UK Private Motor Insurance: Market Dynamics and Opportunities
All the vital news, analysis, and commentary curated by our industry experts.
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
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
THE MARKET GOING FORWARD
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
Comprehensive motor insurance
Non-comprehensive motor insurance
Primary and secondary research
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