Published : Aug-2017
No. of Pages : 63
1. EXECUTIVE SUMMARY 3
1.1. The success of the Civil Liability Bill and a review of the discount rate are crucial to reduce premiums 3
1.2. Key findings 3
1.3. Critical success factors 3
2. MARKET DYNAMICS 10
2.1. Introduction 10
2.2. The private motor insurance market continued to grow in 2016 10
2.2.1. The private motor market grew by 12.4% to reach £12.2bn in GWP in 2016 10
2.2.2. Comprehensive policies make up the majority of the private motor market 11
2.2.3. The Lloyd's of London market accounts for 1.4% of private motor insurance GWP 12
2.3. Motor insurance premiums have reached an all-time high 12
2.3.1. Comprehensive and non-comprehensive premiums are both following an upwards trend 13
2.3.2. IPT has risen to 12% 16
2.3.3. The requirement to notify customers of last years' premium will encourage shopping around 17
2.4. The discount rate has increased the cost of claims 18
2.4.1. The discount rate was changed from 2.5% to -0.75% 18
2.4.2. Insurers' profits have been hit by the rate change 18
2.4.3. The Ogden rate change has impacted profitability 19
2.4.4. Insurers' results highlight the impact of the discount rate change on profits 19
2.4.5. The MoJ is consulting on how the discount rate should be set going forward 20
2.5. Gross claims paid continued to increase in 2016 20
2.5.1. Claims notified remained steady in 2016 20
2.5.2. Personal injury motor claims are on the rise 22
2.5.3. Bodily injury claims have the highest cost for motor insurers 23
2.5.1. Whiplash claims account for up to 80% of motor personal injury claims numbers 25
2.5.2. Fraud remains a significant issue 26
2.5.3. Motor personal injury claims remain high, while RTA claims are in decline 26
2.5.4. Most RTA casualties are car occupants, but these are the least vulnerable road users 27
2.5.5. The number of pedal cyclist casualties has reached a five-year low 27
2.5.6. Car and taxi use reached an all-time high 28
2.5.7. The UK motor parc continues to grow 30
3. COMPETITOR DYNAMICS 32
3.1. Direct Line and Aviva hold the largest shares of private motor 32
3.1.1. Direct Line and Aviva currently lead the private motor market 32
3.1.2. Direct Line has been the top private motor insurer for the past three years 33
3.1.3. Aviva offers standard insurance in addition to short-term, learners, and telematics policies 34
3.1.4. Ageas offers four car insurance policies, which can be purchased through brokers 35
3.1.5. LV= and Allianz are combining to form a joint venture in personal insurance 36
3.1.6. Mobile network providers are entering the telematics market 36
3.1.7. Start-ups are entering the insurance space with telematics, car sharing, P2P, and usage-based policies 37
4. THE MARKET GOING FORWARD 38
4.1. The Civil Liability Bill aims to reform personal injury motor claims 38
4.1.1. The benefits of LASPO did not fully materialize 38
4.1.2. Initial proposals aimed to increase the small claims track limit and remove general damages for minor soft tissue injuries 38
4.1.3. The MoJ has published its first response to the consultation on reforms 38
4.1.4. The Prisons and Courts Bill was scrapped due to the snap general election 39
4.1.5. The Queen's Speech following the election introduced a Civil Liability Bill 39
4.1.6. There has been a split reaction to the Civil Liability Bill 39
4.1.7. The Civil Liability Bill will save customers an estimated £35 on motor insurance premiums 40
4.1.8. The small claims limit will increase to £5,000 for RTA claims 40
4.1.9. A tariff system is being introduced for RTA-related soft tissue injury claims 41
4.1.10. Claims will not be settled without a MedCo medical evidence report 42
4.2. Proposed reforms will impact motor insurance profitability 43
4.2.1. Tariffs and the small claims track limit increase will have a significant impact 43
4.2.2. The increase in the small claims track could affect 70-80% of claims 44
4.2.3. Legal costs could be reduced by up to 50% 45
4.2.4. The introduction of tariffs could reduce whiplash claims costs by £1bn 45
4.3. New legislation could lead to falling premiums and market GWP 45
