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March 10, 2008 10:32 ET

Get a Deep Insight into the UK Household Insurance Market

LONDON, UNITED KINGDOM--(Marketwire - March 10, 2008) - Reportlinker.com announces that a new market research report related to the Financial services industry is available in its catalogue.

UK Household Insurance 2007

This report offers a comprehensive analysis of the UK household insurance market in 2007,incorporating market, customer and competitor analysis and forecasts of market growth and profitability.

Market profitability and size in GWP Customer purchasing trends and distribution trends Forecasts of market size and profitability until 2012.

Competition remained high in the property insurance market in 2006. This has had a negative impact on premium income growth, which has slowed in recent years. AXA recorded a particularly strong growth performance in 2006 which meant the insurer moved a place higher in terms of market position. While the face-to-face platform has decreased in size over the last five years, the number of consumers purchasing their household policies by telephone or online has increased.

Understand key factors influencing customer purchasing trends Understand the future of this market in terms of market growth and underwriting profitability Benchmark yourself against your competitors in terms of market share and performance ratios.

Overview 1

Catalyst 1

Summary 1

Executive Summary 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

Banks and building societies regained market share in the distribution of household insurance in 2006 2

Spending on insurance advertising contracted in 2006, but brand recognition remains strong for the largest insurers 2

Consumers have shifted their purchasing patterns towards the internet 2

The internet continued to gain market share in motor and household insurance in 2006 2

Online consumers are more price-conscious than consumers buying via other platforms 2

The direct channel remains the single largest route to market for personal insurance in the UK 3

The direct channel continued to distribute about two fifths of private motor insurance in 2006 3

Household insurance gross written premiums distributed through the direct channel contracted by one percentage point in 2006 3

AIG restructured its UK operations in 2007 and set up a direct arm called AIG Direct 3

Brokers maintained market share in home insurance, but their share in motor insurance declined in 2006 3

The broker channel's share of the motor insurance market declined by one percentage point in 2006 3

Distribution of household insurance by brokers remained steady at 24% of the market in 2006 3

Activity in the broker channel has been centered on M&A deals, the largest of which involved the AA 4

Banks dominate the distribution of household cover but remain small in motor insurance 4

Banks remained only minor players in motor insurance distribution in 2006, accounting for 6% of GWP 4

Almost a third of all household GWP was arranged through the bank channel in 2006 4

HSBC renewed its partnership with Norwich Union in 2007 4

Brandassurers have become significant players in the distribution of personal lines 5

Affinity groups and retailers increased their share of the motor insurance market in 2006 5

Brandassurers accounted for an estimated 15% of the home insurance distributed in 2006 5

Tesco launched an aggregator website in 2007, heightening competition among price comparison sites 5

Brokers' share of personal insurance distribution will decline as other channels increase their share 5

Banks, partnerships and direct insurers are predicted to gain market share in motor insurance 5

The distribution of home insurance will continue to move away from the broker channel 6

Table of Contents 7

Table of figures 8

Table of tables 9

Personal Insurance Distribution Dynamics 10

Introduction 10

Distribution of personal lines insurance shifted towards partnerships with banks and brands in 2006 10

The partnership channel gained market share from brokers in motor insurance in 2006 10

Banks and building societies regained market share in the distribution of household insurance in 2006 12

Aggregators are becoming a force in personal insurance distribution, intensifying competition in most channels 14

In travel and pet insurance, brandassurers have grown at the expense of traditional competitors 14

The proportion of travel insurance sold through the travel trade has continued to fall 14

Pet insurance is increasingly distributed by brandassurers and direct writers rather than vets and welfare groups 15

The top 10 home and motor insurance providers in 2006 included a range of distribution channels 15

Direct insurers form the bulk of the largest private motor and household insurance distributors 15

Bancassurers accounted for only two of the top 10 distributors 15

The AA and Swinton were the only brokers to rank in the top 10 in 2006 15

Tesco's highly successful general insurance business has secured brandassurers a place in the top 10 16

Spending on insurance advertising contracted in 2006, although brand recognition remains strong for the largest direct insurers 17

Direct Line has maintained its position at the forefront of consumers' awareness of insurance providers 17

