UK Commercial Motor Insurance: Market Dynamics and Opportunities

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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

Key findings

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


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


Commission expenses


Gross premium

Reserve development

Written premiums

Product definitions


Primary and secondary research

GWP forecast


Further reading

About Verdict Financial



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

Table 2: Commercial motor insurance market GWP (£m), 2011-15

Table 3: Commercial motor insurance GWP by line (£m), 2011-15

Table 4: Share of commercial motor insurance GWP by line (%), 2011-15

Table 5: Commercial motor insurance reported-year COR (%), 2011-15

Table 6: Commercial motor insurance loss ratio and expense ratios (%), 2011-15

Table 7: Reserve development (£m) and COR (%), 2011-15

Table 8: Gross claims paid and incurred (£m), 2011-15

Table 9: Exposure, total number of claims notified, and claims frequency (%), 2011-15

Table 10: Number of motor personal injury claims recorded and settled, 2010-16

Table 11: The severity of RTA casualties in Great Britain (000s), 2005-14

Table 12: RTA casualties in Great Britain by road user type, 2005-14

Table 13: Total number of licensed commercial vehicles and GDP, 2011-15

Table 14: Licensed vehicles by body type (000s), 2011-15

Table 15: New commercial vehicle registrations by body type (000s), 2011-15

Table 16: Share of licensed commercial vehicles in Great Britain by region (%), 2015

Table 17: Road traffic (billion vehicle miles) and average petrol price (pence per liter), 2011-15

Table 18: Road traffic usage by vehicle type (billion vehicle miles), 2011-15

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

Table 20: Forecasted annual GDP percentage growth (%), 2011-15


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

Figure 2: Growth of the commercial motor market has been facilitated by economic growth

Figure 3: Commercial fleet is growing, while non-fleet is falling in GWP

Figure 4: Fleet insurance held 59.1% of the commercial motor insurance market in 2015

Figure 5: Commercial motor COR rose by 1.6pp but remained below 100% in 2015

Figure 6: The loss ratio has increased by 1.2pp as a result of stabilizing claims since LASPO

Figure 7: Reserve releases increased over five-fold in 2015

Figure 8: The annual rate of decline of gross claims incurred is slowing

Figure 9: The ABI has reported the total number of claims to have risen to above 2013 levels

Figure 10: Claims recorded increased for the first time since 2011-12

Figure 11: The number of RTA casualties has been in long-term decline

Figure 12: A reduction in RTA car occupant casualties is driving the fall in total casualties

Figure 13: The number of licensed commercial vehicles has increased with economic growth

Figure 14: Company cars and LGVs have fueled the expansion of the UK commercial motor parc

Figure 15: Company cars and LGVs account for the majority of new commercial vehicle registrations

Figure 16: The South East has the largest share of licensed commercial vehicles

Figure 17: Road traffic usage has risen as fuel prices have fallen

Figure 18: The future of the commercial motor insurance market is uncertain

Figure 19: Economic growth will slow in 2017 following Brexit but will then begin to recover

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