4.3.1. The future of the private motor insurance market is uncertain 45
4.3.2. Unless claims costs fall, motor insurance premiums and GWP will remain high 46
4.4. Telematics policies are still mainly held by under 25s 47
4.4.1. Technology will take time to penetrate the market 47
4.4.2. There are over 750,000 live telematics policies in the UK, but penetration is low 47
4.4.3. Most telematics policies are held by under 25s, but popularity is increasing across all ages 48
4.4.4. Telematics policies are predicted to be opt-out by 2025 48
4.4.5. Average speed could be used to assess risk instead of speed limits 49
4.4.6. Dash cams could be the new telematics 49
4.5. Driverless cars are estimated to become mainstream in 2045 50
4.5.1. The government is supporting the development of driverless cars 51
4.5.2. Motorists with driverless cars will be required to have dual insurance policies 51
4.5.3. Autonomous car manufacturers are entering the insurance market for driverless cars 52
4.5.4. Motor insurers are looking to partner with driverless car manufacturers 52
4.5.5. More than half of new UK cars are now sold with autonomous features 53
4.5.6. Electric cars will hold a greater share of the motor parc in the future 54
4.5.7. There will be a divided motor parc as autonomous features gain popularity 54
4.5.8. The need for personal car insurance could diminish 54
4.6. Usage-based, car sharing, and P2P policies are being launched 54
4.6.1. The majority of new, innovative policies target millennials 54
4.6.2. Guevara launched P2P insurance in the UK, but it has yet to take off 55
4.6.3. Motor insurers are beginning to see the opportunity in car sharing 55
4.6.4. Usage-based pay-as-you-go and pay-per-mile car insurance policies are a growing concept 56
4.6.5. The insurance industry is concerned how the GDPR will impact underwriting 57
5. APPENDIX 58
5.1. Abbreviations and acronyms 58
5.2. Bibliography 58
5.3. Further reading 62
List of Tables
Table 1: Quarterly change in market average and Shoparound premiums, Q1 2012-Q2 2017 16
Table 2: Number of claims settled, average cost, and gross claims paid by claim type, 2013-16 25
Table 3: New tariff amounts for RTA soft tissue injury claims compared to 2015 average payment for PSLA, by injury duration 42
List of Figures
Figure 1: The private motor insurance market has grown, primarily due to rising premiums in 2016 11
Figure 2: Motor insurance premiums have reached an all-time high 13
Figure 3: Premiums for comprehensive policies are continuing to rise 14
Figure 4: Non-comprehensive premium rises have been amplified by IPT and discount rate changes 15
Figure 5: The number of claims notified fell in 2016 after rising over the previous four years 21
Figure 6: The number of claims settled decreased in 2016 but average claims cost increased, causing a rise in gross claims paid 22
Figure 7: Personal injury motor claims settled are above pre-LASPO levels 23
Figure 8: Damage claims are the most frequent claim type, but bodily injury claims are the biggest cost 24
Figure 9: The number of RTAs has been in long-term decline but is beginning to stabilize 27
Figure 10: The majority of RTA casualties are car occupants 28
Figure 11: Car usage has increased as petrol has become cheaper 29
Figure 12: Brexit caused the value of sterling to drop, causing petrol prices to rise 30
Figure 13: The UK motor parc grew to 30.8 million in 2016, 8.6% of which were newly registered vehicles 31
Figure 14: The top five motor insurers account for 48.5% of the total market 33
Figure 15: Direct Line uses a plugin box for its telematics policy offering 34
Figure 16: The introduction of the Civil Liability Bill will deliver significant cost savings for motor personal liability claims 44
Figure 17: The future of the private motor insurance market is uncertain 47
Figure 18: Marmalade is a start-up specifically targeting young drivers 55
Figure 19: Cuvva offers usage-based, short-term, and learner motor insurance policies 56
Figure 20: By Miles will save infrequent drivers money by only charging them for the distance they drive 57
