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KN66017 KEY NOTE INSURANCE MARKET (UK) APRIL 1997

ISBN 1-85765-683-0

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Table of Contents

Executive Summary

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TABLE OF CONTENTS

Executive Summary

Introduction

INSURANCE COMPANIES

LLOYD'S OF LONDON

INSURANCE BROKERS

LIFE INSURANCE

MEDICAL INSURANCE

MOTOR INSURANCE

MARINE AND AVIATION INSURANCE

HOUSEHOLD INSURANCE

NON-MOTOR INSURANCE

REINSURANCE

CONSUMER ATTITUDES

Insurance Companies

INTRODUCTION

STRATEGIC PARTNERING

ACQUISITIONS AND DISPOSALS

WHAT IS THE FUTURE FOR THE MUTUALS?

INTERNATIONAL RESTRUCTURING

NET PREMIUMS

INVESTMENTS

ADVERTISING

FAMILY EXPENDITURE

THE UK'S LARGEST INSURANCE COMPANIES

PROFILES OF MAJOR INSURANCE COMPANIES

FORECASTS

Table 2.1: Number of Authorised Insurance Companies and Their Employees, 1991-1995

Table 2.2: Net Premium of UK Insurance Companies Worldwide (£m), 1992-1996

Table 2.3: Net Premiums of UK Insurance Companies' Written in the UK (£m), 1992-1996

Table 2.4: Insurance Companies' Invested Funds and Net Income (£m), 1992-1996

Table 2.5: Location of Life and General Assets ( percent), 1992, 1993 and 1995

Table 2.6: Net Invisible Earnings from Insurance and Pension Funds (£m), 1992-1996

Table 2.7: Main Media Advertising Expenditure by Insurance Companies (£000), 1992-1996

Table 2.8: Family Expenditure on Insurance (£m), 1991-1994

Table: 2.9: The UK's Top Ten Insurance Companies - Net Premium Income Worldwide from General Insurance (£m), 1992-1995

Table 2.10: The UK's Top Ten Life Insurance Companies - Net Premium Income Worldwide from Long-Term Business (£m), 1992-1995

Table 2.11: Forecast Net Premium of UK Insurance Companies Worldwide (£m), 1997-2000

Lloyd's of London

INTRODUCTION

FORECASTS

Table 3.1: Lloyd's of London Global Results (£m), 1989-1993

Table 3.2: Lloyd's Profit Forecast For 1994/1995 Years of Account (£m), 1994 and 1995

Table 3.3: Lloyd's of London Annual Results (£000), 1992-1995

Table 3.4: Lloyd's of London's Market Capacity by Year of Account (£m and £000), 1991-1996

Insurance Broking

INTRODUCTION

THE INTERNATIONAL MARKET

THE CHANGING STRUCTURE OF THE WORLD'S INSURANCE BROKING INDUSTRY

LEADING UK INSURANCE BROKERS

UK COMPANY PROFILES

Table 4.1: World Top 10 Insurance Brokers ($m), 1993

Table 4.2: World Top 10 Insurance Brokers ($m), 1995

Table 4.3: World Top 10 Insurance Brokers ($m), December 1996

Table 4.4: Leading UK Insurance Brokers' Revenues from Broking and Other Income (£m), 1993-1995

Table 4.5: Leading UK Insurers' Results (£m), 1993-1995

Life Insurance

PENSIONS

Table 5.1: Worldwide Long-Term Insurance Net Premium Income, 1985-1996

Table 5.2: Sources of Overseas Premium Income (£m), 1991-1996

Table 5.3: Long-Term Business Income, Investments and Investment Income (£m), 1992-1996

Table 5.4: New Individual Linked, Non-linked and Industrial Branch Life Insurance in the UK (net premium £m), 1992-1996

Table 5.5: Number of New Policies in UK Individual Linked, Non-Linked and Industrial Branch Life Insurance in the UK (million), 1992-1996

Table 5.6: Number of New Policies in Personal Pensions (million and £000), 1992-1996

Table 5.7: Net Premium Income of Personal and Occupational Pension Schemes in Force (000 and £m), 1992-1996

Table 5.8: Payments to Policyholders (£m), 1992-1996

Medical Insurance

INTRODUCTION

PERMANENT HEALTH INSURANCE (PHI)

Table 6.1: Private Medical Insurance for Subscribers, Persons Covered, Subscriptions and Claims (000 and £m), 1989-1996

Table 6.3: Individual Permanent Health Insurance Policies (number of new policies and £m), 1991-1996

Motor Insurance

MOTOR THEFTS

DEVELOPMENTS IN THE MARKETPLACE

Table 7.1: UK Motor Underwriting Results for British Insurance Companies (£m), 1991-1996

Table 7.2: Motor Theft Claims (£m), 1991-1996

Table 7.3: Worldwide Motor Net Written Premium for British Insurance Companies (£m), 1993-1996

Marine and Aviation Insurance

INTRODUCTION

MARINE

AVIATION

SECTORS

LONDON'S RENEWED REPUTATION

AVIATION

Table 8.1: Institute of London Underwriters Revenue Figures (£m), 1992-1996

Table 8.2: Marine and Aviation Insurance Net Premium Income Earned by Lloyd's of London and Members of the Association of British Insurers (£m), 1990-1995

Table 8.3: Annual Tanker, Bulk and Combination Carrier and Other Losses (number of vessels and gross 000 tonnes), 1985-1996

