Abstract
Overview
Introduction
This report provides a comprehensive analysis of claims costs in the UK general insurance market covering motor, property and liability insurance. It reviews historical claims costs and makes predictions about the future claims bill as well as discussing the drivers behind these forecasts. The report also analyses the claims management efficiency of a number of competitors in the market.
Scope
- Detailed analysis of the claims cost efficiency of the top 20 insurers in the motor, property and liability markets
- Extensive claims costs and underwriting data for the motor, property and liability markets
- Forecasts of net claims incurred for the motor, property and liability markets until 2012
Report Highlights
The number of road accidents fell significantly in 2006, declining by 5.0 per cent to a total of 189,000. The number of accidents has been declining steadily since 1997, and accidents have declined particularly quickly since 2001, falling by an average of over 3.5 per cent per year between 2001 and 2006.
The ratio of total claims management costs to total net claims incurred reached 5.7 per cent in 2006, an increase of 0.1 percentage points from 2005 indicating a small decline in total claims handling efficiency
UKI Ins was the most efficient property insurance claims handler in 2006. UKI Ins recorded the lowest ratio of property insurance claims management costs to net property insurance claims incurred at just 1.6 per cent in 2006 despite its ratio deteriorating by 0.4 percentage points from 2005.
Reasons to Purchase
- Benchmark your claims handling efficiency against your competitors
- Understand the key trends in motor, property and liability insurance claims costs
- Gain an insight into profitability of the motor, property and liability insurance markets
Table of Contents
- Overview
- Catalyst
- Summary
- Executive Summary
- The UK motor insurance market made a loss in 2006 however property and
liability made profits
- Underwriting losses grew in the motor market in 2006 as private motor losses exceeded profits in the commercial motor market
- Property underwriting profits continued to decline during 2006 but the market remains profitable
- The liability underwriting result improved for a fifth consecutive year in 2006, and the market finally achieved profitability
- Total claims handling efficiency has declined in 2006 driven by
increases in motor claims management costs
- The motor ratio of claims management costs to net claims incurred rose by 0.1 percentage points
- The property ratio of claims management costs to net claims incurred fell by 0.1 percentage points
- The liability ratio of claims management costs to net claims incurred fell by 0.1 percentage points
- Motor, property and liability net claims costs are expect to rise
between 2006 and 2012
- Personal injury claims will be the main driver of motor claims costs
- Increases in the cost of rebuilding properties will have an impact on property claims costs
- Personal injury claims, changes in periodical payments will have an impact on liability claims costs
- The UK motor insurance market made a loss in 2006 however property and
liability made profits
- Table of Contents
- Table of figures
- Table of tables
- Introduction
- What is this report about?
- Who is the target reader?
- Market context
- The UK motor insurance market continued to contract in 2006 with
underwriting losses in the private motor market deteriorating
- Both private and commercial motor markets contributed to the decline in motor premium income in 2006
- Comprehensive private motor premium led the deterioration in private motor insurance premium income
- Underwriting losses grew in the motor market in 2006 as private motor losses exceeded profits in the commercial motor market
- Total underwriting loss in the private motor market reached £448m in 2006
- Personal injury remains the main driver behind claims inflation
- The number of road traffic accidents has fallen steadily since 1997 as
a result of greater road safety
- Despite the fact that the total number of licensed vehicles continues to rise, the number of road traffic accidents is falling
- Road accident casualties fell in 2006
- The number of road traffic accidents has fallen steadily since 1997 as
a result of greater road safety
- Property GWP fell in 2006, led by the soft commercial property sector
where underwriting profits dropped
- Household insurance GWP increased in 2006, while commercial property GWP fell
- Property underwriting profits continued to decline during 2006 but the market remains profitable
- The commercial property underwriting result decreased in 2006 for a second consecutive year
- Commercial property claims were benign in 2006, as a lack of any serious
weather incidents kept claims numbers low
- Commercial property claims costs resulting from fire, business interruption and weather damage all fell in 2006
