UK Car Insurance Industry Watch, May 2007

This regularly updated section of the HomeApproved web site will cover the latest trends, research, opinion and developments in the UK car insurance sector.

Britons 'Avoiding Car Insurance Payments' As Motoring Costs Soar
A YouGov poll has revealed that motorists are delaying or avoiding their car insurance payments in a bid to cut down escalating motoring costs. The poll of 2,213 UK adults found the average Briton now spends £1,776.62 a year on motor costs including tax, fuel, parking and maintenance - forcing 74 per cent of respondents to keep a careful eye on costs.

For a fifth of those surveyed, budgetary pressures are so extreme that they admit to having delayed or avoided paying motor insurance costs in a bid to alleviate financial pressure.

Commenting on the findings, Mark Searles, chief marketing officer at Zurich Insurance, said that this practice means law-abiding Britons are forced to pay more for their car insurance. "The most worrying findings from our research are those that show some drivers are risking their own and others' safety in a bid to save money," he said.

"We need to change those attitudes and remember that it is a legal requirement to have both a valid MOT and insurance. "Everyone pays an extra £30 per year on their premium as a result of accidents that are caused by those with no insurance."

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Leading Motor Insurers Driving Online Customers Away
Many leading motor insurance web sites are failing to capitalise on the online sales opportunity by making it too difficult for drivers to get a quote online, according to a new industry benchmark report. Ambiguous forms, a lack of clear information and difficult to follow quote processes are some of the critical errors identified in ‘Driving Online Sales for Motor Insurance‘ published by usability specialists Webcredible.

The report evaluates the web sites of 20 UK car insurers against 20 key usability criteria, awarding each a Web Usability Index rating out of 100. Only half of the motor insurers achieved a score of over 55 in the study. Quinn Direct, Hastings Direct and the AA topped the Index with scores of 76, 69 and 69 respectively, providing easy to follow quote processes, consistent formatting and explicit instructions to enable users to easily understand and navigate the website.

However, many big insurance brands languished at the bottom of the league table, including Elephant (53), Endsleigh (43) and The Post Office (43). Swiftcover provided the worst experience, scoring a mere 42 out of 100. The Webcredible report uncovered three critical areas where insurers were putting off web visitors:

1. Failing to set expectations at the start of the quote process. As soon as users click to ‘get a quote’, they should be told how long the process will take and if they will need any information they might not know off the top of their head, such as registration number. Failure to do so can lead users to abandon the quote process altogether. Insurers scored badly in both areas, with an average score of 1.2 and 0.3 out of 5 respectively.

2. Telephone number not clearly displayed by 70% of web sites. Research has shown that 35% of people that use the internet to research insurance or get a quote actually choose to pay offline. If a website doesn't clearly provide contact details, they will be preventing this large percentage of internet users from buying a policy from them.

3. Not helping internet users when they encounter an error. During the quote process, 40% of insurers did not provide users with a summary of errors or provide explicit instructions on how they should be corrected. If internet users can’t spot their mistakes and, more importantly, work out how to fix them, the only alternative could be to visit another website and try again.

“There are countless car insurance web sites all vying for the attention of drivers, so providing a clear, easy to use website can be the critical differentiator,” explained Trenton Moss, managing director, Webcredible.

“Online insurance is an aggressively competitive market but many insurers are failing to meet basic usability standards. For example, 90 per cent of insurers missed the golden rule of setting customer expectations prior to embarking on a quote. This could cost them dearly as drivers give up mid-way through the process and deflect to a competitor’s website out of sheer frustration. By taking steps to design their web sites around the needs of their target users, companies can reap significant rewards and increase conversion rates by as much as 100 per cent.”

Source: Webcredible, 2007.

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Roadsafe Review
With the backdrop of increasing concerns over the number of young drivers killed and seriously injured on UK roads, HomeApproved provides an introduction to the Roadsafe organisation.

Roadsafe is acknowledged as a leading forum for promoting and devising solutions to road safety problems. Their mission is to reduce road deaths and injuries through building partnerships between the motor industry and related companies, traffic engineers, the police and road safety professionals, promoting the safe design and use of vehicles and roads and encouraging education and innovation.

The organisation delivers regular initiatives and schemes designed to reduce road fatalities. One such scheme recently unveiled by Roadsafe is the government-led ‘Driving for Better Business’ safety initiative. Click the Roadsafe link above for further information.

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GMAC Leads Race for Provident Financial Car Cover
GMAC, the US financial-services group, has emerged as the surprise favourite to buy the motor-insurance business of doorstep leader Provident Financial. The deal would mark a major expansion into insurance for GMAC in Britain.

