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UK Travel Insurance 2008 - This report offers a comprehensive guide to the UK travel insurance market, including information on market size, market drivers, consumer trends and the top competitors in the market.

Product Code: dmfs2243

Publication Date: 08-Sep-2008

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Overview

Introduction

This report is an invaluable source of information on the UK travel insurance market. It provides unique market size information and discusses the main challenges and trends facing travel insurance providers. It also reveals which underwriters are leading the way in this market and forecasts what the future holds for the sector in the next five years under two different scenarios.

Scope

· Consumer data giving insight into travel insurance purchasing habits

· Analysis of the major competitive issues shaping the market, supported by interviews with senior industry executives and data from secondary sources

· GWP forecasts to 2012, based on Datamonitor's in-house expertise and proprietary model

Report Highlights

One of the dominant trends in the UK travel insurance market over the last five years has been the shift towards more annual policy sales as opposed to single trip policies. This trend has resulted in annual policy premium income accounting for a larger proportion of travel insurer's premium income in 2007.

Datamonitor estimates that the number of travel insurance policies written in 2007 increased by 2.4%. This expansion in policy numbers served to offset the decline in premium rates, which have occurred to both single trip and annual cover policies

AXA accounted for 27.1% of the market in 2007, an increase of 6.7 percentage points. The company remained the UK's largest travel insurance underwriter in 2007 and has seen its market share and lead over its nearest rivals increase. AXA's growth in market share was the result of substantial growth in premium income.

Reasons to Purchase

· Plan your future travel insurance strategy using Datamonitor's market size forecasts

· Understand consumer purchasing and decision making behavior to help you optimize acquisition rates

