Welcome to Project Loomis;
Ignite's Motor Insurance Study
Gilbert Loomis was the first person to ever take out a motor insurance policy. Back in 1897 in Ohio, it is reported that Loomis purchased a liability insurance policy from the Travelers Insurance Company for one thousand dollars. This policy protected Loomis if his car killed or injured someone or damaged their property. In homage to Loomis' foresight we have titled our 3 part study of the state of play in Ireland's motor insurance sector Project Loomis.
Our study examines the state of the motor insurance industry through the eyes of the motorist, and over the coming days we will share some of the key findings from our nationally representative study of motorists under each of the following headings:
- Consumer Switching Patterns
- Premium Wars - the Winners and Losers
- Pricing Thresholds and impact on Consumer Choices
Tracing the Origins of Premiums Increases in 2016
The motor insurance sector has come in for some attention recently for increasing premiums. Our study will hone in on how consumers are engaging with motor insurance as tensions escalate over price increases.
Despite this recent attention around premiums, many people fail to appreciate that underwriting has become an exceptionally competitive sector over the past decade in Ireland. Some key facts from the latest Central Bank Private Motor Insurance Statistics highlights the mounting commercial pressure of decreasing revenue (via premiums) and increasing costs:
From 2003 - 2013 average premiums for fully comprehensive and third party fire and theft cover declined by 47% and 48% respectively. More recently the cost to service the market for insurance underwriters has increased over the period of 2010 - 2013 by 32% for full fully comprehensive and 56% for third party fire and theft. Many commentators have pointed to the legal costs associated with claims, insurance fraud, uninsured drivers and a range of other technical issues which have contributed to costs.
What is undeniable is that in a category where revenue is falling and costs are climbing, something has to give. The difficulties within the sector have become more acute recently and have resulted in a number of high profile commercial casualties. Fast forward to 2016, and motorists are now faced with rapidly rising premiums. How motorists select who to be insured with is being put under the microscope like never before and how they engage with the sector is getting changing rapidly as the industry starts to behave differently as regards pricing.
In this first issue we will be focusing on Consumer Switching Patterns and first off we wanted to understand what consumers are driving and who they are insured with, before getting into more specifics.
What's Ireland Driving
The average age of fleet on Irish roads is 8.5 years with a 2008 registered car being the most common.
Toyota is the most popular car on the road, just ahead of Ford. SIMI new vehicle registrations for 2016 up until May would indicate that the battle for top spot is heating up with Volkswagen, Toyota, Hyundai and Ford all with between 10.77% and 9.93% share, or a difference of just 838 vehicles between the top four.
Insurance Providers of Choice
When we take a look at where these motorists choose to take out insurance, we can see that things are almost equally as competitive as the auto market, with no one provider having more than 18% share. Aviva and AXA are leading the charge currently.
With variations in market share across regions and age cohorts, combined with vastly different risk profiles, being competitive across all segments of the market is a tough ask for insurers. Increasingly as premiums become more top of mind for motorists the ask is becoming greater still to win customers and importantly to retain them.
Switching Insurance Providers
The majority of motorists feel that it is relatively easy to switch insurance provider, and although younger (18-24 year olds) are a little less confident in the ease of switching, as motorists progress into their later 20's and beyond, the perceived ease of switching rises considerably.
Considering how easy motorists feel it is to switch insurance provider, it is not surprising that in the past 5 years, 7 in 10 motorists have switched motor insurance provider at least once, and on average those who have switched have done so 2.15 times. That means on average the motor industry as a collective has been able to retain newly won customers for just over 2 years .
Irish consumers have well documented low levels of switching across other non insurance categories. The fact that 7 in 10 switch on average every 2 years is a stark statistic in this context. Also with the constant need to fight to win new customers while hemorrhaging existing customers relatively quickly, the industry seems to be in a state of perpetual churn which does little but add to the bottom line cost for insurers and consumers alike. Many other sectors have gone down this road of fighting over the perpetual switchers to win, but arguably no other sector has been doing so with such an unstable "loyal" customer base. In this switching war zone, identifying where largest pools of customer lifetime value exists, and importantly identifying how to secure the customer base for more than two years on average, is critical to winning the switching war and driving higher return on investment.
Where are The Main Insurers Winning Share From?
When we look at where current insurers customers have been insured in the past 5 years before switching in to their current insurer of choice, we can start to understand where some providers are having more success in recruiting the lions share of their new customers in recent years.
However, being successful at enticing new customers in is only one part of the equation. Having the capacity to retain these hard won customers is where the real sustainable growth model is. With premiums growing in recent years, retention is arguably getting more difficult rather than easier. Our next installment of Project Loomis will look at what level of pressure consumers are coming under in terms of premium inflation, and we will then look at what pricing thresholds exist to push motorists to be more motivated to switch providers or to consider reducing level of cover from fully comprehensive down to third party fire and theft. Register below to be on our mailing list to make sure you don't miss out on the next issue.