| MP66014 |
| MAPS : Direct Insurance: November 2004 |
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This report covers: direct insurance, direct sales, forces, direct selling, company agents, independent intermediaries, tied agents, independent financial advisers, banks and building societies, telephone-based selling, internet-based selling, retail chains, financial 'supermarkets', interactive digital television, brokers, significant players, non-UK sectors, motor insurance, buildings insurance, contents insurance, house insurance, travel insurance, health insurance, private medical insurance, long-term care, sickness insurance, pet insurance,
Companies covered include: Admiral Group, BUPA Insurance, |Churchill, Insurance, Direct Line, Esure, More Than, Royal Sun Alliance, Tesco, Personal, Finance Group, General, broker networks, mobile telephones, worldwide web,
EXECUTIVE SUMMARY
| Executive Summary |
| Direct insurance is increasingly the preferred method used by big financial services companies to deliver their personal-lines general insurance. Before the arrival of direct-distribution models, insurance brokers and other intermediaries were the main distribution channel of personal-lines insurance. This still applies to commercial lines, but personal-lines direct insurance is rapidly taking market share. |
| Direct Line set up the first dedicated direct insurance operation in the UK in 1985. The market share taken by direct players has increased steadily ever since, partly at the expense of companies' own sales staff and agents, and partly at the expense of intermediaries. The trend has intensified since 1999, when retailers also entered the market. |
| The obvious success of direct insurance companies prompted some traditional insurance players to set up their own distinct direct insurance brands. New entrants have also been attracted to the direct insurance market, because of the lower operating costs made possible by call-centre and Internet-based operations. The new entrants include utilities, retailers and affinity groups. |
| The trend has also displayed specialisation in the distribution chain as distributors of personal lines have become increasingly separated from underwriters, with each tackling their specialist cost bases. Many market participants have set up partnerships with companies able to offer economies of scale in terms of expertise, or with access to large numbers of customers. |
| Direct insurance companies have developed strong brand names to differentiate them from their fiercely competitive rivals. Their publicity (such as `Quote Me Happy' from Norwich Union Direct or `Just AAsk' from the AA) reinforces their differences from their rivals and their `no nonsense' approach to customer needs. |
| The direct insurance industry is aggressively innovative in using technology to gain speed in obtaining competitive quotations. Direct insurers invest heavily in information technology (IT), and make considerable use of customer relationship management (CRM) techniques to supplement their call-centre and Internet sales opportunities. |
| Key Note research indicates that clients are more likely to select an insurer based on convenience, rather than on price or even on reputation. The research also shows that usage of the Internet to buy insurance policies remains low, compared with telephone-, broker- or branch-mediated purchases. Despite the rise in direct insurance, the ability to purchase insurance from a branch office remains important to many customers. |
| In due course, the development of websites and of digital television may alter the picture, and the share of direct insurance distribution may increase even more. However, the introduction of more technology will also aid brokers, and their share may eventually cease to shrink. |
TABLE OF CONTENTS
| Executive Summary |