Table 8.4: Lloyd's Aviation Market Net Premiums (£m), 1989-1995

Household Insurance

INTRODUCTION

SUBSIDENCE CLAIMS

Table 9.1: Number of Claims Arising from Domestic Burglaries in the UK (number and percent), 1990-1995

Table 9.2: Domestic Property Claims in the UK (£m), 1990-1995

Non-Motor Insurance

INTRODUCTION

WORLDWIDE NON-MOTOR UNDERWRITING

WORLDWIDE NON-MOTOR PREMIUM INCOME

UK NON-MOTOR PREMIUM INCOME

Table 10.1: Worldwide Non-Motor Underwriting Results from Members of the Association of British Insurers (£m), 1992-1995

Table 10.2: Worldwide Non-Motor Premium Income Earned by Lloyd's of London (£m), 1992-1995

Table 10.3: UK Non-Motor Premium Income (£m), 1992-1995

Reinsurance

INSURANCE

THE MARKET IN EARLY 1997

Table 11.1: World's Ten Largest Reinsurers Based on 1995 Net Premiums ($), 1996

Consumer Attitudes

INTRODUCTION

ATTITUDES BY SEX AND SOCIAL CLASS

ATTITUDES BY AGE

REGIONAL VARIATIONS

CLAIMS EXPERIENCE

Table 12.1: Attitudes Towards Insurance and Insurance Companies by Sex and Social Class ( percent), 1997

Table 12.2: Attitudes Towards Insurance and Insurance Companies by Age ( percent), 1997

Table 12.3: Consumer Experience of the Claims Process by Sex and Social Class ( percent), 1997

Table 12.4: Consumer Experience of the Claims Process by Age Group ( percent), 1997

Further Sources

ASSOCIATIONS

PERIODICALS

DIRECTORIES

GENERAL SOURCES

HBI UK INFORMATION SOURCES

GOVERNMENT PUBLICATIONS

OTHER SOURCES

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EXECUTIVE SUMMARY

The UK insurance industry is a major employer, pensions provider and earner of foreign income. In 1996, UK insurance companies had a worldwide premium income of £95.6bn, of which around £92bn was earned by those companies that are members of the Association of British Insurers (ABI). Lloyd's, in its latest year of account, earned £5.89bn in 1993.

The overseas earnings of the insurance industry in 1996 totalled around £7.7bn (excluding the earnings of pension funds), which represents around 30 percent of all overseas earnings of the UK's financial institutions.

The UK is the fourth largest insurance market in the world after Japan, the US and Germany, according to Sigma, the research subsidiary of Swiss Reinsurance (Swiss Re). However, given that the UK population is smaller than any of these the other three leading markets, the importance of UK insurance is even more significant. Compared with other countries, the UK is one of the most heavily insured in the world.

UK insurance is part of an industry that is becoming ever more international. Except for UK household, motor and commercial insurance, most insurance rates are now largely influenced by worldwide rating levels. Accordingly, aviation, marine, catastrophe insurance and reinsurance rates are being determined by international rating levels, and these in turn are affected by rates set in the London insurance market. This means that large parts of the industry cannot shield themselves from what is happening outside the UK.

The industry is now characterised by the growing number of mergers and aquisitions. Worldwide, there have been some very significant mergers during 1995 and 1996, especially in the reinsurance sector. In the UK, a major development has been the decision by some of the mutual insurance companies to `demutualise', i.e. to become public companies. The imminent flotation of the Norwich Union Assurance Society has been the most publicised example.

Another feature of this industry is the speed at which non-insurance companies are announcing their attention to enter this market. The banks have been in this market for some time, but now the building societies are starting to observe this maket too.

London remains a key insurance centre. The Lloyd's reconstruction plan -- announced in the autumn of 1996 -- has bought back business to London, and temporarily has enhanced the reputation of the London insurance market.

A feature in many markets over the last 2 or 3 years has been weak premium rates. Worldwide, this has been true in marine, aviation and reinsurance, while in the UK motor and household premium rates have fallen.

This worldwide weakness of rates is worrying, given that environmental, weather-related and liability insurance claims are on the increase almost everywhere in the world. This point is reinforced by the fact that US tobacco companies are facing substantial claims from smokers for damaged health. UK tobacco companies are likely to be next in line for similar claims. A large part of these claims will be paid by the insurance companies.

Profitability improved during 1996 both for the insurance companies and for Lloyd's, but it is uncertain as to how long this improvement will last. Lloyd's, for example, is expected to show profits for 1997, but profits for 1998 have been projected to fall by at least one industry expert. For brokers, whether they were large, small, UK or US, 1996 was a difficult year. The small UK brokers are being squeezed by the direct insurers, while the international brokers have seen their margins shrink as their key premium earners -- marine, aviation, commercial property and accident -- have seen declining rates. This has given rise to some very big acquisitions on both sides of the Atlantic. The latest of these was the sale of the UK broker Minet by its US parent company, St Paul's, to another US company, Aon.

In the UK, the three sectors most under pressure are motor, household and life insurance. There is substantial overcapacity in all these sectors and declining profitability. Anyone who has spent any length of time in the industry expects to see significant rationalisation in these sectors over the next 3 to 5 years.

A survey, specially commissioned for Key Note by The Gallup Organization, polls the public's attitudes towards insurance, insurance companies and their experience of the claims process. The good news for insurance companies is that 68 percent of people are happy with the claims process and also that 20 percent of people intend to increase their insurance cover in 1997. However, the survey also shows that 23 percent of people believe that they have been `ripped off' in the past by an insurer.

Text © 1997 Key Note

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