Summary of Contents
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UK Commercial Property Insurance 2003
Product Code: DMFS1530
publication Date: 10-00-2003
Overview
Several factors, such as frequent, severe flooding,
September 11th and rising reinsurance rates, have shaped the current hard,
profitable market. There are a number of key questions. How long will this hard
market last? Which players have been successful in improving the balance of
their books? How do you successfully target customers in the competitive SME
market? This report answers these questions and more, arming the reader with
the understanding and foresight vital to future success.
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Provides a detailed overview of the UK commercial
property insurance market
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Includes the latest data from company returns to the
FSA, providing market shares and comprehensive competitor ratio analysis
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Primary research with leading commercial insurers
provides analysis of key issues in the market
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A B2B survey of over 50 SME commercial property
insurance customers furthers the reader's understanding of this competitive
market segment
·
Premium income growth and market profitability is
forecast up to 2007
The report examines how successful major players have
been in adopting a strategy of tougher underwriting and strong rate increases
to reduce their risk exposure and improve the balance of their books. Most have
seen an improvement in their claims ratio, but to what extent has this been the
result of higher premiums or fewer claims following more selective
underwriting?
The report analyzes the key trends that will affect the
future shape of the market. Datamonitor anticipates that these trends will see
the market remain profitable for a longer period than under previous market
conditions.
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Datamonitor's B2B survey of SME customers will allow
you to target this market segment more effectively
·
Analysis of competitor market shares and performance ratios
will enable you to benchmark your company
·
Quantitative and qualitative analysis of the of the
future of the market will allow you to plan your company's future strategy with
confidence
CHAPTER 1 EXECUTIVE SUMMARY
·
Introduction
·
Market context
·
Distribution
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Targeting SME customers
·
Competitive dynamics
·
The future decoded
CHAPTER 2 INTRODUCTION
·
What is this report about?
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Who is the target reader?
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How to use this report
CHAPTER 3 MARKET CONTEXT
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Introduction
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Market size
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The market grew by 27.1 per cent in 2001
·
Premiums increased for a number of reasons
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Large corporations are increasingly retaining their
risk in-house
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Market profitability
·
The market returned to profitability in 2001
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Commercial property claims
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2001 experienced a general decrease in claims costs,
though fire damage increased by 30 per cent
·
The health of the commercial property market influences
the insurance industry
CHAPTER 4 DISTRIBUTION
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Introduction
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Distribution splits
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The broker remains the dominant distribution force in
commercial insurance
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Independent intermediaries
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Company staff
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Tied agents
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Banks/Building societies
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Direct
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Utilities/Retailers/Affinity groups
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Datamonitor estimates for the distribution of
commercial insurace
CHAPTER 5 TARGETING SME CUSTOMERS
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Introduction
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Customer requirements and attitudes
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Office space is the principal property requirement of
most survey respondents
·
75 per cent of SMEs purchase their insurance from a
broker
·
Price and service are the most important reasons for choosing
an insurance provider
·
63 per cent of SMEs would not consider purchasing their
cover from a bank/building society
·
Over half of SMEs would consider purchasing their
commercial property insurance from a direct provider
·
Satisfaction and switching behavior
·
94 per cent of SMEs are satisfied with their commercial
property insurance provider
·
Almost a quarter of SMEs have changed their insurance
provider in the last 2 years
·
However, only 15 per cent of SMEs are considering
changing their provider in the next 12 months
·
83 per cent of SMEs have experienced an increase in
commercial property insurance premiums in the last 12 months
·
The impact of premium increases
·
The majority of SMEs experienced premium increases of
up to 40%
·
These increases have affected the businesses of just
over a third of SMEs
·
SME profitability and costs have been hardest hit
·
In spite of premium increases, the attitude of SMEs
towards commercial property insurers has, for the most part, remained unchanged
·
The most popular way for insurers to change their
disgruntled customers' attitudes is to reduce their premiums
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Additional services
·
The most common additional service received by SMEs
from their insurance providers is risk management
·
86 per cent of SMEs consider these additional services
useful
·
56 per cent of SMEs consider commercial property cover
bundled with other types of cover attractive
CHAPTER 6 COMPETITIVE DYNAMICS
·
Introduction
·
Top ten commercial property insurers 2001
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Norwich Union and R&SA are the largest players
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Comparison between the top 10 and the top 11-20
insurers in terms of growth
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Analysis of top ten commercial property insurers by
claims ratio
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Ecclesiastical
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Royal & SunAlliance
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NIG
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AXA
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Zurich FS
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Groupama
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NFU & Avon
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Allianz Cornhill
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New Hampshire
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The Lloyd's Market
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Competitive issues
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New entrants
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The SME sector is becoming increasingly competitive
·
Insurers must be prepared for a move back into the
corporate sector
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Underwriting skill has been neglected, yet is the key
to future profitability
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Quality data is a competitive advantage that cannot be
ignored
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Changes to Pool Re have opened up the market for
terrorism cover
CHAPTER 7 THE FUTURE DECODED
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Introduction
·
Forecast GWP for the commercial property insurance
market
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The market will be worth £5 billion in 2007
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Underwriting result
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The market will remain profitable for longer than in
previous cycles
CHAPTER 8 APPENDIX
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Supplementary data
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Commercial property GEP by competitor
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Commercial property market share
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Property insurance performance ratios by competitor
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Explanatory notes to competitor tables
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SME survey data tables
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Definitions
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DTI definitions of SME businesses
·
Research methodology
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Further reading
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Future readings
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Relevant links
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Do you need more information?
