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UK Insurance – Key Facts September 2011
UK Insurance – Key Facts
September 2011
3UK INSURANCE – KEY FACTS
The UK insurance industry is the third largest in the world and the largest in Europe. It is a vital part of the UK economy, managing investments amounting to 26% of the UK’s total net worth and contributing £10.4 billion in taxes to the Government. Employing around 290,000 people in the UK alone, the insurance industry is also one of this country’s major exporters, with 28% of its net premium income coming from overseas business.
The ABI has over 300 member companies which account for some 90% of premiums in the UK. On behalf of our members, the ABI works with governments and political parties in the UK, the EU, regulators, the media and general public to ensure the British insurance industry goes from strength to strength, providing high quality products and services to customers, while continuing to be a global leader and serve the UK economy.
This booklet, published annually, gives 2010 facts and figures about UK insurance and its contribution both to the economy and society.
3UK INSURANCE – KEY FACTS
4 UK INSURANCE – KEY FACTS
Insurance and the economy
The UK insurance industry:• is the largest in Europe and the third largest in the world,
accounting for 7% of total worldwide premium income.
Breakdown of worldwide premium income by country, 2010.1
•employs around 290,000 people.2 This is more than a quarter of all financial services jobs, and twice as many as are employed in the combined electricity, gas and water supply sectors.
United StatesJapan
ChinaItaly
Switzerland
United KingdomFrance
Canada
Ireland
South Korea
Germany
Netherlands
Other
27%
13%
7%6%6%5%
4%
3%3%2%1%1%
22%
1 Source: Swiss Re. Sigma No 2/2010. Note that Switzerland and Ireland are not the next largest countries by premium income, but are included because, together with the Netherlands, they have more favourable tax regimes than the UK and as a result are attracting business away from the UK.
2 Source: ONS, Economic and Labour Market Review, April 2011 and ABI. End-year 2010. This figure includes an estimate of those in auxiliary businesses (brokers, actuarial consultants etc) which is no longer available separately from all financial services.
5UK INSURANCE – KEY FACTS
• is responsible for investments of £1.7 trillion, equivalent to 26% of the UK’s total net worth.3
•controls around 13.4% of investments in the London stock
market.4 This compares to 12.8% held by company pension funds, 3.5% by banks, 1.8% by unit trusts, and 10.0% by other financial institutions.
• is a major contributor to the UK’s tax take. In the 2010/11 tax year ABI members contributed £10.4 billion in taxes, equivalent to 1.9% of total Government tax receipts. Of this, £2.7 billion was Corporation Tax and £1.6 billion was Insurance Premium Tax.5
• is a major exporter – 28% of its net premium income comes
from overseas business. Premium income from overseas is £56 billion, of which £42 billion is long-term business and £14 billion is general business.
3 Source: ONS, The Blue Book, 2010 edition.4 Source: ONS, Share Ownership Survey. Figures relate to 2008, the latest available, but an update is
expected in October 2011.5 Source: ABI Research Paper No. 29, 2011 - Total Tax Contribution conducted by PwC for the ABI.
6 UK INSURANCE – KEY FACTS
Insurance and its customers
Almost every adult and every business in the UK has involvement with the insurance industry in some way.
•An estimated 19.6 million households have contents insurance, and 16.5 million have buildings insurance.
– 2.1m claims were made in 2010. An average fire claim cost £7,900, a theft claim cost £1,400, and a claim following a major flood is estimated to cost between £20,000 and £40,000. In total £9.8 million was paid out to households each day.
•24.3 million private vehicles were insured.
– 3.7 million claims were reported in 2010, leading to £22.4 million per day being paid in claims.
•4.4 million commercial vehicles were insured.
– 855,000 claims were made, and £5.8 million paid each day in claim payments.
•£4.6 million was paid each day to businesses on property damage.
•£5.2 million paid daily in liability claims, such as for accidents at work, professional indemnity and injuries to the public on commercial premises.
7UK INSURANCE – KEY FACTS
Approximately 8.5 million households benefit from a variety of long-term insurance products.
•5.6 million pension annuities pay out £32.8 million each day.
•43% of the working population contribute to a pension policy.6
– of the 21.2 million individual pension policies in force, 10.2 million receive regular contributions averaging £1,100 per annum.
– 2.9 million people in occupational pension schemes contribute £3,660 per person on average.