Increases in marketing budgets were rare among the top 10 advertisers in 2006 19

In 2006, the top 10 advertisers reduced their spending by Pounds Sterling 28 million overall 19

In defiance of the market trend in 2006, three of the largest insurance advertisers increased spending 19

RIAS joined the top 10 in 2006 by increasing its advertising spend by 36.9% 19

Both RBSI subsidiaries in the top 10 increased advertising spending in 2006 20

The majority of general insurance advertisers scaled back their advertising spending in 2006 20

BUPA, the AA, Lloyds TSB and Saga also scaled back advertising in 2006, albeit to a lesser degree 20

Personal Insurance Consumers 22

Introduction 22

The internet continued to gain market share in 2006 in motor and household insurance 22

New sales from online sources grew strongly in household and motor in 2006 22

The telephone remained the largest platform for arranging a motor policy in 2007, but the internet platform is growing fast 24

The telephone and face-to-face platforms have been declining steadily among motor insurance consumers 24

More consumers are turning to the internet to arrange their motor policies 24

Face-to-face arrangements of household insurance policies continue to decline in favor of phone and internet 26

Face-to-face distribution of household insurance has been declining for several years 26

The number of consumers arranging household insurance online or over the telephone grew in 2007 26

Consumers' insurance purchasing behavior varies by age and income 28

The internet is most popular among younger consumers as a platform for purchasing motor and household insurance 28

Arranging home or motor insurance over the telephone remained the most popular option for consumers, regardless of age 29

The face-to-face platform was most popular among older consumers in 2007 31

The face-to-face platform was most popular among low-income consumers 32

Affluent motor insurance consumers were the most likely to have purchased their insurance online in 2007 34

Arranging insurance over the telephone was popular at all income levels in 2007 35

Consumers' propensity for switching provider varies by platform used 37

More than a third of consumers who purchased their motor insurance online switched provider at renewal 37

Consumers purchasing their motor policies face-to-face, by phone or via post are unlikely to change provider 37

Consumers are more likely to switch if they purchase their household insurance online 39

Switching provider is more prevalent among younger consumers 41

Motor insurance consumers become less likely to change their provider as they age 41

The loyalty of household insurance consumers also increases with age 43

Online consumers are more price-conscious than consumers buying via other platforms 44

Consumers purchasing a motor policy via the internet are more likely to be motivated by cheaper quotes than others 44

Online household insurance consumers show greater price sensitivity than consumers using other platforms 46

Direct Insurance 49

Introduction 49

The direct channel remains the single largest route to market for personal insurance in the UK 49

The direct channel continued to distribute two fifths of private motor insurance in 2006 49

Household insurance GWP distributed through the direct channel contracted by one percentage point in 2006 49

Direct writers' dominant position was supported by large advertising budgets in 2006 50

Direct insurers spent 60% of their advertising budget on motor insurance in 2006 50

Direct insurers spent over 50% of their advertising budget on television campaigns in 2006 52

Direct Line increased its insurance advertising spending enough to become the top advertiser in 2006 54

Direct Line's advertising investment has given the firm superior brand recognition 56

Direct Line has spoken out against aggregators and in favor of buying direct 57

Direct Line warned consumers against aggregators in 2007 and highlighted the benefits of buying direct 57

RBSI brands other than Direct Line are available through Tesco's aggregator 57

Most direct insurers make use of aggregators in distributing their policies 57

AIG restructured its UK operations in 2007 and set up a direct arm 59

Composite insurer AIG consolidated its brands and insurers in 2007 and established AIG Direct 59

A panel approach could give AIG a crucial edge in competitive markets 59

Brokers and Intermediaries 60

Introduction 60

In 2006, brokers maintained market share in home insurance, but their share in motor insurance declined 60

The broker channel's share of the motor insurance market declined by one percentage point in 2006 60

Distribution of household insurance by brokers remained steady at 24% of the market in 2006 60

Brokers have fought back against other channels by increasing advertising spending 61

Brokers increased advertising spending on insurance products by 38.4% in 2006 61

Direct mail remains the most important medium for brokers, although television is gaining ground 63

RIAS became the largest broker advertiser in 2006, narrowly outspending the AA 65

The AA maintained its lead over other brokers, the majority of which lack widespread brand awareness 66