· Benchmark your travel insurance business against the competition

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Overview	1
Catalyst	1
Summary	1
Executive Summary	2
The market grew in 2007 driven by increased volume and a shift towards annual cover	2
Premium income climbed to an all time high of £718.8m	2
Annual policy premium income is estimated to have increased its proportion of the market in 2007	2
Claims frequency is low and the majority of claims are low value	2
The FSA will begin regulating the travel trade in 2009, though a number have already become tied agents	2
UK consumers continued to increase their travel abroad in 2007	3
The number of visits abroad by UK residents increased by 2.3% in 2007	3
Growth was distributed throughout the year, though the summer months remain favorite times to travel	3
The fastest growing reason for travel abroad by UK residents was visits to family and friends	4
Consumers are strongly influenced by the convenience of a product, although product penetration varies by age and income	4
Convenience, reputation and price are the key influences behind a consumer's purchase decision for travel insurance	4
Younger consumers are the least inclined to purchase an annual travel insurance policy	4
Conditions were competitive as consolidation continued among distributors	4
AXA's market leading position has increased despite weakness in the travel trade	4
Marketing and advertising outlays climbed to an all time high in 2007	5
The UK market in the future will remain highly competitive, constraining premium income growth	5
Competition will remain fierce among underwriters	5
Distributors will also keep competitive pressures high	5
Annual growth averaging 4.1% per year is forecast for the UK travel insurance market between 2008 and 2012	5
Table of Contents	6
Table of figures	7
Table of tables	7
Market Context	8
Introduction	8
The market grew in 2007 driven by increased volume and a shift towards annual cover	8
Premium income climbed to an all time high of £718.8m	8
Annual policy premium income is estimated to have increased its proportion of the market in 2007	9
Increases in foreign travel and product penetration have increased the number of policies sold	11
Premium rates declined marginally due to fierce competition, particularly for annual cover	11
Profits in the market continued to narrow as claims costs rose faster than premium income	11
The market was estimated to have remained profitable in 2007	11
Claims frequency is low and the majority of claims are low value	12
Medical expenses represent the largest claims cost for insurers	13
Regulatory change will have a large impact on the market in the near future	13
The FSA will begin regulating the travel trade in 2009, though a number have already become tied agents	13
The overseas terrorism bill is not likely to be passed, though insurers are active on the file	14
Customer focus	15
Introduction	15
UK consumers continued to increase their travel abroad in 2007	15
The number of visits abroad by UK residents increased by 2.3% in 2007	15
Growth was distributed throughout the year, though the summer months remain favorite times to travel	16
Europe remains the destination of choice even with other locales gaining in popularity	17
Visits to family and friends continue to grow at a higher rate than other trips, though holidays still lead	19
The fastest growing reason for travel abroad by UK residents was visits to family and friends	19
Holidays abroad are the top reason for foreign travel by UK residents	19
Consumers are strongly influenced by the convenience of a product, although product penetration varies by age and income	21
Convenience, reputation and price are the key influences behind a consumer's purchase decision for travel insurance	21
Product penetration rates for travel insurance are higher among older consumers	22
The uptake of travel insurance is higher among the more affluent consumer	23
Annual cover is most popular among consumers aged between 45 and 59 and those who belong to higher income brackets	25
Younger consumers are the least inclined to purchase an annual travel insurance policy	25
Affluent consumers have a higher tendency to purchase annual policies	26
The travel trade has lost market share to cheaper alternatives	28
Direct, broker and financial product related offerings have increased market share at the expense of the travel trade	28
Internet based purchases have grown considerably	30
Compeititive Dynamics	31
Introduction	31
Conditions were competitive as consolidation continued among distributors	31
The merging of SAGA and AA has resulted in a fierce new competitor for underwriters and distributors	31
AIG acquired Direct Travel Insurance Services in September 2007	31
R3 Group acquired military travel and holiday specialist Forces Travel	31
Citybond acquired Aon's travel book in November 2007	32
The top 10 gained market share as the market grew slowly in 2007	32
Most top 10 insurers lost market share due to declining GWP	32
AXA's market leading position has increased despite weakness in the travel trade	32
Three of the top 10 insurers experienced increasing market share in 2007	33
Norwich Union's travel insurance book continued to experience robust growth in 2007	33
Great Lakes has rapidly become a significant underwriter in the UK travel insurance market	33
ACE wrote more UK originated travel insurance in 2007	33
A number of the top insurers experienced contracting market shares in 2007	33
Few large affinity accounts changed hands in 2007	35
Mondial was one of the more active players in the travel insurance affinity market	35
Europ Assist has renewed and secured new travel accounts in 2007	36
Several other affinity accounts were also agreed in 2007 and 2008	36
Insurance providers increased their travel insurance advertising spending in 2007	37
Marketing and advertising outlays climbed to an all time high in 2007	37
Direct mail remains the principle means for advertising travel insurance, though press advertising also grew	38