- Fire accounted for the majority of costs for commercial property claims in 2006
- Business interruption claims costs, following fire and weather damage, fell in 2006
- Weather claims costs for commercial property insurance declined in 2006
- Theft claims costs increased in 2006
- The increase in theft claims costs was due to a rise in average claims value in 2006
- The household insurance market experienced a reduction in the cost of
weather claims in 2006, but an increase in the cost of claims from other
perils
- The cost of domestic property claims fell slightly in 2006, as a result of a fall in weather related costs
- Storm damage accounted for the largest part of the weather claims bill for households in 2006
- The cost of domestic fire claims increased in 2006
- The cost of household theft claims rose by 9.9% in 2006 as both the
number of claims and the average cost of claims increased
- The number of burglaries fell by 0.8% in 2006-07
- The risk of burglary is heavily influenced by factors such as tenancy status and security measures
- Subsidence claims costs grew in 2006 as did the average cost of claims
- The total general liability market contracted in 2006, but it moved into
an underwriting profit
- Competitive conditions in the liability market resulted in lower premium income
- The liability underwriting result improved for a fifth consecutive year in 2006, and the market finally achieved profitability
- The total number of personal injury claims rose by 5.4% in 2006-7
- The number of accident claims increased by 8.3% in 2006-07
- The number of disease claims fell in 2006-07, declining by 36.4%
- Workplace accidents and work-related ill-health dropped again in
2005-06
- The number of workplace injuries dropped in 2005-06
- Workplace fatalities increased in 2005-06 mainly due to more fatalities among the public
- The UK motor insurance market continued to contract in 2006 with
underwriting losses in the private motor market deteriorating
- Competitive dynamics
- Introduction
- Total claims handling efficiency has declined in 2006 driven by
increases in motor claims management costs
- The motor ratio of claims management costs to net claims incurred rose by 0.1 percentage points
- The property ratio of claims management costs to net claims incurred fell by 0.1 percentage points
- The liability ratio of claims management costs to net claims incurred fell by 0.1 percentage points
- Norwich Union and UKI performed well in terms of motor claims management
efficiency
- Norwich Union and UKI were the most efficient insurers in terms of claims management out of the top five motor insurers in 2006
- Fortis remained the most efficient motor insurance claims handler in 2006
- Highway saw the largest improvement in its claims management efficiency while Direct Line recorded the largest decline
- AXA and Norwich Union performed well in terms of managing property claims
- AXA and Norwich union achieved relatively low ratios in 2006
- UKI was the was the most efficient of the top 20 insurers at handling property insurance claims in 2006
- Allianz achieved the largest reduction it its property claims efficiency ratio in 2006
- Zurich and Norwich Union both saw their ratios deteriorate in 2006
- Norwich Union recorded a relatively low ratio of liability claims
management costs to net claims incurred in 2006
- Norwich Union was the most efficient claims handler out of the top five liability insurers
- Brit replaced Aspen as the most efficient liability insurance claims handler in 2006
- NIG achieved the largest reduction in its ratio in 2006
- The future decoded
- Motor claims cost will increase by a CAGR of 5.2% between 2007 and 2012
primarily driven by increases in the cost of personal injury claims
- Personal injury claims will continue to have a strong effect on total claims costs
- The UK motor insurance market will see claims costs increase by 5.2% per annum between 2007 and 2012
- A number of factors will provoke an increase in property insurance
claims costs between 2007 and 2012
- Increases in the cost of rebuilding properties will have an impact on claims costs
- Property claims are estimated to have reached £7.5 billion in 2007
- Liability claims costs are forecast to reach £5 billion driven largely
by personal injury claims
- Personal injury claims will be the main driver of claims costs
- Liability claims cost are expected to increase by a CAGR of 9% between 2007 and 2012
- Motor claims cost will increase by a CAGR of 5.2% between 2007 and 2012
primarily driven by increases in the cost of personal injury claims
- APPENDIX
- CIS
- Definitions
- Market Context
- Gross Premium
- Written premiums
- Competitive Dynamics
- 2005-06 definitions for line of business
- Motor
- Total private motor
- Total commercial motor
- Private motor comprehensive
- Private motor non-comprehensive
- Motorcycle
- Fleets
- Commercial vehicles (non-fleet)
- Property
- Total commercial property
- Household and domestic all risks.