It is understood to have offered about £175m for the business, known as Provident Insurance. However the group faces competition from Brit Insurance, the listed insurer, and a number of private equity firms.

Provident Financial put it's car-insurance division up for sale in January (2007) after it received several approaches for the business. The division has about 500,000 policyholders and edged pre-tax profits to £41m last year (2006) amid tough competition in the car-insurance market.

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Web Motor Supermarket
Motor broker 4 Insurance has created www.motorinsurancesupermarket.com, a fully transactional web site that allows customers to search and buy policies online from companies such as Zurich, Norwich Union, NIG and Churchill.

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Allianz in Motor Trade Drive
Allianz will target the SME sector with an enhanced motor trades policy. Allianz said that it hoped to increase the number of its policyholders, currently at 7,000, by between 5% and 6% by the end of the year (2007).

Mark Ashwood, motor trade manager, said: "The SME market is where we hope to penetrate the most. This is where our new policy delivers the most tangible benefits. It is also the most profitable area."

The enhanced product will provide legal expenses cover for policyholders that have an income of less than £2m. It will also extend personal accident cover to directors, and increase the lock and keys limit to £50,000.

Policyholders will also have access to an online risk management tool, RiskDirector. Allianz claims that 85% of UK businesses have no commercial legal expenses cover.

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One in Ten Lie to Motor Insurance Company - Admiral
Ten per cent of motorists lie to their insurance company when they insure their car in order to get themselves a cheaper quote, according to new figures from British insurer Admiral.

The company is warning all drivers to tell the truth or risk losing their cover. Admiral, like other insurers cancels hundreds of policies every year because they find out someone has lied when they bought their insurance.

Admiral managing director, Sue Longthorn, said: "Some people think that by telling a small lie they can get a cheaper quote. In reality they are committing fraud. An insurance policy is a legal contract so its vital that you are honest, or that contract can be claimed invalid and cancelled."

Common lies told by motorists include not disclosing modifications to the car, insuring a young person's car in the name of an older driver and not mentioning previous claims.

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Changes to the Highway Code Arouse Cyclists Fears
Britain's cyclists are on the warpath. Fed up with being hooted, bumped and abused by motorists, they are campaigning against changes to the one document that has previously offered them protection: the Highway Code.

Under the proposed alterations laid before parliament the new Highway Code will require cyclists to stick to cycle paths and lanes rather than using the road. Cyclists groups warn that many cycle lanes increase the risks they face, and being forced to use them would take away their members' right to use their initiative and react to changing road conditions.

Their is a distinct sense that the government is getting its safety policy on cyclists wrong. According to the DfT's latest full-year figures, in 2005 cycling was the only mode of transport with an increase in deaths, up 10% to 148 from 134 in 2004, while the number of cyclists seriously injured rose by 2% to 2,212. It was the second year running in which cycling deaths rose: in 2003 there were 114 fatalities.

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G-Wiz Electric Urban Run-Around Fails Safety Tests
Mini-cars that are fashionable with the environmentally-conscious could be lethal in a crash, ministers have warned. There is mounting evidence that some urban motorists are switching from conventional cars to light-weight, green vehicles, such as the electric G-Wiz.

Electric cars are seen as green and are exempt from the Congestion Charge in London and road tax. But Government research has found that the G-Wiz failed the sort of crash tests which conventional family cars and 4x4s must pass to be allowed on the road.

When the Department for Transport ran crash tests on a Reva G-Wiz electric vehicle, it passed the European requirement for quadricycles. However, a spokesperson said: "When it was subjected to the same impact test expected of normal cars, serious safety concerns were highlighted.

More than 750 G-Wiz vehicles were sold in the UK between 2004, when they went on sale, and the end of 2006. The cars are priced from £6,999 and have a range of about 40 miles per charge. The top speed is 42mph - fast enough in 30mph and 20mph zones.

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HSBC looks to insurance expansion
HSBC and Norwich Union have formed a joint venture as Britain's biggest bank looks to strengthen its hand and make it one of the UK's top ten insurance providers.

The pact will see Norwich Union, the UK arm of Aviva, underwrite and distribute general insurance products to HSBC's 10.2 million UK customers. It builds on an existing arrangement between the pair stretching back almost a quarter of a century that has seen HSBC distribute protection, home, travel and car insurance products created by Norwich Union.

Dyfrig John, chief executive of HSBC Bank, said: “It would be fair to say that HSBC has historically punched below its weight in insurance. But we have shown before that our customers want to stay with us if we offer well serviced, good value products.”

And he added: “We didn't have the most powerful operation, we didn't have scale and this is a scale business. Now was the time for us to focus.”