The top 10 travel insurance advertisers increased their spending in 2007	40
Press and direct mail formed the bulk of the advertising spending of the top 10	40
Saga more than doubled its travel advertising outlays in 2007 to become the lead travel insurance advertiser	42
Future Decoded	44
Introduction	44
The UK market in the future will remain highly competitive, constraining premium income growth	44
Competition will remain fierce among underwriters	44
Distributors will also keep competitive pressures high	44
No large spike in claims is forecast due to natural disaster or terrorist event	44
The travel insurance market is forecast to attain a value of £880.5m in 2012	45
Conditions in the market are generally forecast to be flat with no big shifts in market trends	45
Annual growth averaging 4.1% per year is forecast for the UK travel insurance market between 2008 and 2012	45
The market is forecast to grow much slower if the bulk of travel agents fail to proactively adapt to regulation	47
FSA regulation in 2009 could force many smaller travel agents out of the market	47
The market will grow by an average 3.2% per year over the forecast period	48
Appendix	51
Supplementary Information	51
Market Context	51
Customer Focus	51
Competitive Dynamics	53
Affinity partnerships	55
Definitions	57
Brokers	57
Bancassurers	57
Brandassurers	57
Gross written premiums	57
Geographical areas	57
Research methodology	58
Primary research	58
Market Context	58
Customer Focus	58
Ipsos MORI methodology and contacts	58
Relevant links	59
Further reading	60
Ask the analyst	60
Datamonitor consulting	60
Disclaimer	60
List of Tables
Table 1: Estimated UK travel insurance GWP, 2003−07 (£000s)	9
Table 2: Estimates of UK travel insurance GWP by policy type, 2004-07	10
Table 3: Number of travel insurance policies written, 2004−07e (000s)	11
Table 4: UK travel insurance gross loss ratio, 2004−06	12
Table 5: UK travel insurance claims volume, costs and frequency, 2004−06	12
Table 6: UK travel insurance claims costs by peril 2004−06	13
Table 7: Number of visits abroad by UK residents, 2003−07p (000s)	16
Table 8: UK residents' visits abroad by destination, 2003−07 (000s)	18
Table 9: UK residents' visits abroad by reason for travel, 2003−07 (000s)	20
Table 10: Travel insurance product penetration by age group, 2007	23
Table 11: Travel insurance product penetration by income bracket, 2007	24
Table 12: Split between annual and single trip polices, by age group, 2007	26
Table 13: Split between annual and single trip policies, by household income, 2007	27
Table 14: Distribution of travel insurance GWP by channel, 2003−07 (%)	29
Table 15: Top 10 UK travel insurers by market share, 2007	34
Table 16: Top 10 UK travel insurers by market share, 2007 (£000s)	35
Table 17: UK travel insurance advertising spend by media, 2003−07	39
Table 18: Top 10 UK travel insurance advertisers by medium, 2007 (£)	42
Table 19: Top 10 UK travel insurance advertisers, 2005−07 (£)	43
Table 20: Key variables affecting travel insurance GWP, neutral scenario, 2008e-12f	45
Table 21: UK travel insurance GWP, neutral forecast, 2003-12f, (£000s)	47
Table 22: Key variables affecting travel insurance GWP, pessimistic scenario, 2008e-12f	48
Table 23: UK travel insurance GWP, pessimistic forecast, 2003-12f, (£000s)	50
Table 24: Number of trips abroad taken by UK residents by quarter, 2004-07p	51
Table 25: Business travel abroad by UK residents, by destination, 2003-07p	51
Table 26: Visits to friends and relatives abroad by UK residents, by destination, 2003-07p	52
Table 27: UK travel insurance competitors by premium income, 2005-07 (£000s)	53
Table 28: UK travel insurance competitors by market share, 2005-07 (%)	54
Table 29: Relationships between travel underwriters and major tour operators, 2008	55
Table 30: Relationships between travel underwriters and online travel agents, 2008	55
Table 31: Relationships between travel underwriters and low cost airlines, 2008	56
Table 32: Relationships between travel underwriters and banks and building societies, 2008	56
Table 33: Relationships between travel underwriters and selected brandassurers, 2008	57
List of Figures
Figure 1: Visits abroad have increased steadily in recent years	3
Figure 2: Premium income has continued to climb despite declining rates	8
Figure 3: The shift towards annual cover has been slight but steady in the last two years	10
Figure 4: Visits abroad have increased steadily in recent years	15
Figure 5: Increases in travel were noticeable in Q1 2006 Q4 2005 and 2007 as well as Q2 2007	17
Figure 6: Trips to Asia and Africa have increased between 2003 and 2007	18
Figure 7: Visits to friends and relatives have increased	19
Figure 8: Holidays abroad remain the single most common reason to travel abroad	20
Figure 9: Convenience was a highly valued factor for consumers purchasing travel insurance	21
Figure 10: Product penetration increases with the age of consumers, with older consumers more likely to purchase travel insurance	22
Figure 11: The uptake of travel insurance is likely to increase as income grows	24
Figure 12: Consumers aged 45-59 are more likely to purchase their travel insurance in the form of annual cover	25
Figure 13: Consumers with lower household income are more inclined to purchase single trip policies	27
Figure 14: The travel trade is still the single most important channel when measured by GWP	29
Figure 15: AXA retains its dominant position in the market with strong growth in premium income	32
Figure 16: Providers have increased marketing outlays significantly in 2007	38
Figure 17: Direct mail accounted for almost half of all expenditures on travel insurance advertising	39
Figure 18: Saga's advertising spend on direct mail is more than double its nearest rival's spend	41
Figure 19: Steady growth over the forecast period will be driven by increases in premium rates and higher trip volumes	46
Figure 20: The market will sacrifice almost £57m of potential value in 2009 if a large proportion of travel agents cease offering cover	49

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