| 1. Introduction |
| OVERVIEW |
| DEFINITION |
| 2. Strategic Overview |
| MARKET DYNAMICS AND SEGMENTATION |
| Market Segmentation |
| Market Sectors |
| Current Status of the Market |
| Total Industry Value and Growth |
| Table 1: The Total UK Market for General Insurance† by Gross Written Premiums (£m, % and index), 1999-2004e |
| Table 2: The UK Market for General Insurance — UK Risks† — by Gross Written Premiums (£m, % and index), 1999-2004e |
| Largest Sector and Market Share |
| Table 3: UK General Insurance Premiums — UK Risks† — by Distribution Channel (%), 1999-2004e |
| Table 4: UK Personal-Lines General Insurance Premiums — UK Risks — by Distribution Channel (%), 1999-2004e |
| Figure 1: Estimated UK Personal-Lines General Insurance Premiums — UK Risks — by Distribution Channel (%), 2004 |
| Table 5: The UK Market for Personal-Lines General Insurance — UK Risks — by Category by Gross Written Premiums (£m), 2003 |
| Figure 2: The UK Market for Personal-Lines General Insurance — UK Risks — by Category by Gross Written Premiums (%), 2003 |
| Market Dynamics |
| Market Sectors |
| Current Status of the Market |
| Table 6: Banks' Links With Insurers, 2004 |
| Table 7: Direct Insurers' Links With Traditional Insurers, 2004 |
| Fastest-Growing Sectors |
| Slowest-Growing Sectors |
| DISTRIBUTION |
| Direct Sales Forces |
| Direct Selling |
| Company Agents |
| Independent Intermediaries |
| Tied Agents |
| Independent Financial Advisers |
| Banks and Building Societies |
| Telephone-Based Selling |
| Internet-Based Selling |
| Retail Chains |
| Financial `Supermarkets' |
| Interactive Digital Television |
| Brokers |
| COMPETITIVE STRUCTURE |
| Significant Players |
| Table 8: The Top Ten General Insurers by UK Premiums (£m), 2002 |
| Non-UK Sectors |
| Most Significant Outlet |
| ADVERTISING |
| Major Spenders |
| Table 9: Main Media Advertising Expenditure by Top General Insurers (£000), Year to June 2004 |
| Table 10: Main Media Advertising Expenditure on General Online Insurance (£000), Year to June 2004 |
| Direct Sales |
| THE CONSUMER |
| Who is the Consumer? |
| Consumer Loyalty |
| Consumer Factors Affecting the Sector |
| REGULATION |
| Financial Ombudsman Service |
| Table 11: Number of Complaints About General Insurance to the Financial Ombudsman Service, 2002/2003-2003/2004 |
| MARKET FORECASTS |
| Predicted Size of the Market |
| Future Prospects in Insurance/Direct Insurance |
| Future Impact of Regulatory Changes and Growth in E-Business |
| 3. Motor Insurance |
| BACKGROUND |
| MARKET SIZE |
| Table 12: The UK Market for Domestic Motor Insurance (annual business) by Gross Written Premiums (£m, % and index), 1999-2004e |
| Figure 3: The UK Market for Domestic Motor Insurance (annual business) by Gross Written Premiums (£m), 1999-2004e |
| CONSUMER TRENDS |
| Table 13: Average Yearly Expenditure on Motor Insurance Per UK Household (£ and % of households), 1998/1999-2003/2004e |
| Consumer Research |
| `I Buy My Motor Insurance From A Telephone-Based Insurer' |
| `I Buy My Motor Insurance From A Broker' |
| MARKETING ACTIVITY |
| ADVERTISING |
| Table 14: Main Media Advertising Expenditure by Home and Motor Insurers (£000), Year to June 2004 |
| Table 15: Main Media Advertising Expenditure on Motor Insurance (£000), Year to June 2004 |
| Table 16: Main Media Advertising Expenditure on Online Motor Insurance (£000), Year to June 2004 |
| DISTRIBUTION |
| Table 17: UK Personal Motor Insurance Premiums by Distribution Channel (%), 1999-2004e |
| Figure 4: Estimated UK Personal Motor Insurance Premiums by Distribution Channel (%), 2004 |
| SUPPLIERS |
| Table 18: The Top Ten Most Popular Motor Insurance Websites, July-August 2004 |
| 4. House Insurance |
| BACKGROUND |
| Buildings Insurance |
| Contents Insurance |
| MARKET SIZE |
| Table 19: The UK Market for Domestic Property Insurance by Gross Written Premiums (£m, % and index), 1999-2004e |