- Consequential loss (i.e. business interruption)
- Liability business
- Employers liability (including the employers liability part of mixed liability packages but excluding mixed commercial packages)
- Professional indemnity (including directors' and officers' liability and errors and omissions liability)
- Public and products liability
- Mixed commercial package
- Market Context
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Tables
- Table 1: Total motor market GWP by private and commercial segment, 2002-06
- Table 2: Private motor insurance premium income by line of business 2002-06
- Table 3: Total motor underwriting account, 1996-2006
- Table 4: Total private motor underwriting account, 1996-2006
- Table 5: Total number of road accidents in the UK, 1995-2005
- Table 6: The number of road accidents relative to the number of registered vehicles in the UK, 1995-2006
- Table 7: Road accident casualties in the UK, split by severity of injury, 2002-06
- Table 8: Property insurance GWP split between household and commercial business, 2002-06
- Table 9: Total property underwriting account, 1996-2006
- Table 10: Commercial property underwriting result, 1996-2006
- Table 11: Gross incurred commercial property insurance claims by peril, 2002-06
- Table 12: Proportion of gross incurred commercial property insurance claims by peril, 2002-06
- Table 13: Cost of business interruption claims by cause, 2002-06
- Table 14: Commercial property insurance weather claims costs, 2002-06
- Table 15: Total cost of commercial property insurance theft claims, 2002-06
- Table 16: Number of commercial property theft claims, 2002-06
- Table 17: Average value of commercial property theft claims, 2002-06
- Table 18: Domestic property insurance claims by peril, 2002-06
- Table 19: Proportion of household claims by peril, 2002-06
- Table 20: Gross claims incurred for domestic property weather claims, 2002-06
- Table 21: Claims incurred by fire, domestic and total, 2002-06
- Table 22: Number of household theft and average theft claims cost
- Table 23: Number of burglaries in England and Wales, 2001-02 and 2006-07, (000s)
- Table 24: Unemployment among 18-24 year old males, 1998-2007
- Table 25: Households most at risk of burglary 2006-07
- Table 26: Average subsidence claims cost compared to claims costs and number of claims for subsidence, 2002-06
- Table 27: UK commercial liability market, 2002-06 (£m)
- Table 28: Total general liability underwriting result, 1996-2006
- Table 29: Number of personal injury claims made to general insurers, split by accident and disease, 2002-07
- Table 30: Workplace injuries reportable under RIDDOR, 2001-02 and 2005-06p
- Table 31: Workplace fatalities reported under RIDDOR, 2000-05
- Table 32: Claims management costs, net claims incurred and ratio of claims management costs to net claims incurred, 2002-06
- Table 33: Ratio of motor claims management costs to net motor claims incurred, 2002-06, top five motor insurers by GWP
- Table 34: Ratio of motor claims management costs to net motor claims incurred, top 20 motor insurers, 2002-06
- Table 35: Change in ratio of motor claims management costs to net motor claims incurred, top 20 motor insurers, 2005-06
- Table 36: Ratio of property claims management costs to net property claims incurred, 2002-06, top five property insurers by GWP
- Table 37: Ratio of property claims management costs to net property claims incurred, top 20 property insurers, 2005-06
- Table 38: Change in ratio of property claims management costs to net property claims incurred, top 20 property insurers, 2005-06
- Table 39: Ratio of claims management costs to net claims incurred, 2002-06, top five liability insurers by GWP
- Table 40: Ratio of liability claims management costs to net liability claims incurred, top 20 liability insurers, 2002-06
- Table 41: Change in ratio of liability claims management costs to net property claims incurred, top 20 liability insurers
- Table 42: Key variables affecting motor claims costs, 2007e-2012f
- Table 43: Forecast of net motor claims incurred, 2002-12f, (£m)