•29.6 million protection term and whole life policies in force.
– consumers received benefits of around £32.7 million per day.
•There are 10.3 million endowment policies and investment bonds in force.
– investors received benefits from these policies amounting to £63.9 million per day.
6 ABI Quarterly Consumer Survey Q1 2011.
8 UK INSURANCE – KEY FACTS
The UK insurance industry 1,005 insurers are able to carry out general insurance business (such as motor, household, health and commercial insurance) in the UK. Of these, 411 are authorised by the FSA, while a further 594 are EEA authorised and passporting into the UK under the 3rd Non-Life Directive.
309 insurers are able to carry out long-term business (such as investments, pensions and protection) in the UK. Of these, 129 are authorised by the FSA, while a further 180 are EEA authorised and passporting into the UK under the 3rd Life Directive.
The ABI represents around 90% of insurance companies operating in the UK. Many companies are owned by larger insurance or financial services groups. The top 10 general insurance groups account for 67% of the business written, while the top 10 life and pensions insurance groups account for 79% of the business written.
General Insurance Business
In 2010, insurers received worldwide net premiums (written premium less reinsurance premiums paid by the insurer) totalling £46.4 billion and they paid out £30.8 billion in claims. Further outgoings – expenses, commissions, adjustment to reserves etc also contributed to the underwriting result – a small loss of £1.2 billion in 2010.
9UK INSURANCE – KEY FACTS
The worldwide trading result for general insurance business combines the underwriting result with investment income. The return on investing the premiums and reserves held by insurers ensures they make a profit – in 2010 this profit was £3.5 billion, or 7.5 % of premium income.
Worldwide trading result, 1985-2010
In insurers’ UK business, motor insurance is currently the most challenging product for insurers, with increasing bodily injury claims, legal costs, uninsured driving and fraud in 2010.
•Premiums amounted to £10.7 billion, and claims to £10.3 billion.•With other costs, the motor insurers’ underwriting loss was £1.8 billion.
£bn %8.0 24
18
12
6
0
-6
-12
6.0
4.0
2.0
0.0
-2.0
-4.0
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Trading result,£bn (LHS)
Trading result as percentage of premiums,% (RHS)
10 UK INSURANCE – KEY FACTS
Property insurance is affected by major weather incidents, as well as increasing levels of escape of water claims in recent years.
•Premiums amounted to £8.4 billion, and claims to £5.2 billion.
•After two years of underwriting profits, 2010 saw a loss of £191 million.
Liability insurance has historically been a loss-making line of business because of asbestos – related claims, but four of the last six years have seen small profits.
•Premiums amounted to £3.0 billion, and claims to £1.9 billion.
•The underwriting profit was £86 million, although employers’ liability saw a loss of £110 million, and other liability offset this with a profit of £196 million.
£m
14,000
Motor Property Liability Accident & Health
Misc &Pecuniary Loss
12,000
10,000
8,000
6,000
4,000
2,000
0
Net Premiums Total Outgo
11UK INSURANCE – KEY FACTS
Long-Term Insurance & Savings Business
Premiums for life and pensions business were £110 billion for ABI members in 2010, a 7% decrease over 2009. Life premiums decreased by 1% and pension premiums decreased by 8%.
Total premium by type of insurance, 2000-2010 7
£bn200
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
180
160
140
120
100
80
60
40
20
0
Life Insurance
Individual Pensions
Group Pensions
OtherBusiness
7 Figures are shown in nominal terms – not adjusted for inflation.
12 UK INSURANCE – KEY FACTS
Payments by insurers in 2010 amounted to £151 billion, a 1% decrease on 2009. This includes:
•Around £53.6 billion – or £147 million per day – paid out in benefits to pensioners and long-term savers.
•Around £6.2 billion – or £17 million per day, in death and disability benefits.
•Around £91 billion of transfers of pension funds to other insurers or pension fund managers.
Payments by insurers, 2000-2010 8,9
£bn180
160
140
120
100
80
60
40
20
02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Maturity &Surrender
Periodical Payments
Death & Disability
PensionTransfers
8 Figures are shown in nominal terms – not adjusted for inflation.9 Periodical payments stem mainly from pension annuity payments, but also from some life
insurance products.
13UK INSURANCE – KEY FACTS
How consumers buy insurance
There are many ways to buy insurance, and this varies considerably according to the product being purchased.