| Figure 5: The UK Market for Domestic Property Insurance by Gross Written Premiums (£m), 1999-2004e |
| CONSUMER TRENDS |
| Table 20: Average Yearly Expenditure on Household Insurance Per UK Household by Type (£ and % of households), 1998/1999-2003/2004e |
| Table 21: Average Weekly Expenditure Per UK Household and Total Weekly UK Household Expenditure on House Contents Insurance (£ per week and £m per week), 2001/2002 and 2002/2003 |
| Consumer Research |
| `I Buy My Buildings Insurance From A Mortgage Lender' |
| `I Buy My Buildings Insurance From A Broker' |
| `I Buy My Buildings Insurance From A Telephone-Based Insurer' |
| `I Buy My Contents Insurance From A Mortgage Lender' |
| `I Buy My Contents Insurance From A Bank/Building Society Branch' |
| `I Buy My Contents Insurance From A Broker' |
| `I Buy My Contents Insurance From A Telephone-Based Insurer' |
| MARKETING ACTIVITY |
| ADVERTISING |
| Table 22: Main Media Advertising Expenditure on Buildings and Contents Insurance (£000), Year to June 2004 |
| DISTRIBUTION |
| Table 23: UK Personal Household Insurance Premiums by Distribution Channel (%), 1999-2004e |
| Figure 6: Estimated UK Personal Household Insurance Premiums by Distribution Channel (%), 2004 |
| SUPPLIERS |
| Table 24: Leading Direct House Insurance Providers by Number of Customers, 2004 |
| Table 25: The Top Ten Most Popular Household Insurance Websites, July-August 2004 |
| 5. Travel Insurance |
| BACKGROUND |
| MARKET SIZE |
| CONSUMER TRENDS |
| Table 26: Average Weekly Expenditure Per UK Household and Total Weekly UK Household Expenditure on Non-Package Holiday Travel Insurance (£ per week, £m per week and index), 2000/2001-2002/2003 |
| Consumer Research |
| `I Buy My Travel Insurance From A Telephone-Based Insurer' |
| `I Buy My Travel Insurance From A Broker' |
| MARKETING ACTIVITY |
| ADVERTISING |
| Table 27: Main Media Advertising Expenditure on Travel Insurance (£000), Year to June 2004 |
| DISTRIBUTION |
| SUPPLIERS |
| Table 28: The Top Ten Most Popular Travel Insurance Websites, July-August 2004 |
| 6. Health Insurance |
| BACKGROUND |
| Table 29: Household Penetration of Health Insurance by Type of Insurance and Type of Household (%), 2002/2003 |
| MARKET SIZE |
| Table 30: The UK Market for Health Insurance (annual business) by Gross Written Premiums (£m, % and index), 1999-2004e |
| Figure 7: The UK Market for Health Insurance (annual business) by Gross Written Premiums (£m), 1999-2004e |
| Private Medical Insurance |
| Long-Term Care |
| Sickness Insurance |
| CONSUMER TRENDS |
| Table 31: Average Yearly Expenditure on Medical Insurance Per UK Household (£ and % of households), 1998/1999-2003/2004e |
| Table 32: Average Weekly Expenditure on Medical Insurance Per UK Household by Gross Income Decile (£ and index), 2002/2003 |
| MARKETING ACTIVITY |
| ADVERTISING |
| Table 33: Main Media Advertising Expenditure on Private Healthcare Insurance (£000), Year to June 2004 |
| DISTRIBUTION |
| SUPPLIERS |
| Table 34: The Top Five Health Insurers by Number of Subscribers, 2004 |
| Table 35: The Top Ten Most Popular Health Insurance Websites, July-August 2004 |
| 7. Pet Insurance |
| BACKGROUND |
| MARKET SIZE |
| Table 36: The UK Market for Pet Insurance by Gross Written Premiums (£m, % and index), 1999-2004e |
| Figure 8: The UK Market for Pet Insurance by Gross Written Premiums (£m), 1999-2004e |
| CONSUMER TRENDS |
| MARKETING ACTIVITY |
| ADVERTISING |
| Table 37: Main Media Advertising Expenditure on Pet Insurance (£000), Year to June 2004 |
| DISTRIBUTION |
| SUPPLIERS |
| 8. An International Perspective |
| BACKGROUND |
| DISTRIBUTION |
| Trends In European Distribution |
| Leading Players In European General Insurance |
| Trends In Dutch Insurance Distribution |
| Trends in Italian Insurance Distribution |
