insurance underwriting account 1996-2006, (�m) 41
Table 20: UK private and commercial motor underwriting results, 1996-2006, (�m) 43
Table 21: Motor insurance GWP distribution by channel, 2002-06 46
Table 22: Distribution of private motor insurance, by platform, 2003-07 48
Table 23: Private motor retention rates, 2003-07 50
Table 24: Propensity to switch motor provider and likelihood of getting other quotes, by distribution platform, 2007 52
Table 25: Private motor retention rates by age, 2003-07 54
Table 26: Motivations for taking out a motor insurance policy, by distribution platform, 2007 56
Table 27: Reasons for choosing current motor insurance policy by age, 2007 58
Table 28: Sources of information for motor policy, by age, 2007 62
Table 29: Advertisement spending by type of insurance provider, 2006 64
Table 30: Top 10 motor insurance advertisers, 2004-06 66
Table 31: Top 10 motor insurance advertisers' spend by media, 2006 68
Table 32: Motor insurance advertisers' spending by media, 2006 71
Table 33: Top 10 TV advertisers, 2006 72
Table 34: Top 10 direct mail advertisers, 2005-6 73
Table 35: Top 10 motor insurers by advertising spend and brand awareness of motor insurers, 2007 75
Table 36: Top 10 insurance providers by spontaneous recognition, 2007 76
Table 37: Top 10 UK private motor insurers' market share in 1996, 2005 and 2006 79
Table 38: Top 10 UK private motor insurers by market share, 2002-06 81
Table 39: Top 10 UK private motor insurers by premium income, 2002-06, (�000s) 84
Table 40: UK private motor insurers ranked 11-20 by market share, 2002-06 88
Table 41: UK private motor insurers ranked 11-20 by premium income, 2002-06, (�000s) 89
Table 42: Top 10 UK private motor insurers' comprehensive and non-comprehensive shares of total GWP, 2005-06, (�000s) 91
Table 43: Top 10 UK private motor insurers' GWP split by private and commercial, 2006, (�000s) 92
Table 44: Top 10 UK motor insurers' GWP split by private and commercial, 2006, (�000s) 94
Table 45: Change in premium income compared to change in loss ratio, top 10 UK motor insurers, 2005-06 97
Table 46: Change in premium income compared to change in expense ratio, top 10 UK motor insurers, 2005-06 100
Table 47: Change in premium income compared to change in combined ratio, top 10 UK motor insurers, 2005-06 103
Table 48: Key variables affecting private motor insurance GWP, neutral scenario, 2002-12f 105
Table 49: UK private motor insurance GWP forecast, neutral scenario, 2002-12f 107
Table 50: UK private motor insurance underwriting account forecast, neutral scenario, 2002-12f, (�m) 109
Table 51: Key variables affecting private motor insurance GWP, optimistic scenario, 2002-12f 110
Table 52: UK private motor insurance GWP forecast, optimistic scenario, 2002-12f 112
Table 53: UK private motor insurance underwriting account forecast, optimistic scenario, 2002 -12f, (�m) 114
Table 54: Key variables affecting private motor insurance GWP, pessimistic scenario, 2002-12f 115
Table 55: UK private motor insurance GWP, pessimistic scenario, 2002-12f 117
Table 56: UK private motor insurance underwriting account forecast, pessimistic scenario, 2002-12f, (�m) 119
Table 57: Total UK motor insurance GWP 2002-12f, neutral scenario, 2002-12f 121
Table 58: UK total motor insurance underwriting account, 2002-12f (�m) 123
Table 59: Cars and light goods vehicles registered by taxation class, 1996-2006, (000s) 125
List of Figures
Figure 1: The percentage of consumers arranging their motor insurance online in the UK has been increasing steadily since 2003 3
Figure 2: The top 10 UK insurers controlled more of the market in 2006 than in 1996 4
Figure 3: The UK private motor insurance market grew in 2007 as premium rates hardened 9
Figure 4: Fewer vehicles had non-comprehensive cover in the UK in 2006 11
Figure 5: The main UK private motor lines once again declined in 2006 before recovering in 2007 13
Figure 6: Both sectors of the UK private motor market experienced significant premium rate inflation in 2007 15
Figure 7: UK comprehensive premium rates increased significantly in 2007 16
Figure 8: New private cars in Great Britain have declined in number since 2002 19