In general insurance overall:
•56% of business was sold through brokers, although for commercial business 80% of business was sold this way.
•31% of personal business is sold direct – by telephone or through the internet. For private vehicle insurance, the figure is 43%.
Insurers cannot report how much broker business is written through comparison websites, but it is estimated that 51% of all private car new business was purchased as a result of the use of the Internet in 2010, and this is increasing in 2011.10 The report also suggests that 10% of household insurance was purchased this way in 2009, and that this could double by 2011.
10 Datamonitor Report – UK Personal Insurance Distribution 2011
14 UK INSURANCE – KEY FACTS
General Insurance Retail Sales, 2010
76% of life and pensions business was sold through Independent Financial Advisers in 2010, and 13% through advisers selling the products of one or a limited range of insurance companies. The remaining 11% was sold without advice. The current methods of selling insurance are being reformed by the FSA as part of the Retail Distribution Review, and significant changes are due to come into force on 31 December 2012.
Company Agents
Direct
Brokers
Banks/Building Societies
Utilities/Retailers/Affinity Groups
11%
31%
12%8%
37%
15UK INSURANCE – KEY FACTS
Investment holdings
As at 31 December 2010, the insurance industry had £1,719 billion invested in company shares and other assets on behalf of millions of savers and general insurance customers in the UK and elsewhere. General insurance investments amounted to £122 billion, while long-term investments were £1,597 billion.
Invested funds by asset class, 2010
UK public sector securities (including gilts)
Overseas public sector securities
UK ordinary stocks and shares
Other UK company securities
Other overseas company securities
Property
Overseas ordinary stocks and shares
Unit Trusts
Cash and other investments
13%
5%
14%
10%
16%
14%
15%
6%
7%
16 UK INSURANCE – KEY FACTS
A world-leading industry
Insurance helps individuals and businesses protect themselves against the everyday risks they face, enabling people to own homes, travel overseas, provide for a financially secure future and run businesses. Insurance underpins a healthy and prosperous society, enabling businesses and individuals to thrive, safe in the knowledge that problems can be handled and risks carefully managed.
The ABI’s current priorities are to:
•Lead the debate and achieve an appropriate outcome on the treatment of insurance as the UK and EU reshape the regulatory architecture following the financial crisis, most importantly in relation to the Solvency II Directive on capital.
•Maintain pressure for a stable, competitive tax regime which helps to promote the UK as an attractive place to do business and maintains the place of the UK as a leading financial centre.
•Work to build trust and tackle detriment to our customers through clear communication, proportional regulation and making the right products available to people who need them at a fair price.
•Ensure Government works with industry to deliver a sustainable framework to manage and reduce flood risk so that insurance can remain widely available and affordable after the Statement of Principles expires in 2013.
17UK INSURANCE – KEY FACTS
•Help drive key Government reforms to the personal injury compensation scheme to help road traffic accident victims.
•Help tackle under-saving by ensuring the successful introduction of auto-enrolment in 2012, increasing customer awareness of annuities and the benefits of shopping around, as well as promoting the benefits of saving into a pension.
•Develop a simplified advice model for consumers who are unable or unwilling to pay for full financial advice, helping them to access suitable services and products that will meet their needs, especially after the implementation of the Retail Distribution Review reforms in 2012.
•Lead thinking on how risk can be shared between public and private provision, giving people who can afford to protect themselves more options so that they are not as reliant on the state.
•Drive key policy thinking on supporting radical reform of long-term care.
•Provide leadership in corporate governance, including through advice to institutional investors from the ABI IVIS advisory system.
18 UK INSURANCE – KEY FACTS
Otto Thoresen Director [email protected] 020 7216 7300
Joanna Rose Assistant Director, [email protected] 020 7216 7380
Statistics [email protected] 020 7216 7390
ABI Website
The ABI website – www.abi.org.uk – is the primary means of communication between the ABI, its members and the wider community. It contains all the latest news, facts, figures and policy responses from the ABI.
There is a dedicated area for ABI members where meeting papers, staff contact details and information can be found. Detailed statistics are free to members and accessed by others through subscription.
Everyone can access the latest responses to Government consultations, information for consumers, overview statistics and media stories.
Contacts at the ABI
18 UK INSURANCE – KEY FACTS
For more information, contact:
Association of British Insurers, 51 Gresham Street, London EC2V 7HQ
020 7600 3333 www.abi.org.uk