| 9. PEST Analysis |
| POLITICAL FACTORS |
| ECONOMIC FACTORS |
| SOCIAL FACTORS |
| TECHNOLOGICAL FACTORS |
| 10. Consumer Dynamics |
| OVERVIEW |
| Table 38: Summary of Responses to Consumer Survey Statements (% and rank), 2004 |
| CONSUMERS' VIEWS ON BUYING INSURANCE IN RESPONSE TO DIRECT MAIL AND ADVERTISEMENTS |
| `I Buy My Insurance In Response To Direct-Mail Advertising' |
| `I Buy My Insurance In Response To Advertisements In Newspapers And Magazines' |
| Table 39: Buying Insurance In Response To Direct Mail Or Advertisements (% of respondents), 2004 |
| CONSUMERS' VIEWS ON BUYING INSURANCE FROM FINANCIAL SERVICES COMPANIES OR BUYING MOTOR INSURANCE FROM A TELEPHONE-BASED INSURER |
| `I Buy My Insurance From A Bank, Building Society Or Insurance Company' |
| `I Buy My Motor Insurance From A Telephone-Based Insurer' |
| Table 40: Buying Insurance From Financial Services Companies Or Buying Motor Insurance From A Telephone-Based Insurer (% of respondents), 2004 |
| CONSUMERS' VIEWS ON BUYING MOTOR INSURANCE FROM A BROKER OR TOWARDS BUYING TRAVEL INSURANCE FROM A TELEPHONE-BASED INSURER |
| `I Buy My Motor Insurance From A Broker' |
| `I Buy My Travel Insurance From A Telephone-Based Insurer' |
| Table 41: Buying Motor Insurance From A Broker Or Buying Travel Insurance From A Telephone-Based Insurer (% of respondents), 2004 |
| CONSUMERS' VIEWS ON BUYING TRAVEL INSURANCE FROM A BROKER OR TOWARDS BUYING BUILDINGS INSURANCE FROM A MORTGAGE LENDER |
| `I Buy My Travel Insurance From A Broker' |
| `I Buy My Buildings Insurance From A Mortgage Lender' |
| Table 42: Buying Travel Insurance From A Broker Or Buying Buildings Insurance From A Mortgage Lender (% of respondents), 2004 |
| CONSUMERS' ATTITUDES TO BUYING BUILDINGS INSURANCE FROM A BROKER OR FROM A TELEPHONE-BASED INSURER |
| `I Buy My Buildings Insurance From A Broker' |
| `I Buy My Buildings Insurance From A Telephone-Based Insurer' |
| Table 43: Buying Buildings Insurance From A Broker Or From A Telephone-Based Insurer (% of respondents), 2004 |
| CONSUMERS' ATTITUDES TOWARDS BUYING CONTENTS INSURANCE FROM A MORTGAGE LENDER, OR FROM A BANK OR BUILDING SOCIETY BRANCH |
| `I Buy My Contents Insurance From A Mortgage Lender' |
| `I Buy My Contents Insurance From A Bank/Building Society Branch' |
| Table 44: Buying Contents Insurance From A Mortgage Lender, Or From A Bank Or Building Society Branch (% of respondents), 2004 |
| CONSUMERS' VIEWS ON BUYING CONTENTS INSURANCE FROM A BROKER OR FROM A TELEPHONE-BASED INSURER |
| `I Buy My Contents Insurance From A Broker' |
| `I Buy My Contents Insurance From A Telephone-Based Insurer' |
| Table 45: Buying Contents Insurance From A Broker Or From A Telephone-Based Insurer (% of respondents), 2004 |
| Consumers' attitudes toWARDS buying insurance over the INTERNET or towards choosing the cheapest provider |
| `I Buy My Insurance Over The Internet' |
| `If I Need Insurance In The Future, I Will Probably Choose The Cheapest Provider' |
| Table 46: Buying Insurance Over The Internet Or Choosing The Cheapest Provider (% of respondents), 2004 |
| CONSUMERS' VIEWS ON CHOOSING THE INSURER RECOMMENDED BY THE BROKER AND ON CHOOSING THE MOST CONVENIENT INSURER |
| `If I Need Insurance In The Future, I Will Probably Choose The One Recommended By My Broker' |
| `If I Need Insurance In The Future, I Will Probably Choose The Most Convenient' |
| Table 47: Choosing The Insurer Recommended By The Broker And Choosing The Most Convenient Insurer (% of respondents), 2004 |
| CONSUMERS' VIEWS: THOSE WHO DID NOT KNOW, OR WHO REJECTED ALL THE SUGGESTIONS PRESENTED |
| `Don't Know' |
| `None Of These' |
| Table 48: Those Who Did Not Know, Or Who Rejected All The Suggestions Presented (% of respondents), 2004 |
| 11. Company Profiles |
| ADMIRAL GROUP PLC |
| Corporate Strategy |
| Strengths and Weaknesses |
| New Product Development |