The two sides said they aimed to make the venture, which will be branded HSBC Insurance, a top ten firm in UK general insurance, which implies it will pull in premiums of around £600 million a year. Both sides agreed it was too soon to give details on the capital each would contribute, although they expect the venture to be up and running by the second half of 2007.

Simon Machell, chief executive of Norwich Union, said: “Customers are increasingly turning to trusted brands for their insurance needs and by leveraging the HSBC brand we will crate a significant new force in the UK insurance market.”

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Road casualty improvement is no accident
Compared to 1994 – 1998 average, 2006 figures reveal:

• Pedestrian deaths and serious injuries cut 40 per cent.
• 39 per cent fewer car users killed or seriously injured.
• Child fatalities and serious injuries down 53 per cent.

Investment in car, van and truck safety has helped drive down road casualties. Latest statistics from the DfT reveal improvement in all areas particularly a year-on-year reduction in pedestrian casualties, seven per cent down to 31,020 and child casualties down 10 per cent to 10,140.

The motor industry believes it continues to play a significant role in this progress. Improvements in passive safety – systems designed to protect occupants in a crash including air bags and crumple zones – are now complemented by more cars on the road fitted with active safety systems.

These prevent an accident happening and include technologies like lane departure warnings, assisted braking systems and ESC (electronic stability control) that works to prevent cars from skidding out of control.

"We should welcome the news that UK roads are safer and highlight the progress we as an industry have made," commented SMMT chief executive Christopher Macgowan. "Nevertheless, we must not be complacent: behind the statistics lie events that devastate lives and the motor industry is committed to continue to deliver safer cars, vans and trucks."

Source: Department for Transport (DfT), May 12th, 2007.

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More Than Delivers 'Green' Black Box
Drivers who sign up to a trial project with More Than will have an aircraft-style 'black box' fitted in their car. The system will give regular feedback to the insurer. Along with Norwich Union, More Than already puts GPS trackers into the cars of young drivers to encourage them to keep off the road at dangerous periods by imposing a high charge for night-time driving. But this initiative is aimed at protecting the planet rather than saving lives.

Paul Pritchard, corporate responsibility manager at More Than, says: "The whole idea is to look at changing drivers' behaviour and encouraging them to use their car more efficiently and responsibly. Though drivers will not benefit from lower premiums if they have the device fitted, the Energy Saving Trust says that 'greener' driving can trim up to £120 off the annual fuel bill.

The GPS technology will highlight wasteful short journeys, or long periods where the engine is running and the car not moving. It will also tell drivers about average speeds or over-revving. Pritchard says: "We might give feedback weekly or monthly. It could be through a secure web site, by email or even by text. We just have to find out what the motorist wants. More Than plans to install 1,000 of the GPS systems by the ned of the year (2007).

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Swinton Seeks to Accommodate Penalised Drivers
Drivers with six points or more on their license looking for car insurance could soon be viewed as ‘standard’ rather than ‘non-standard’ according to high street broker Swinton.

Pointed drivers are no longer automatically penalised at Swinton as a result of the increase in the number of motorists now saddled with penalty points. And the move reflects a change in attitude by the insurance industry as the estimated number of pointed motorists tops six million.

With the 6,000 speed cameras on our roads already catching over two million speeders each year, and driving whilst using a mobile phone now costing the driver three points, an unblemished license is becoming rare. Swinton announced it had seen a 12% increase in the number of drivers with points looking for insurance during 2006 - and as a result has set up a dedicated unit to deal with this rising demand.

Swinton Specialist was launched earlier this year for drivers of imported, modified and high performance motors. The division is now also handling drivers with penalty points, and is already experiencing a high volume of calls.

Neil Ackinclose, head of Swinton Specialist, explained: “Here at Swinton we have set up Swinton Specialist - a dedicated unit to deal with non-standard motor insurance - where drivers with any number of points are treated as individuals. We look at full driving history and aim find a value policy to suit each car owner, whatever the vehicle.”

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Liverpool Victoria Buys Britannia Rescue
Liverpool Victoria (LV) purchased Britannia Rescue, the UK's fourth largest roadside rescue provider, from the Civil Service Motoring Association for £36m. LV said it would expand the business through a number of channels, including brokers and corporate partners.

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Admiral admits Takeover Interest for Confused.com
Motor insurer Admiral has been forced into making a public statement about its aggregator business Confused.com. The company has received a number of approaches for the business and recently made an announcement to the stock exchange, after the Daily Telegraph reported that the firm was seeking bids of around £700m for the business.

"The company notes the recent press speculation regarding Confused.com and confirms that it has received approaches from several parties regarding the business. The board is reviewing its options in relation to Confused which include retention of the business or a partial or full disposal. There can be no certainty that any transaction will take place."

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