- Table 44: Key variables affecting property claims costs, 2007e-2012f
- Table 45: Forecast of net property claims incurred, 2002-12f, (£m)
- Table 46: Key variables affecting liability claims costs, 2007e-2012f
- Table 47: Forecast of net liability claims incurred, 2002-12f, (£m)
- List of Figures
- Figure 1: Both the private and commercial motor markets declined in 2006
- Figure 2: Both of the main private motor lines declined in 2006
- Figure 3: The motor insurance market continued to make an underwriting loss in 2006
- Figure 4: The private motor market made an underwriting loss of £448m in 2006
- Figure 5: The number of RTAs has fallen every year since 1997-98
- Figure 6: Although vehicle registrations rose again in 2006, road traffic accidents continued to fall
- Figure 7: Road accident casualties continued to decline in 2006
- Figure 8: Household insurance GWP increased in 2006, while commercial property GWP fell
- Figure 9: Property insurance underwriting profits fell in 2006 to £517m
- Figure 10: The commercial property underwriting result decreased in 2006
- Figure 11: Commercial fire, business interruption and weather property insurance claims costs fell in 2006
- Figure 12: Fire claims continued to account for the largest part of commercial property claims costs in 2006
- Figure 13: Business interruption claims costs fell in 2006
- Figure 14: The cost of commercial property weather claims declined in 2006
- Figure 15: 2006 saw a slight increase in the cost of commercial property insurance theft claims
- Figure 16: 2006 saw a drop in the number of commercial property theft claims but an increase in the average value of claims
- Figure 17: The total cost of domestic property claims fell slightly in 2006, as a result of a reduction in weather related claims
- Figure 18: The cost of weather insurance claims fell in 2006 for domestic property
- Figure 19: The cost of claims caused by fire grew in 2006 for domestic property
- Figure 20: Both the number of theft claims and the average theft claims cost grew in 2006
- Figure 21: Number of burglaries in England and Wales, 2001-02 and 2006-07, (000s)
- Figure 22: Homes with no security measures were at the highest risk to burglary in 2006-07
- Figure 23: The cost of subsidence claims rose in 2006, while the average cost of subsidence claims increased only slightly
- Figure 24: Falling premium rates in most liability lines meant lower GWP across the liability market
- Figure 25: The total general liability underwriting result increased in 2006
- Figure 26: The number of disease claims registered with the Compensation Recovery Unit declined in 2006-07, however the number of accident claims rose
- Figure 27: Workplace fatalities went down in 2005-06p, apart from among members of the public and the self-employed
- Figure 28: Overall claims handling efficiency decreased slightly in 2006
- Figure 29: Zurich recorded the highest ratio of claims management costs to net claims incurred of the top five motor insurers in 2006
- Figure 30: Fortis was the most efficient at handling motor insurance claims in 2006
- Figure 31: Highway saw the largest decrease in its ratio of motor claims management costs to net motor claims incurred for 2006
- Figure 32: AXA recorded the lowest ratio of claims management costs to net claims incurred of the top five property insurers in 2006
- Figure 33: UK Ins was the most efficient at handling property insurance claims in 2006
- Figure 34: NIG saw the second largest improvement in its ratio which decreased by 3.4% in 2006
- Figure 35: Norwich Union recorded the lowest ratio of claims management costs to net claims incurred of the top five liability insurers in 2006
- Figure 36: Brit Insurance was the most efficient liability claims handler in 2006
- Figure 37: NIG saw the largest improvement in its claims ratio in 2006
- Figure 38: Total motor claims costs will reach £10.9 billion in 2007
- Figure 39: Property insurance claims costs peaked to £7.5 billion in 2007 due to the summer floods
- Figure 40: Liability claims costs will grow to £5 billion in 2012