Activity in the broker channel has been almost exclusively centered on M&A deals 68

The merger of the AA and Saga could have significant implications for the broker channel 68

Personal lines brokers were also involved in consolidation in 2007, although commercial brokers were more active 68

New and established brokers have significant personal insurance growth targets 69

Castle Cover began trading in 2006 and aims to write Pounds Sterling 100 million in GWP within five years 69

Swinton has announced growth plans for its personal lines business 69

The Budget Group has set the target of reaching Pounds Sterling 1.25 billion in GWP by 2010 69

Banks and Building Societies 71

Introduction 71

Banks dominate the distribution of household cover, but their share in motor insurance remains small 71

Banks remained only minor players in motor insurance distribution in 2006, accounting for 6% of GWP 71

Almost one third of all household GWP was arranged through the bank channel in 2006 71

Bancassurers devote their advertising budgets to household products using direct mail 72

The top 10 bancassurers increased spending on most insurance products in 2006 72

Due to bancassurers' large established customer bases, direct mail remained their preferred advertising option 74

In 2006, Lloyds TSB continued to be the bancassurer that spent the most on personal insurance advertising 76

Despite decreasing its marketing effort in 2006, Halifax became the most recognized bancassurer in 2007 77

Some banks are stepping up their involvement in the distribution of personal insurance 79

HSBC renewed its partnership with Norwich Union in 2007 79

Alliance & Leicester re-entered the motor market in 2007, relaunching its product with a new insurer 79

Santander, which owns Abbey in the UK, applied to set up two new insurance vehicles in the UK in 2007 79

Lloyds TSB and Nationwide will compete on an aggregator for the first time 80

Affinity Groups and Retailers 81

Introduction 81

Brandassurers have become significant players in the distribution of personal insurance lines 81

In 2006, affinity groups and retailers increased their share of the motor insurance market to 18% 81

Brandassurers distributed an estimated 15% of home insurance in 2006 81

Brandassurers mainly advertise motor insurance by television, but cut back on spending in 2007 82

The top brandassurers reduced their advertising spending by 26.7% in 2006 to Pounds Sterling 24.5 million 82

The top affinity brands and retailers spent more than half of their advertising budgets on motor insurance in 2006 83

Brandassurers cut back spending on most media in 2006, with outdoor and television media suffering the most 84

Tesco increased advertising expenditure by 20.1%, becoming the largest brandassurer advertiser in 2006 86

Tesco's marketing outlays have secured the firm a large brand presence in the insurance market 87

Affinity partnerships have branched out into aggregators 89

Tesco launched an aggregator website in 2007, heightening competition among price comparison sites 89

Other brands have become interested in setting up aggregators as well 89

Most affinity deals announced in 2007 were small, but some existing partnerships have strong growth targets 90

Some existing partnerships announced strong growth targets in 2007 90

A few new affinity partnerships were announced in 2007 91

Car manufacturers and dealers have figured prominently in affinity deals 91

Future Decoded 93

Introduction 93

Banks, partnerships and direct insurers are predicted to gain market share in the motor insurance market 93

The direct channel will continue to dominate the motor insurance market, although its share will be relatively stable 93

Banks are expected to grow their market share, reflecting individual banks' strong growth targets 93

The proportion of motor insurance GWP distributed through the partnership channel will grow as insurers revitalize existing deals 93

Brokers will continue to lose market share to other channels 93

Company staff and other agents will retain approximately the same market distribution share 94

The distribution of home insurance will continue to move away from the broker channel 95

Banks and building societies' share of the market will rise marginally due to investments in alternative distribution platforms 95

Direct insurers will remain largely stable in the market 95

Affinity partnerships will increase to 17% of GWP by 2011 as more brandassurers offer home cover 96

Brokers' home insurance market share will continue to contract in the forecast period 96

Company staff and other agents' share of the market will decline to 3% 96

The internet will grow as a distribution platform at the expensive of more traditional outlets 98

The proportion of all motor and household insurance sales that the internet accounts for is growing 98

New sales will also see strong growth in internet distribution 99

The internet's share of new motor insurance sales is forecast to grow by around 21 percentage points by 2011 99