·
Datamonitor Financial Services Consulting
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SPP writing team
LIST OF TABLES
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Table 1: Premium income growth in the UK commercial
property insurance market, 1997-2001
·
Table 2: The UK commercial property insurance market
underwriting result, 1997-2001
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Table 3: Commercial property gross incurred claims, by
peril, 1997-2001
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Table 4: Number of commercial property theft claims
compared to average cost of claim, 1997-2001
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Table 5: Cost of business interruption claims by cause,
1997-2001
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Table 6: Market share of distribution channels in CGI
market, 1997-2001
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Table 7: Datamonitor estimates for the distribution of
commercial insurance, 2001-2e
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Table 8: Market share of the top ten players in the UK
commercial property insurance market, 1997-2001
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Table 9: GEP of the top ten players in the UK
commercial property insurance market, 1997-2001
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Table 10: Total GEP of the top ten commercial property
insurers compared to that of those insurers placed 11-20, 1997-2001
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Table 11: Commercial property gross claims ratios of
the top ten commercial property insurers in the UK, 2001
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Table 12: Claims incurred, GEP and claims ratio for
Ecclesiastical, 1997-2001
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Table 13: Claims incurred, GEP and claims ratio for
Royal & SunAlliance, 1997-2001
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Table 14: Claims incurred, GEP and claims ratio for
NIG, 1997-2001
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Table 15: Claims incurred, GEP and claims ratio for
AXA, 1997-2001
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Table 16: Claims incurred, GEP and claims ratio for
Zurich FS, 1997-2001
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Table 17: Claims incurred, GEP and claims ratio for
Groupama, 1997-2001
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Table 18: Claims incurred, GEP and claims ratio for NFU
& Avon, 1997-2001
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Table 19: Claims incurred, GEP and claims ratio for
Allianz Cornhill, 1997-2001
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Table 20: Claims incurred, GEP and claims ratio for New
Hampshire, 1997-2001
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Table 21: Property GWP split between the Lloyd's and
the company markets, 1990-2000
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Table 22: Property insurance market shares of the
Lloyd's and the company markets, 1990-2000
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Table 23: Forecast GWP for the commercial property
insurance market, 2003-2007
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Table 24: Base assumptions for the forecasts
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Table 25: Forecast underwriting result for the
commercial property insurance market, 2003-2007
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Table 26: Commercial property GEP by competitor, 1997-
2001
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Table 27: Commercial property GEP by competitor, 1997-
2001, cont.
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Table 28: Commercial property market share by
competitor, 1997- 2001
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Table 29: Commercial property market share by
competitor, 1997- 2001, cont.
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Table 30: Property loss ratio, by competitor, 1997-2001
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Table 31: Property loss ratio, by competitor,
1997-2001, cont.
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Table 32: Property expense ratio, by competitor, 1997-2001
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Table 33: Property expense ratio, by competitor,
1997-2001, cont.
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Table 34: Property combined ratio, by competitor,
1997-2001
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Table 35: Property combined ratio, by competitor,
1997-2001, cont.
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Table 36: Property commission ratio, by competitor, 1997-2001
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Table 37: Property commission ratio, by competitor,
1997-2001, cont.
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Table 38: Property commission ratio, by competitor,
1997-2001, cont.
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Table 39: Property management expenses ratio, by
competitor, 1997-2001
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Table 40: Property management expenses ratio, by
competitor, 1997-2001, cont.
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Table 41: Property net / gross premiums ratio, by
competitor, 1997-2001
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Table 42: Property net / gross premiums ratio, by
competitor, 1997-2001, cont.
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Table 43: Property net / gross premiums ratio by competitor,
1997-2001, cont.
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Table 44: Methodology for Datamonitor's property
premium income splits
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Table 45: How would you describe your principal
property requirements?
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Table 46: Where do you purchase your commercial
property insurance from?
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Table 47: What were the most important reasons for
choosing your current provider?
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Table 48: Would you consider purchasing your commercial
property insurance from a bank/building society?
·
Table 49: Why would you consider purchasing your
commercial property insurance from a bank/building society?
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Table 50: Why would you NOT consider purchasing your
commercial property insurance from a bank/building society?
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Table 51: Would you consider purchasing your commercial
property insurance direct?
·
Table 52: Why would you consider purchasing your
commercial property insurance direct?
·
Table 53: Why would you NOT consider purchasing your
commercial property insurance direct?