Figure 9: Less than a third of the UK car parc was older than 12 years old in 2006 21
Figure 10: In Great Britain, growth in motorcycle numbers has been slowing since 2005 22
Figure 11: The UK underwriting result deteriorated sharply in 2006 24
Figure 12: Average motor claims costs have risen every year since 2002 in the UK 27
Figure 13: The average UK claims cost for bodily injury claims was higher than for other claim types in 2006 29
Figure 14: UK road accidents peaked in 1997 and have fallen ever since 30
Figure 15: Accidents in the UK have fallen despite a steady increase in the number of vehicles 32
Figure 16: Casualties continued to decline across all categories in 2006 34
Figure 17: Theft of and from motor vehicles continued to decline in 2006/7 35
Figure 18: Commercial motor was the weaker market in 2006 declining more than private motor 39
Figure 19: The UK motor insurance market reported a loss of �204m in 2006 40
Figure 20: The UK private and commercial motor underwriting results diverged after 2001 42
Figure 21: The partnership channel has increased its share of the private motor market in recent years 45
Figure 22: The percentage of consumers arranging their motor insurance online has been increasing steadily since 2003 47
Figure 23: Around three quarters of motor insurance consumers stay with the same company at renewal 49
Figure 24: Consumers purchasing their motor insurance online were more likely to change their insurance provider in 2007 51
Figure 25: Older consumers were more likely to stay with their current providers in 2007 53
Figure 26: Obtaining a cheaper quote was the most common reason for choosing a provider across all distribution platforms in 2007 55
Figure 27: Reputation was a factor more valued by older consumers than younger ones in 2007 57
Figure 28: Use of web-based materials was most common among young consumers in 2007 60
Figure 29: Most older consumers value previous experiences with providers in 2007 61
Figure 30: Insurers dominate advertising spend for motor insurance, but brokers' spend grew in 2006 63
Figure 31: Television remained the medium of choice for most of the top 10 advertisers in 2006 67
Figure 32: Television and direct mail account for almost 90% of spending by advertisers ranked 11-20 69
Figure 33: Spontaneous consumer awareness of motor insurers against advertising expenditure, 2006 74
Figure 34: The top 10 insurers controlled more of the market in 2006 than in 1996 78
Figure 35: Norwich Union remained the single largest insurer in the UK market in 2006 80
Figure 36: Insurers in the 11-20 segment showed very little difference in market share in 2006 87
Figure 37: None of the top 10 insurers wrote a substantial part of their business in the non-comprehensive market 90
Figure 38: Most of the top 10 UK private motor insurers also maintain a presence in the commercial market 92
Figure 39: The top 10 UK private insurers dominate the top motor rankings due to the size of their private books 93
Figure 40: While the average loss ratio of the top 10 UK motor insurers fell in 2006, NIG and Direct Line saw increases in their ratios 96
Figure 41: Norwich Union saw the biggest increase in private motor expense ratio in 2006 99
Figure 42: NIG saw the biggest increase in combined ratio in 2006 102
Figure 43: Private motor GWP is forecast to grow significantly in 2008 and 2009 106
Figure 44: Private motor is forecast to make a small profit in 2009 108
Figure 45: Less competition allows for a stronger rally in comprehensive premium income and higher private motor GWP in the optimistic scenario 111
Figure 46: In the optimistic scenario stronger premium growth results in three years of underwriting profits 113
Figure 47: In the pessimistic scenario, GWP growth is expected to be subdued from 2008 onwards 116
Figure 48: In the pessimistic scenario, the market fails to reach a profit in the forecast period 118
Figure 49: After four years of declines, the total motor market is expected to begin growing again in 2008 120
Figure 50: The UK motor market is forecast to be profitable for a total of four years starting in 2008 122
Figure 51: New cars and light goods have declined again as a proportion of the total parc 124