The proportion of new household insurance sales conducted online is also forecast to grow steadily until 2011 99

Aggregators' share of the private motor and household markets is expected to grow 100

APPENDIX 102

Definitions 102

Premium income measures 102

Earned premiums 102

Gross Premium 102

Net Premium 102

Written premiums 102

Other definitions 102

Channel 102

Platform 102

Direct insurer/writer/channel 102

Brokers 102

Bancassurers 103

Brandassurers 103

Methodology 103

Primary and secondary research 103

Top 10 distributor estimates 103

Distribution estimates and forecast methodology 103

Advertising and marketing spend data 104

Ipsos MORI methodology and contacts 104

Sample design 104

Further reading 105

Ask the analyst 105

Datamonitor consulting 105

Disclaimer 105

List of Tables

Table 1: Motor insurance GWP distribution by channel, 2002-06 11

Table 2: Household insurance GWP distribution by channel, 2002-06 13

Table 3: Top 10 home and motor insurance distributors, 2006 17

Table 4: Overall personal lines insurance brand awareness, H1 2007 19

Table 5: Top 10 personal general insurance advertisers, 2005-06 21

Table 6: Datamonitor estimates of proportion of new sales transacted online in private motor and household, 2005-07 23

Table 7: Distribution of private motor insurance, by platform, 2003-07 25

Table 8: Distribution of household insurance, by platform, 2003-07 27

Table 9: Consumers buying motor and household insurance via the internet, by age group, 2005-07 29

Table 10: Consumers buying motor and household insurance by telephone, by age group, 2005-07 30

Table 11: Consumers buying motor and household insurance face-to-face, by age group, 2005-07 32

Table 12: Consumers buying motor and household insurance face-to-face, by income, 2005-07 33

Table 13: Consumers buying motor and household insurance via the internet, by income, 2005-07 35

Table 14: Consumers buying motor and household insurance by telephone, by income, 2005-07 36

Table 15: Propensity to switch motor provider and likelihood of getting other quotes, by distribution platform, 2007 39

Table 16: Propensity to switch household provider and likelihood of getting other quotes, by distribution platform, 2007 41

Table 17: Private motor retention rates by age, 2007 42

Table 18: Household insurance retention rates by age, 2007 44

Table 19: Motivations for taking out a motor insurance policy, by distribution platform, 2007 46

Table 20: Motivations for taking out a new household insurance policy, by distribution platform, 2007 48

Table 21: The direct channel's share of motor and household insurance, 2002-06 50

Table 22: Top 10 direct insurers' advertising spend by product, 2004-06 52

Table 23: Top 10 direct insurers' advertising spending by medium, 2004-06 54

Table 24: Top 10 direct insurers' advertising spend, 2004-06 55

Table 25: Direct insurers' spontaneous brand awareness, 2007 57

Table 26: The broker channel's share of motor and household insurance, 2002-06 61

Table 27: Top 10 brokers' advertising spend by product, 2004-06 63

Table 28: Top 10 brokers' advertising spend by medium, 2004-06 64

Table 29: Top 10 broker advertisers, 2004-06 66

Table 30: Top brokers' spontaneous brand awareness 67

Table 31: Banks and building societies' share of motor and household insurance, 2002-06 72

Table 32: Top 10 bancassurers' advertising spend by product, 2004-06 74

Table 33: Top 10 bancassurers' advertising spend by medium, 2004-06 75

Table 34: Top 10 bancassurance advertisers, 2004-06 77

Table 35: Top 10 bank and building societies' spontaneous brand awareness, 2007 78

Table 36: The partnership channel's share of motor and household insurance, 2002-06 82

Table 37: Top affinities and retailers' advertising spend by product, 2004-06 84

Table 38: Top affinities and retailers' advertising spend by medium, 2004-06 85

Table 39: Top affinity groups and retailers' advertising spend, 2004-06 87

Table 40: Top retailers and affinities' spontaneous brand awareness, 2007 88

Table 41: Private motor insurance distribution forecast by channel, 2007-11 95

Table 42: Household insurance distribution forecast by channel, 2007e-11f 97

Table 43: Online sales as a proportion of total sales forecast, 2007e-11f 99

Table 44: New online sales as a proportion of all new sales forecast, 2007e-11f 100