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Table 54: How satisfied are you with your commercial
property insurance provider?
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Table 55: Have you changed your provider in the last 2
years?
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Table 56: Why have you changed your provider in the
last 2 years?
·
Table 57: Do you think you will change your commercial
insurance provider in the next 12 months?
·
Table 58: Why do you think you will change your
commercial property insurance provider in the next 12 months?
·
Table 59: Have your commercial property insurance
premiums increased over the last 12 months?
·
Table 60: By how much has your commercial property
insurance premium increased?
·
Table 61: Has an increase in your commercial property
insurance premium affected your business?
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Table 62: If yes, how has it affected your business?
·
Table 63: Has your attitude towards commercial property
insurers changed over the last 12 months?
·
Table 64: In what way has it changed?
·
Table 65: What can insurers do to improve their image?
·
Table 66: What services do you receive from your
current commercial property insurance provider?
·
Table 67: How useful are the additional services you
receive?
·
Table 68: What other services would you like to
receive?
·
Table 69: How attractive is commercial property cover
bundled in a package with other insurance cover?
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Table 70: Why is a bundled offering unattractive?
·
Table 71: Why is a bundled offering attractive?
LIST OF FIGURES
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Figure 1: Ecclesiastical had the lowest gross claims
ratio in 2001
·
Figure 2: The UK commercial property insurance market
reversed its downward trend in 2001
·
Figure 3: 2001 was a profitable year for the UK
commercial property insurance market
·
Figure 4: Commercial property fire claims experienced a
dramatic rise in 2001
·
Figure 5: The average cost of a commercial property
theft claim rose in 2001, while the number of theft claims fell
·
Figure 6: 2001 saw a dramatic decrease in
weather-related business interruption costs
·
Figure 7: Brokers remain the dominant distribution
force in commercial insurance
·
Figure 8: How would you describe your principal
property requirements?
·
Figure 9: Where do you purchase your commercial
property insurance from?
·
Figure 10: What were the most important reasons for
choosing your current commercial property insurance provider?
·
Figure 11: Would you consider purchasing your
commercial property insurance from a bank/building society?
·
Figure 12: Reasons for not purchasing commercial
property insurance from a bank/building society
·
Figure 13: Reasons for purchasing commercial property
insurance from a bank/building society
·
Figure 14: Would you consider purchasing your
commercial property insurance direct?
·
Figure 15: Reasons for purchasing commercial property
insurance direct
·
Figure 16: Reasons for not purchasing commercial
property insurance direct
·
Figure 17: How satisfied are you with your commercial
property insurance provider?
·
Figure 18: Have you changed your commercial property
insurance provider in the last 2 years?
·
Figure 19: Why did you change your commercial property
insurance provider?
·
Figure 20: Do you think you will change your commercial
property insurance provider in the next 12 months?
·
Figure 21: Reasons why you might change your commercial
property insurance provider in the next 12 months.
·
Figure 22: Have your commercial property insurance
premiums increased over the last 12 months?
·
Figure 23: If yes, by how much?
·
Figure 24: Have increases in your premiums affected
your business?
·
Figure 25: If yes, how have they affected your business
·
Figure 26: Has your attitude towards commercial
property insurers changed over the last 12 months?
·
Figure 27: If yes, in what way has it changed?
·
Figure 28: What can insurers do to improve their image?
·
Figure 29: What services do you receive from your
current commercial property insurance provider?
·
Figure 30: How useful are these additional services?
·
Figure 31: What other services would you like to
receive?
·
Figure 32: How attractive is commercial property cover
bundled in a package with other insurance?
·
Figure 33: Why is a bundled offering attractive?
·
Figure 34: Why is a bundled offering unattractive?
·
Figure 35: The commercial property insurance market is
dominated by two large, composite players
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Figure 36: Insurers placed outside the top ten in terms
of GEP achieved a significantly higher growth rate in 2001 than the ten largest
players
·
Figure 37: Ecclesiastical had the lowest gross claims
ratio in 2001
·
Figure 38: In 2001 Ecclesiastical overcame the poor
claims experience of 2000
·
Figure 39: 2001 saw Royal & SunAlliance's claims
ratio improve
·
Figure 40: Strong GEP growth in 2001 improved NIG's
claims ratio
·
Figure 41: In 2001, improved GEP and claims experience
reversed AXA's worsening claims ratio
·
Figure 42: A less exposed book of business improved
Zurich's claims ratio in 2001
·
Figure 43: Groupama's claims ratio significantly
improved in 2001
·
Figure 44: Strong GEP growth saw NFU's claims ratio
improve in 2001
·
Figure 45: Strong GEP growth failed to improve Allianz
Cornhill's claims ratio in 2001
·
Figure 46: In spite of being hit by claims, New
Hampshire's claims ratio improved with strong GEP growth in 2001
·
Figure 47: Lloyd's share of the market increased in
2000
·
Figure 48: Premium growth is forecast at a slower rate
post-2002
·
Figure 49: The market will remain profitable until 2007