| KN66015 |
| KEY NOTE Market Review : Insurance Industry : June 2005 |
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EXECUTIVE SUMMARY
| This Market Review examines the UK insurance market and the industry that provides it with insurance products. The industry is experiencing a challenging period in 2005, with growing regulation, weakening premium rates and uncertainty in the financial markets. |
| Key Note estimates that the UK insurance market was worth £126.51bn in 2004. This represents a 2.9% increase on 2003 but is still lower than the market's value in 2002. There are two broad sectors: long-term insurance and general insurance. Long-term insurance accounted for an estimated 73.2% of the market in 2004, but the sector's value has fallen by 1.8% since 2001, whereas sales of general insurance have grown by 20.1%. |
| The industry is under immense pressure to cut its costs. Regulation by organisations such as the Financial Services Authority (FSA) and the EU is increasing, and this is undoubtedly adding to the industry's cost base. At the same time, premium rates have been softening as insurers have undercut each other's prices in order to win business. How long this situation will continue is debatable, given that many in the industry believe that premium rates need to rise in order to make up for growth in the cost of claims. There is inevitably some concern about profitability in the industry. |
| Particular attention is being paid to long-term insurance, since this sector accounts for the majority of sales. Changes in the rules governing the sale of insurance (as laid down by the FSA) have opened up new channels of distribution, with the result that insurance companies have increased their number of outlets. However, the big problem for the industry is that people are not saving enough. In October 2005, the Pensions Commission will deliver its recommendations on how to address the so-called pensions gap, i.e. the difference between the amount consumers need to save for their retirement and the amount they are actually saving. The Commission may recommend some element of compulsion in personal pensions. |
| Key Note forecasts that the UK insurance market will grow by between 3.3% and 3.7% each year between 2005 and 2009. Unless consumer behaviour changes dramatically or the Government makes personal pensions compulsory, sales of general insurance are likely to continue to grow faster than sales of long-term insurance. |
TABLE OF CONTENTS
| Executive Summary |
| 1. Industry Overview |
| REPORT COVERAGE |
| REPORT BACKGROUND |
| Lloyd's of London |
| ECONOMIC TRENDS |
| Population |
| Table 1.1: UK Resident Population Estimates by Sex (000), Mid-Years 2000-2004 |
| Gross Domestic Product |
| Table 1.2: UK Gross Domestic Product at Current Prices and Annual Prices (£m), 2000-2004 |
| Inflation |
| Table 1.3: UK Rate of Inflation (%), 2000-2004 |
| Unemployment |
| Table 1.4: Actual Number of Unemployed Persons in the UK (million), 2000-2004 |
| MARKET SIZE |
| Table 1.5: The UK Insurance Market by Sector by Net Premium Income (£m), 2000-2004 |
| MARKET SEGMENTATION |
| Long-Term Insurance |
| Life Insurance |
| Pensions |
| Annuities |
| Income-Protection Insurance |
| Critical-Illness Insurance |
| General Insurance |
| Motor Insurance |
| Property Insurance |
| Accident and Health Insurance |
| General Liability Insurance |
| Pecuniary-Loss Insurance |
| INDUSTRY STRUCTURE |
| Industry Synopsis |
| Life Insurance |
| Table 1.6: Average Financial Performance of Companies Engaged in Life Insurance† (£000, % and £), 2003/2004 |
| General Insurance |
| Table 1.7: Average Financial Performance of Companies Engaged in Non-Life Insurance† (£000, % and £), 2003/2004 |
| Concentration |
| Table 1.8: Number of VAT-Based Enterprises Engaged in Life Insurance and Non-Life Insurance by Turnover Sizeband (£000 and number), 2004 |
| Employment |
| Table 1.9: Number of VAT-Based Local Units Engaged in Life Insurance and Non-Life Insurance by Number of Employees, 2004 |
| Distribution |
| Insurance Distribution Channels |
| Direct Sales Forces |
| Direct Marketing |
| Independent Intermediaries |
| Tied Agents |
| Banks/Building Societies |
| Market Shares |
| MARKET POSITION |
| KEY TRENDS |
| Softening of Rates |
| Insurers' Concerns |
| The Way Life and Pensions Products Are Sold |
| Development of Niche Products |
| LEGISLATION |
| KEY TRADE ASSOCIATIONS |
| Association of British Insurers |
| International Underwriting Association of London |
| Lloyd's of London |
| National Association of Pension Funds |
| 2. PEST Analysis |