List of Figures

Figure 1: The partnership channel has increased its share of the private motor market in recent years 11

Figure 2: Banks increased their share of the household insurance market in 2006 13

Figure 3: The top 10 insurance providers distributed just under half the total home and motor premium income in 2006 16

Figure 4: Although both RBSI direct brands enjoy high consumer awareness, Direct Line remains the clear leader 18

Figure 5: The majority of the largest insurance advertisers reduced advertising spending in 2006 21

Figure 6: Internet sales are rapidly growing in motor while online home insurance sales have lagged 23

Figure 7: The percentage of consumers arranging their motor insurance online has been increasing steadily since 2003 25

Figure 8: Phone remains the largest distribution platform for household insurance in 2007 27

Figure 9: Younger consumers were most likely to purchase home or motor insurance online in 2007 28

Figure 10: Consumers of every age group remain most comfortable arranging their insurance by telephone 30

Figure 11: The proportion of motor insurance bought face-to-face increased with age 31

Figure 12: The face-to-face platform declined in popularity among more affluent consumers in 2007 33

Figure 13: Consumers in the highest income brackets were most likely to buy motor and household insurance via the internet in 2007 34

Figure 14: Use of the telephone to arrange household insurance rose slightly relative to household income in 2007 36

Figure 15: Consumers purchasing their motor insurance online were more likely to change their insurance provider in 2007 38

Figure 16: Consumers are most likely to switch from an insurance provider when they purchase their household insurance online in 2007 40

Figure 17: Older consumers were more likely to stay with their current providers in 2007 42

Figure 18: Consumer loyalty increased with age among household insurance consumers in 2007 43

Figure 19: Obtaining a cheaper quote was the most common reason for choosing a provider across all distribution platforms in 2007 45

Figure 20: There is a greater price awareness among consumers who purchase their household insurance online in 2007 47

Figure 21: Direct players are a significant presence in both the home and motor markets 50

Figure 22: Direct insurers continue to spend most of their advertising budgets on just two lines: motor and household 51

Figure 23: In 2006, insurers continued to spend the majority of their advertising budgets on television campaigns 53

Figure 24: Direct Line spent the most on insurance advertising in 2006 55

Figure 25: RBSI's advertising investments have paid off in terms of customer awareness 56

Figure 26: A number of the top direct insurance brands are on the Tesco Compare website 58

Figure 27: Brokers maintained their market share in household insurance, but their share in motor insurance continued to decline 61

Figure 28: Broker advertising spending was heavily concentrated on motor and household insurance 62

Figure 29: Television advertising became more important for brokers in 2006 as they sought to reach new consumers 64

Figure 30: RIAS and the AA accounted for almost half of the top 10 brokers' advertising spend in 2006 65

Figure 31: The AA continues to be the most recognizable broker due to its years of brand investment 67

Figure 32: Banks maintained a large portion of household GWP, but failed to increase their share of the motor market 72

Figure 33: In 2006, bancassurers continued to spend the majority of their advertising budget on household insurance 73

Figure 34: Direct mail remained the preferred marketing method for bancassurers in 2006 75

Figure 35: Lloyds TSB spent by far the most on general insurance advertising in 2006 76

Figure 36: Halifax was the most recognized bancassurance brand in 2007 78

Figure 37: Affinity partnerships accounted for 18% of motor and 15% of home insurance GWP in 2006 82

Figure 38: Brandassurers spent over half of their advertising budget on motor insurance in 2006 83

Figure 39: Television and direct mail were the favored forms of advertising for brandassurers in 2006 85

Figure 40: Tesco spent roughly twice as much on advertising as its closest rival British Gas in 2006 86

Figure 41: Other retailers only have a fraction of Tesco's brand presence in the insurance market 88

Figure 42: Tesco was one of the first affinities to launch an aggregator website 90

Figure 43: Brokers are expected to continue to lose market share in the future 94

Figure 44: Banks will continue to dominate household insurance distribution 97

Figure 45: The proportion of motor and home insurance bought on the internet is forecast to grow quickly 98

Figure 46: New online sales as a proportion of all new sales will rise steadily over the next five years 100

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UK Household Insurance 2007

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