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MP66013

MAPS DIRECT INSURANCE : JULY 2003

Overview

Editor: Market Assessment
ISBN: 1-86111-350-1

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This report covers: General Insurance, Personal Lines, Distribution, Non-UK sectors, Direct mail, consumer loyalty, personal motor insurance, house insurance, premiums, travel insurance, health insurance, medical insurance, domestic appliances warranties, pet insurance, travel insurance, interactive television, internet, mobile telephony

Companies covered include: Admiral Group,BUPA Insurance, Churchill Insurance, Direct Line Insurance,Esure Insurance,MORE THAN, Norwich Union,Norwich Union, Tesco Personal Finance Group,

Table of Contents
Executive Summary
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TABLE OF CONTENTS

1	Executive Summary 8
2	1. Introduction 9
3	OVERVIEW 9
4	DEFINITION 9
5	2. Strategic Overview 10
6	MARKET DYNAMICS 10
7	Market Sectors 10
8	Current Status of the Market 10
9	Total Industry Value and Growth 13
10	Table 1: Total General Insurance Business by Gross Written Premium and Source of Business (£m and percent), 1998-2002 14
11	Figure 1: Total General Insurance Business by Gross Written Premium (£m), 1998-2002 15
12	Table 2: General Insurance (Personal Lines) Business by Gross Written Premium and Source of Business (£m and percent), 1998-2002 16
13	Figure 2: General Insurance (Personal Lines) Business by Gross Written Premium (£m), 1998-2002 17
14	Largest Sector and Market Share 17
15	Fastest-Growing Sector 18
16	Slowest-Growing Sector 18
17	DISTRIBUTION 18
18	COMPETITIVE STRUCTURE 22
19	Significant Players 22
20	Table 3: The Top Ten UK Insurance Groups by Gross Premiums Written (£bn), 2002 22
21	Non-UK Sectors 23
22	ADVERTISING 23
23	General Insurance 23
24	Table 4: Main Media Advertising Expenditure on General Insurance (£000), Years Ending March 2002 and 2003 24
25	THE CONSUMER 25
26	Table 5: Average Annual Household Expenditure on Different Types of Insurance (£ and percent), 2001/2002 25
27	REGULATION 26
28	FORECASTS 26
29	3. Motor Insurance 27
30	BACKGROUND 27
31	MARKET SIZE 27
32	Table 6: Personal Motor Insurance by Gross Written Premium (£m), 1998-2002 27
33	Figure 3: Personal Motor Insurance by Gross Written Premium (£m), 1998-2002 28
34	CONSUMER TRENDS 30
35	Table 7: Yearly Expenditure on Motor Insurance per Household (£ and percent), 1990-1993 and 1994/1995-2001/2002 30
36	MARKETING ACTIVITY 31
37	ADVERTISING 31
38	Table 8: Main Media Advertising Expenditure on Motor Insurance (£000), Years Ending March 2002 and 2003 32
39	DISTRIBUTION 33
40	Table 9: Personal Motor Insurance by Source of Business ( percent), 1998-2002 34
41	SUPPLIERS 35
42	4. House Insurance 36
43	BACKGROUND 36
44	MARKET SIZE 36
45	Table 10: House Insurance by Gross Written Premium (£m), 1997-2001 36
46	Figure 4: House Insurance by Gross Written Premium (£m), 1997-2001 37
47	CONSUMER TRENDS 38
48	Table 11: Yearly Expenditure on Household Insurance by Type (£ and percent), 1990-1996 and 1997/1998-2000/2001 38
49	MARKETING ACTIVITY 40
50	ADVERTISING 40
51	Table 12: Main Media Advertising Expenditure on Home Insurance by Sector (£000), Years Ending March 2002 and 2003 41
52	DISTRIBUTION 41
53	Table 13: Personal Household Insurance by Source of Business ( percent), 1998-2002 41
54	SUPPLIERS 43
55	Table 14: Leading Direct House Insurance Providers by Number of Customers, 2002/2003 43
56	5. Travel Insurance 44
57	BACKGROUND 44
58	MARKET SIZE 44
59	CONSUMER TRENDS 44
60	MARKETING ACTIVITY 45
61	ADVERTISING 45
62	Table 15: Main Media Advertising Expenditure on Travel Insurance by Sector (£000), Years Ending March 2002 and 2003 46
63	DISTRIBUTION 46
64	SUPPLIERS 48
65	6. Private Medical Insurance 49
66	BACKGROUND 49
67	MARKET SIZE 50
68	Table 16: Number of Individuals in the UK Covered by Private Medical Insurance (million and percent), 1971, 1990 and 1999-2002 50
69	CONSUMER TRENDS 52
70	MARKETING ACTIVITY 52
71	ADVERTISING 52
72	Table 17: Main Media Advertising Expenditure on Private Healthcare Insurance (£000), Years Ending March 2002 and 2003 53
73	DISTRIBUTION 53
74	SUPPLIERS 55
75	Table 18: The Five Largest Private Healthcare Providers, 2003 56
76	7. Pet Insurance 57
77	background 57
78	MARKET SIZE 57
79	Table 19: Pet Insurance by Gross Written Premium (£m), 1998-2002 57
80	Figure 5: Pet Insurance by Gross Written Premium (£m), 1998-2002 58
81	MARKETING ACTIVITY 58
82	ADVERTISING 58
83	Table 20: Main Media Advertising Expenditure on Pet Insurance (£000), Years Ending March 2002 and 2003 59
84	DISTRIBUTION 59
85	SUPPLIERS 59
86	8. An International Perspective 61
87	BACKGROUND 61
88	TRENDS IN EUROPEAN DISTRIBUTION 62
89	Leading Players in European Insurance 62
90	Trends in Dutch Insurance Distribution 62
91	Trends in Italian Insurance Distribution 63
92	9. PEST Analysis 64
93	POLITICAL FACTORS 64
94	ECONOMIC FACTORS 64
95	SOCIAL FACTORS 65
96	TECHNOLOGICAL FACTORS 65
97	10. Consumer Dynamics 67
98	OVERVIEW 67
99	Table 21: Comparative Summary of Overall Responses to Statements ( percent of respondents), 2000 and 2003 67
100	2003 SURVEY RESPONSES 69
101	Motor Insurance Purchasing Habits (Table 22) 69
102	S1: "I buy motor insurance from one or more of the following — a bank or a building society or from an insurance company." 69
103	S2: "I buy motor insurance from a direct telephone insurer." 70
104	S3: "I buy motor insurance through direct mail." 70