| POLITICAL FACTORS |
| ECONOMIC FACTORS |
| SOCIAL FACTORS |
| TECHNOLOGICAL FACTORS |
| 3. Key Note Primary Research |
| INTRODUCTION |
| SURVEY RESULTS |
| Satisfaction with the Claims Process |
| Table 3.1: Those Who Were Satisfied with the Claims Process by Sex, Age, Social Grade and Region (% of respondents), 2003 and 2005 |
| Perception of Value for Money |
| Life Insurance |
| Table 3.2: Those Who Consider That Their Life Insurance Policy Gives Value for Money by Sex, Age, Social Grade and Region (% of respondents), 2003 and 2005 |
| Pensions |
| Table 3.3: Those Who Consider That Their Pension Policy Gives Value for Money by Sex, Age, Social Grade and Region (% of respondents), 2003 and 2005 |
| Motor Insurance |
| Table 3.4: Those Who Consider That Their Motor Insurance Policy Gives Value for Money by Sex, Age, Social Grade and Region (% of respondents), 2003 and 2005 |
| Property Insurance |
| Table 3.5: Those Who Consider That Their Property Insurance Policy Gives Value for Money by Sex, Age, Social Grade and Region (% of respondents), 2003 and 2005 |
| Medical Insurance |
| Table 3.6: Those Who Consider That Their Medical Insurance Policy Gives Value for Money by Sex, Age, Social Grade and Region (% of respondents), 2003 and 2005 |
| Propensity to Change Insurers |
| Pensions |
| Table 3.7: Those Who Had Changed Their Pension Provider in the Previous 12 Months by Sex, Age, Social Grade and Region (% of respondents), 2003 and 2005 |
| Motor Insurance |
| Table 3.8: Those Who Had Changed Their Motor Insurer in the Previous 12 Months by Sex, Age, Social Grade and Region (% of respondents), 2003 and 2005 |
| Property Insurance |
| Table 3.9: Those Who Had Changed Their Property Insurer in the Previous 12 Months by Sex, Age, Social Grade and Region (% of respondents), 2003 and 2005 |
| Medical Insurance |
| Table 3.10: Those Who Had Changed Their Medical Insurer in the Previous 12 Months by Sex, Age, Social Grade and Region (% of respondents), 2003 and 2005 |
| Concerns About the Financial Health of Insurers |
| Table 3.11: Those Who Were Concerned About the Financial Health of Their Insurance Company by Sex, Age, Social Grade and Region (% of respondents), 2003 and 2005 |
| Confidence in the Final Value of Pension/Annuity Payments |
| Table 3.12: Those Who Were Confident About the Final Value of Their Pension/Annuity Payments by Sex, Age, Social Grade and Region (% of respondents), 2005 |
| 4. Competitive Structure |
| THE MARKETPLACE |
| MARKET LEADERS |
| Table 4.1: The Top Ten Companies in the UK Markets for Long-Term Insurance and General Insurance by UK Net Premium Income (£m), 2002 and 2003 |
| AEGON UK PLC |
| Company Structure |
| Financial Results |
| Allianz Cornhill Insurance PLC |
| Company Structure |
| Financial Results |
| Aviva PLC |
| Company Structure |
| Financial Results |
| AXA UK PLC |
| Company Structure |
| Financial Results |
| The British United Provident Association Ltd |
| Company Structure |
| Financial Results |
| Co-operative Insurance Society Ltd |
| Company Structure |
| Financial Results |
| Friends Provident PLC |
| Company Structure |
| Financial Results |
| HBOS PLC |
| Company Structure |
| Financial Results |
| Legal & General Group PLC |
| Company Structure |
| Financial Results |
| Lloyds TSB Group PLC |
| Company Structure |
| Financial Results |
| The National Farmers Union Mutual Insurance Society Ltd |
| Company Structure |
| Financial Results |
| Prudential PLC |
| Company Structure |
| Financial Results |
| Royal & SunAlliance Insurance Group PLC |
| Company Structure |
| Financial Results |
| RBS Insurance |
| Company Structure |
| Financial Results |
| The Standard Life Assurance Company |
| Company Structure |
| Financial Results |
| Zurich Financial Services |
| Company Structure |
| Financial Results |
| Other Companies |
| ADVERTISING AND PROMOTION |
| Table 4.2: Main Media Advertising Expenditure on Insurance by Sector and Brand (£000), Years Ending March 2003 and 2005 |
| 5. Long-Term Insurance |
| DEFINITION |
| KEY TRENDS |
| MARKET SIZE |
| Table 5.1: The UK Market for Long-Term Insurance by Net Premium Income (£m), 2000-2004 |
| Table 5.2: The UK Market for Long-Term Insurance by Sector by Net Premium Income (£m), 2000-2004 |
| Policies in Force |
| Life Insurance |
| Table 5.3: Regular-Premium Individual-Life Business in Force in the UK — Linked and Non-Linked Policies (000 policies and £m), 2000-2004 |
| Personal Pensions |
| Table 5.4: Personal Pensions in Force in the UK (000 policies and £m), 2000-2004 |
| Annuities |
