UK Commercial Motor Insurance: Market Dynamics and Opportunities
All the vital news, analysis, and commentary curated by our industry experts.
The commercial motor insurance market grew slightly in 2015. This is a result of economic growth which has increased business prosperity and therefore the investment in commercial vehicles to support business expansion. The market remains at a COR of just under 100%; however, this has been strengthened by reserve releases. Without releases the market would be unprofitable, as insurers have been unable to keep rates in line with claims inflation. Rates have seen an increase due to a 3.5% rise in IPT in November 2015; however, excluding tax, rates have remained flat due to intensifying market competition. With the market in unprofitable territory it is therefore expected that rates will begin to harden over the next few years until government reforms are introduced, which may cause a lowering of claims costs. Claims cost fell initially when LASPO was implemented back in 2013, but the claims environment has now stabilized with some insurers reporting rises as the market has adjusted to the legislation. The commercial motor parc has continued to increase in 2015 with LGVs and company cars driving the majority of growth. However, with the UK’s vote to leave the EU it is expected that growth of the motor parc will slow as businesses have less confidence and money to invest in new commercial vehicles until the economy begins to recover. While reforms will provide instant benefits upon implementation, telematics and driverless technology will help to reduce the frequency and severity of claims in the longer term.
• GWP for the commercial motor insurance market grew by 1.0% to £3.99bn in 2015.
• The COR rose by 1.6pp to 99.9% in 2015 but was strengthened by £101.9m in reserve releases.
• The commercial motor parc enjoyed another year of growth. In 2015 the total commercial motor parc grew by 3.8% to 7.6 million vehicles.
• The claims environment has begun to stabilize with some insurers reporting slight increases since the market has adjusted to LASPO.
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Table of Contents
Future growth will be dependent on new reforms and economic growth
Critical success factors
Commercial motor GWP grew slightly in 2015
The total motor insurance market grew by
3.3% in 2015
The commercial motor insurance market grew by
1.0% to £3.99bn in 2015
Commercial fleet dominates the market and is the driver of GWP growth
Fleet insurance is gaining share of the commercial motor insurance market
Lloyd's of London accounts for
9.7% of the commercial motor market
Commercial motor COR is below 100% but has been strengthened by reserve releases
The COR for commercial motor insurance remained just below 100% in 2015
Fluctuations in the loss ratio as a result of LASPO have influenced the COR over recent years
Without reserve releases the COR would have risen above 100% in 2015
Commercial motor insurance premiums remained flat over 2015
Market competition prevented premiums from rising in 2015
Fluctuations in commercial premiums are softer compared to private motor
Premium rates will have to increase if the market is to remain profitable
Claims are beginning to stabilize
LASPO initially benefitted the commercial motor insurance market
The ABI reports a rise in the number of commercial claims notified in 2015
Whiplash claims account for up to 80% of motor personal injury claims numbers
Fraud remains a significant issue in the commercial motor insurance market
The number of road traffic accident casualties will continue to fall
The number of car, motorcycle, and pedestrian RTA casualties is falling
Larger commercial vehicles are colliding with pedal cyclists
The UK commercial motor parc has continued to grow
The commercial motor parc has grown in line with a strengthening UK economy
Growth has come from LGVs and company cars
The number of newly licensed commercial vehicles rose in 2015
The majority of commercial vehicles are licensed in the South East
Road usage reached a five-year high as a result of a growing motor parc and cheaper fuel
THE MARKET GOING FORWARD
Growth of the commercial motor market will depend on rate increases
The future of the commercial motor insurance market is uncertain
The dynamics of growth for the commercial motor insurance market will shift in 2017
The economy will dictate growth of the commercial motor parc
Rates may rise in response to claims inflation but may then fall due to new government reforms
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 Ministry of Justice to the FCA
The success of reforms will be dependent on how the market responds
Telematics and driverless cars will reduce claims costs in the longer term
Telematics and safety features are already popular in the commercial market
Telematics and connected vehicles have business benefits outside of insurance
Larger commercial vehicles will see the greatest benefit from safety features
Telematics policies are predicted to reach an "opt-out" model for cars by 2025
The government has announced a new bill to support the development of driverless cars
Connected vehicles will uncover exaggerated and fraudulent claims
Abbreviations and acronyms
Primary and secondary research
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