105	S4: "I buy motor insurance through a broker." 70
106	Table 22: Motor Insurance Purchasing Habits ( percent of respondents), 2003 71
107	Travel Insurance Purchasing Habits (Table 23) 73
108	S5: "I buy travel insurance from either a branch of a bank, a building society or an insurance company." 73
109	S6: " I buy travel insurance from a direct telephone insurance company." 73
110	S7: "I buy travel insurance through direct mail." 73
111	S8: "I buy travel insurance through a broker." 73
112	Table 23: Travel Insurance Purchasing Habits ( percent of respondents), 2003 74
113	House Insurance Purchasing Habits (Table 24) 76
114	S9: "I buy house contents or buildings insurance from a branch of either a bank, a building society or an insurance company." 76
115	S10: "I buy house contents or buildings insurance direct via a telephone insurance company." 76
116	Table 24: House Insurance Purchasing Habits ( percent of respondents), 2003 77
117	Internet or Direct Mail-Based Insurance Purchasing Habits (Table 25) 79
118	S11: "I buy insurance through the Internet." 79
119	S12: "I have bought either motor, travel or house contents or buildings insurance in response to direct mail advertising." 79
120	Table 25: Internet or Direct Mail-Based Insurance Purchasing Habits ( percent of respondents), 2003 80
121	Factors Influencing Future Choice of Insurance (Table 26) 82
122	S13: "If I need to buy insurance in the future, I will probably choose the cheapest provider." 82
123	S14: "If I need to buy insurance in the future, I will probably choose an insurer that has been recommended to me." 82
124	Table 26: Factors Influencing Future Choice of Insurance ( percent of respondents), 2003 83
125	11. Company Profiles 85
126	ADMIRAL GROUP 85
127	Corporate Strategy 85
128	New Product Development 85
129	Advertising 85
130	Distribution 86
131	Market Performance and Profitability 86
132	Table 27: Financial Results for Admiral Group (£000), Years Ending 31st December 2000 and 2001 86
133	Future Company Developments 86
134	BUPA INSURANCE 87
135	Corporate Strategy 87
136	Strengths and Weaknesses 87
137	New Product Development 88
138	Advertising 88
139	Distribution 88
140	Market Performance and Profitability 89
141	Table 28: Financial Results for BUPA Insurance (£000), Years Ending 31st December 2000-2002 89
142	Future Company Developments 89
143	CHURCHILL INSURANCE GROUP LTD 90
144	Corporate Strategy 90
145	Strengths and Weaknesses 90
146	Advertising 90
147	Distribution 91
148	Market Performance and Profitability 91
149	Table 29: Financial Results for Churchill Insurance Group Ltd (£000), Years Ending 31st December 2000-2002 91
150	Future Company Developments 92
151	DIRECT LINE INSURANCE PLC 92
152	Corporate Strategy 92
153	New Product Development 93
154	Advertising 94
155	Distribution 94
156	Market Performance and Profitability 94
157	Table 30: Financial Results for Direct Line Insurance PLC (£000), Years Ending 30th September 1999 and 31st December 2000-2001 94
158	Future Company Developments 95
159	ESURE INSURANCE LTD 95
160	Corporate Strategy 95
161	Strengths and Weaknesses 95
162	Advertising 95
163	Distribution 96
164	Market Performance and Profitability 96
165	Table 31: Financial Results for esure Insurance Ltd (£000), Years Ending 31st December 2000 and 2001 96
166	Future Company Developments 97
167	MORE TH>N 97
168	Corporate Strategy 97
169	Strengths and Weaknesses 97
170	New Product Development 98
171	Advertising 98
172	Distribution 98
173	Profitability 99
174	Future Company Developments 99
175	NORWICH UNION (AVIVA PLC) 99
176	Corporate Strategy 99
177	Strengths and Weaknesses 100
178	New Product Development 100
179	Advertising 101
180	Distribution 101
181	Market Performance and Profitability 102
182	Table 32: Financial Results for Aviva PLC (£000), Years Ending 31st December 1999-2001 102
183	Future Company Developments 102
184	TESCO PERSONAL FINANCE GROUP LTD 103
185	Corporate Strategy 103
186	Strengths and Weaknesses 103
187	New Product Development 103
188	Advertising 103
189	Distribution 104
190	Market Performance and Profitability 104
191	Table 33: Financial Results for Tesco Personal Finance Group Ltd (£000), Years Ending 31st December 1999-2001 105
192	Future Company Developments 105
193	12. The Future 106
194	FORECASTs 106
195	General Insurance 106
196	Table 34: Forecast General Insurance (Personal Lines) Business by Gross Written Premium and Source of Business (£m and percent), 2003-2007 106
197	Figure 6: Forecast General Insurance (Personal Lines) Business by Gross Written Premium (£m), 2003-2007 107
198	Motor Insurance 108
199	Table 35: Forecast Motor Insurance Business by Gross Written Premium and Source of Business (£m and percent), 2003-2007 108
200	Figure 7: Forecast Motor Insurance Business by Gross Written Premium (£m), 2003-2007 109
201	House Insurance 109
202	Table 36: Forecast Household Insurance Business by Gross Written Premium and Source of Business (£m and percent), 2003-2007 110
203	Figure 8: Forecast Household Insurance Business by Gross Written Premium (£m), 2003-2007 111
204	STRATEGIC OPTIONS 111
205	BROKER-SOLD PERSONAL LINES INSURANCE 112
206	FUTURE REGULATORY CHANGES 113
207	INTERACTIVE DIGITAL TELEVISION 114
208	MOBILE TELEPHONY 115
209	THE INTERNET 115
210	OTHER TECHNOLOGY 116
211	POLARISATION 116
212	14. Further Sources 117
213	Associations 117
214	Publications 118
215	General Sources 118
216	Bonnier Sources 119
217	Government Sources 120
218	Other Sources 120