| Table 5.5: Purchased Ordinary-Branch Life Annuities (Immediate) in Force in the UK (000 and £m), 2000-2004 |
| Income-Protection Insurance |
| Table 5.6: Individual Income-Protection Policies in Force in the UK (000 policies and £m), 2000-2004 |
| New Business |
| Regular-Premium Business |
| Table 5.7: New Individual Regular-Premium Business by Sector (£m), 2000-2004 |
| Single-Premium Business |
| Table 5.8: New Individual Single-Premium Business by Sector (£m), 2000-2004 |
| Group Business |
| Table 5.9: New Regular-Premium and Single-Premium Group Business (£m), 2000-2004 |
| Benefits Paid |
| Table 5.10: Long-Term Insurance Benefits Paid in the UK by Sector (£m), 2000-2004 |
| SUPPLY STRUCTURE |
| Table 5.11: Breakdown of New Long-Term Insurance Business by Distribution Channel (% of premiums), 2000-2004 |
| MAJOR PLAYERS |
| FORECASTS 2005 TO 2009 |
| Table 5.12: The Forecast UK Market for Long-Term Insurance by Net Premium Income (£m), 2005-2009 |
| 6. Motor Insurance |
| DEFINITION |
| KEY TRENDS |
| MARKET SIZE |
| Table 6.1: The UK Market for Motor Insurance by Net Premium Income (£m), 2000-2004 |
| Profitability |
| Table 6.2: The UK Market for Motor Insurance — Underwriting Result (£m and %), 2000-2004 |
| Domestic Vehicles |
| Table 6.3: The UK Market for Motor Insurance — Underwriting Result for Domestic Vehicles (£m and %), 2000-2004 |
| Commercial Vehicles |
| Table 6.4: The UK Market for Motor Insurance — Underwriting Result for Commercial Vehicles (£m and %), 2000-2004 |
| Theft Claims |
| Table 6.5: The UK Market for Motor Insurance — Domestic and Commercial Motor Theft Claims Settled (000 claims and £m), 2000-2004 |
| SUPPLY STRUCTURE |
| MAJOR PLAYERS |
| FORECASTS 2005 TO 2009 |
| Table 6.6: The Forecast UK Market for Motor Insurance by Net Premium Income (£m), 2005-2009 |
| 7. Property Insurance |
| DEFINITION |
| KEY TRENDS |
| MARKET SIZE |
| Table 7.1: The UK Market for Property Insurance by Net Premium Income (£m), 2000-2004 |
| Profitability |
| Table 7.2: The UK Market for Property Insurance — Underwriting Result (£m and %), 2000-2004 |
| Claims |
| Table 7.3: The UK Market for Property Insurance — Domestic Claims Experience by Type of Claim (£m), 2000-2004 |
| Table 7.4: The UK Market for Property Insurance — Commercial Claims Experience by Type of Claim (£m), 2000-2004 |
| Table 7.5: The UK Market for Property Insurance — Domestic and Commercial Claims Experience by Type of Claim (£m), 2000-2004 |
| SUPPLY STRUCTURE |
| MAJOR PLAYERS |
| FORECASTS 2005 TO 2009 |
| Table 7.6: The Forecast UK Market for Property Insurance by Net Premium Income (£m), 2005-2009 |
| 8. Accident and Health Insurance |
| DEFINITION |
| KEY TRENDS |
| MARKET SIZE |
| Table 8.1: The UK Market for Accident and Health Insurance by Net Premium Income (£m), 2000-2004 |
| Profitability |
| Table 8.2: The UK Market for Accident and Health Insurance — Underwriting Result (£m and %), 2000-2004 |
| Claims |
| Table 8.3: The UK Market for Accident and Health Insurance — Breakdown of Insurers' Outgoing Expenditure (£m), 2000-2004 |
| Private Medical Insurance |
| Table 8.4: The UK Market for Private Medical Insurance by Type of Purchase (000 subscribers and £m), 2000-2004 |
| SUPPLY STRUCTURE |
| MAJOR PLAYERS |
| FORECASTS 2005 TO 2009 |
| Table 8.5: The Forecast UK Market for Accident and Health Insurance by Net Premium Income (£m), 2005-2009 |
| 9. General Liability Insurance |
| DEFINITION |
| KEY TRENDS |
| MARKET SIZE |
| Table 9.1: The UK Market for General Liability Insurance by Net Premium Income (£m), 2000-2004 |
| Profitability |
| Table 9.2: The UK Market for General Liability Insurance — Underwriting Result (£m and %), 2000-2004 |
| SUPPLY STRUCTURE |
| MAJOR PLAYERS |
| FORECASTS 2005 TO 2009 |
| Table 9.3: The Forecast UK Market for General Liability Insurance by Net Premium Income (£m), 2005-2009 |
| 10. Pecuniary-Loss Insurance |
| DEFINITION |
| KEY TRENDS |
| MARKET SIZE |
| Table 10.1: The UK Market for Pecuniary-Loss Insurance by Net Premium Income (£m), 2000-2004 |
| Profitability |
| Table 10.2: The UK Market for Pecuniary-Loss Insurance — Underwriting Result (£m and %), 2000-2004 |
| SUPPLY STRUCTURE |
| MAJOR PLAYERS |
| FORECASTS 2005 TO 2009 |
| Table 10.3: The Forecast UK Market for Pecuniary-Loss Insurance by Net Premium Income (£m), 2005-2009 |
| 11. A Global Perspective |
| THE LEADING INSURANCE MARKETS |
| Table 11.1: The World's Leading Insurance Markets by Premium Income ($bn and %), 2003 |
| 12. The Future |
Text © 2005 Key Note
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Last updated by Amanda Porteous 2005
