UK Private Motor Insurance: Market Dynamics and Opportunities

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The private motor insurance market has grown in GWP following three years of successive decline. This change is primarily a result of premiums rising rapidly over 2015 in addition to a growing motor parc. Insurers raised their premiums in response to the impact falling rates in anticipation of LASPO had on market profitability. Insurers have also had to pass on a 3.5 percentage point IPT rise to 9.5% to customers. COR remained steady at just above 100% in 2015, but continues to be strengthened by large reserve releases. However, with reserves developed over the profitable period of 2011 to 2013 running out it is forecast that COR will rise in 2016. While claims fell significantly in 2013 and 2014 due to the implementation of LASPO, claims have since stabilized as the market has adapted to legislative changes. Despite the significant decline in road traffic accidents, whiplash claims remain incredibly high and fraud is still a significant issue. The government and regulatory bodies are introducing new reforms in order to reduce claims costs so insurers can pass on the savings to customers. The industry seeks to impose tougher regulation on the role claims management companies and solicitors play in encouraging claims and also confront the UKs whiplash epidemic. Proposed government reforms include an increase of the small claims track limit and the removal of general damages for minor soft-tissue injuries; however, it is uncertain when legislation will be introduced. While reforms have the potential to create an immediate effect, telematics and driverless cars will cause claims to fall in the longer term.


• GWP for the private motor insurance market grew by 4.2% to £10.8bn in 2015.

• COR fell slightly by 0.2 percentage points to 101.3% in 2015.

• Motor insurance premiums have risen above pre-LASPO levels.

• Gross claims incurred have stabilized, only falling by 1.9% in 2015.

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Table of Contents


The next few years will be pivotal as new reforms seek to reduce claims costs

Key findings

Critical success factors



Private motor insurance GWP is in growth after three years of continued decline

The total motor insurance market has grown by

3.3% in the last year

The private motor insurance market grew by

4.2% in GWP to £10.8bn in 2015

Comprehensive and non-comprehensive policies have maintained market share

The Lloyd's of London market accounted for

3.6% of private motor insurance GWP

Reserve releases and a lower expense ratio improved COR in 2015

COR for the private motor market fell slightly to

101.3% in 2015

An annual decline in the expense ratio led to a fall in COR despite an increase in loss ratio

Reserve releases increased by

4.9% in 2015, providing a boost to COR

Motor insurance premiums grew over 2015

Motor insurance premiums have risen above pre-LASPO levels

Comprehensive and non-comprehensive premiums have stabilized in Q1 2016

Premiums are expected to continue rising, but at a slower rate throughout 2016

Motor insurance premiums for older drivers are on the rise

Claims have stabilized as the market has found ways to adapt to LASPO

The expected LASPO benefits of lower claims costs and frequencies did not fully materialize

Gross claims incurred have stabilized, only falling by

1.9% in 2015

Bodily injury claims have the highest average cost for motor insurers

Whiplash claims account for up to 80% of motor personal injury claims numbers

Fraud remains a significant issue

The number of RTA casualties will continue to fall

The number of car, motorcycle, and pedestrian RTA casualties is falling

The number of pedal cycle road accident casualties may fall for the first time in 2015

The UK motor parc continues to grow

The usage of cars and taxis reached a seven-year high in 2015


New legislation could lead to falling premiums and market GWP

The future of the private motor insurance market is uncertain

A growing UK population will increase the number of motor insurance policies in force

Unless claims costs fall, motor insurance premiums will remain high

Insurers will be more realistic in lowering premiums since LASPO did not deliver

IPT will rise to 10% in October 2016

The government is making a second attempt at reforms with new legislation

The benefits of LASPO did not fully materialize

Government reforms are estimated to save motor insurers £1bn a year

The personal injury small claims track limit is proposed to increase from £1,000 to £5,000

The government proposes to end cash compensation for minor soft-tissue injuries

MedCo will strengthen as initial reports find MROs playing the system

New regulation seeks to tackle nuisance calls as a result of the failed referral fee ban

Regulation of CMCs will be passed from the MoJ to the FCA

The success of reforms will be dependent on how the market responds

Telematics and driverless cars will cause falls in claims costs in the longer term

Car technology will take time to penetrate the market

Telematics policies are predicted to reach an "opt-out" model by 2025

Driverless cars will take longer to enter the market

The Queen announced a new bill to support the development of driverless cars

The frequency of accidents will fall but cars will become more expensive to repair

Connected cars will uncover exaggerated and fraudulent claims

The sharing economy may influence motor insurance policies in the future

Guevara launched P2P car insurance in the UK, but it has yet to take off

Pay-per-mile car insurance policies would complement car sharing


Abbreviations and acronyms


Commission expenses

Comprehensive motor insurance


Earned premiums

Gross premium

Net premium

Non-comprehensive motor insurance

Reserve development

Written premiums


Primary and secondary research

GWP forecast


Further reading

About Verdict Financial



Table 1: UK motor insurance market GWP (£m), 2011-15

Table 2: Private motor insurance market GWP by subcategory (£m), 2011-15

Table 3: Sub-category share of the private motor insurance market GWP (%), 2011-15

Table 4: Private motor insurance reported-year COR (%), 2006-15

Table 5: Private motor insurance loss and expense ratios (%), 2006-15

Table 6: Reserve development (£m) and COR (%), 2006-15

Table 7: Reserve development and net earned premium (£000s), 2006-15

Table 8: Average motor insurance premiums, (£), Q1 2012-Q1 2016

Table 9: Quarterly change in market average and Shop around premiums (%), Q1 2011-Q1 16

Table 10: Average premium and claims cost by age demographic (£), 2014

Table 11: Gross claims incurred (£m), 2011-15

Table 12: Number of motor personal injury claims recorded and settled, 2010-16

Table 13: Number of claims settled for private motor (000s), 2013-15

Table 14: Average cost of claims settled for private motor (£), 2013-15

Table 15: The severity of RTA casualties in Great Britain, 2005-14

Table 16: RTA casualties in Great Britain by road user type, 2005-14

Table 17: Existing and newly licensed cars in the UK, 2007-15

Table 18: Car and taxi road traffic and average petrol price, 2007-15

Table 19: Forecast of private motor insurance market GWP (£m), 2011-20f


Figure 1: The private and commercial motor markets are in growth year-on-year

Figure 2: Comprehensive policies drove GWP growth in 2015

Figure 3: Comprehensive policies have gained 2.9pp in market share since 2011

Figure 4: The last three years have seen the lowest CORs of the decade

Figure 5: The loss ratio increased by 1.2pp while the expense ratio fell by 1.4pp year-on-year

Figure 6: Reserves developed from 2011 to 2013 are running low

Figure 7: Reserve releases held a 14.1% share of net earned premium in 2015

Figure 8: The 3.5pp IPT rise in November 2015 caused a steep rise in premiums

Figure 9: Premium increases for comprehensive policies seems to have slowed

Figure 10: Non-comprehensive premiums fell marginally in Q1 2016

Figure 11: Average claims are the highest for those aged 86 and over

Figure 12: Gross claims incurred only fell minimally in 2015

Figure 13: Claims recorded increased for the first time since 2011-12

Figure 14: Bodily injury claims have the highest average cost for motor insurers

Figure 15: The number of RTA casualties has been in long-term decline

Figure 16: A reduction in RTA car occupant casualties is driving the fall in total casualties

Figure 17: Customers have regained confidence to purchase new cars since the 2007 recession

Figure 18: Car usage has increased as petrol has become cheaper

Figure 19: The future of the private motor insurance market is uncertain

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