EXECUTIVE SUMMARY

Direct insurance has revolutionised the way that personal lines general insurance is delivered. Before the arrival of direct distribution models, insurance brokers and other intermediaries were the backbone of the industry: today, the extent of insurance sold via intermediaries has decreased considerably.

Since Direct Line set up the UK's first dedicated direct insurance operation in 1985, the market share taken by direct players has steadily increased, with considerable growth seen in the last 5 years — most notably in the most recent year for which figures are available.

As the direct insurance business has become increasingly established, it has attracted some of the existing traditional insurance players — some of which have set up distinct direct insurance brands. The industry has also seen varying types of new entrants, which have been able to capitalise on the lower operating costs made possible by call centre- and Internet-based operations. These have included different types of non-financial institutions, including supermarkets and other retailers.

As part of this trend, there has been a growing separation between underwriting and distribution capabilities, with many players choosing to develop alliances with partners able to offer critical mass in terms of skills and consumer reach.

For all players, the development of strong brands is vital in order to provide differentiation in an increasingly crowded marketplace. Many direct players have also sought to gain increased public awareness for their brands by taking a stance against entrenched practices affecting their industry.

The direct insurance industry can be seen as innovative in terms of gaining advantage via the adoption of new technologies. It is a heavy investor in IT, making extensive use of techniques in customer-relationship management as well as Internet and call centre-management technologies.

Key Note research indicates that consumers are far more likely to select an insurer based on reputation than on price. The research also shows that, while use of the Internet to purchase insurance policies has increased slightly over the last 2 years, usage remains low. Despite the rise of the direct insurance business, the ability to purchase insurance via a physical branch remains important to many consumers.

As direct players increasingly develop both website and interactive digital television platforms, with more compelling content and increased functionality, these are expected to lead to further increases in the sale of direct insurance.

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Last updated by Amanda Porteous September 2003