| Advertising |
| Distribution |
| Market Performance and Profitability |
| Table 49: Financial Results for Admiral Group PLC† (£000), Years Ending 31st December 2001-2003 |
| Future Company Developments |
| BUPA INSURANCE LTD |
| Corporate Strategy |
| Strengths and Weaknesses |
| New Product Development |
| Advertising |
| Distribution |
| Market Performance and Profitability |
| Table 50: Financial Results for BUPA Insurance Ltd (£000), Years Ending 31st December 2001-2003 |
| Future Company Developments |
| CHURCHILL INSURANCE COMPANY LTD |
| Corporate Strategy |
| Strengths and Weaknesses |
| New Product Development |
| Advertising |
| Distribution |
| Market Performance and Profitability |
| Table 51: Financial Results for Churchill Insurance Company Ltd (£000), Years Ending 31st December 2001-2003 |
| Future Company Developments |
| DIRECT LINE INSURANCE PLC |
| Corporate Strategy |
| Strengths and Weaknesses |
| New Product Development |
| Advertising |
| Distribution |
| Market Performance and Profitability |
| Table 52: Financial Results for Direct Line Insurance PLC (£000), Years Ending 31st December 2001-2003 |
| Future Company Developments |
| ESURE INSURANCE LTD |
| Corporate Strategy |
| Strengths and Weaknesses |
| New Product Development |
| Advertising |
| Distribution |
| Market Performance and Profitability |
| Table 53: Financial Results for esure Insurance Ltd (£000), Years Ending 31st December 2001-2003 |
| Future Company Developments |
| MORE TH>N (ROYAL & SUNALLIANCE INSURANCE PLC) |
| Corporate Strategy |
| Strengths and Weaknesses |
| New Product Development |
| Advertising |
| Distribution |
| Market Performance and Profitability |
| Table 54: Financial Results for Royal & SunAlliance Insurance PLC (£000), Years Ending 31st December 2001-2003 |
| Future Company Developments |
| TESCO PERSONAL FINANCE GROUP LTD |
| Corporate Strategy |
| Strengths and Weaknesses |
| New Product Development |
| Advertising |
| Distribution |
| Market Performance and Profitability |
| Table 55: Financial Results for Tesco Personal Finance Group Ltd (£000), Years Ending 31st December 2001-2003 |
| Future Company Developments |
| 12. Forecasts |
| GENERAL INSURANCE |
| Table 56: The Forecast Total UK Market for General Insurance† by Gross Written Premiums (£m, % and index), 2004-2009 |
| Table 57: Forecast UK Personal-Lines General Insurance Premiums — UK Risks — by Distribution Channel (%), 2004-2009 |
| MOTOR INSURANCE |
| Forecast Market Size |
| Table 58: The Forecast UK Market for Domestic Motor Insurance (annual business) by Gross Written Premiums (£m, % and index), 2004-2009 |
| Figure 9: The Forecast UK Market for Domestic Motor Insurance (annual business) by Gross Written Premiums (£m), 2004-2009 |
| Distribution |
| Table 59: Forecast UK Personal Motor Insurance Premiums by Distribution Channel (%), 2004-2009 |
| HOUSEHOLD INSURANCE |
| Forecast Market Size |
| Table 60: The Forecast UK Market for Domestic Property Insurance by Gross Written Premiums (£m, % and index), 2004-2009 |
| Figure 10: The Forecast UK Market for Domestic Property Insurance by Gross Written Premiums (£m), 2004-2009 |
| Distribution |
| Table 61: Forecast UK Personal Household Insurance Premiums by Distribution Channel (%), 2004-2009 |
| OTHER PERSONAL LINES |
| STRATEGIC OPTIONS |
| BROKER NETWORKS |
| FUTURE REGULATORY CHANGES |
| DISTRIBUTION CHANNELS |
| Interactive Digital Television |
| Mobile Telephones |
| The Worldwide Web |
| POLARISATION |
| FUTURE PEST ANALYSIS |
| Political Factors |
| Economic Factors |
| Social Factors |
| Technological Factors |
| 13. Further Sources |
| Associations |
| General Sources |
| Government Publications |
| Other Sources |
| Bonnier Information Sources |
Text © 2004 Key Note
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Last updated by Amanda Porteous November 2004
