’I can understand some of the reasons why people might see this as the right time to get out,’ says director of insurance pricing

Earlier this year (28 March 2023), RSA Insurance announced it would exit the UK personal lines motor market after conducting a “thorough review” of its business.

Then, just over three months later (13 July 2023), Zurich UK revealed plans to refocus its personal lines home and motor business to concentrate on the high-net-worth (HNW) market and proposed to withdraw from the regional and national broker channels.

While these announcements came as a shock, they had something in common – both cited the competitive nature of the market as part of the reasons for decisions that had been made.

The motor sector has always been fast-paced and competitive by nature, given that drivers are required by law to have insurance and that they can use price comparison websites (PCWs) to find the best prices.

For example, back in 2015, Citizens Advice found that from a survey of 980 consumers, some 85% would use a PCW to get the best deal, while 79% would use one to save money.

“PCWs have led to a fairly dynamic and fast-paced market that does not really exist anywhere else in the same way,” Markerstudy’s underwriting director Gary Humphreys said.

“That’s obviously led to insurers having different business models, which is really what drives the intensity and competitive nature.

“The benefits are that you have quick, fast access to a significant number of customers who are marketed to heavily on a regular basis.

“[However], if there are weaknesses in your pricing models, then it gets exposed pretty quickly.”


While the UK personal lines motor market is competitive by nature, rising costs for insurers have not helped the situation.

For example, the ABI noted earlier this month (11 August 2023) that insurers paid out £2.4bn in all motor insurance claims – including theft, vehicle repairs and personal injury – in the first quarter of this year, up 14% from Q1 2022.

It added that the cost of vehicle repairs had leapt by 33% year-on-year to £1.5bn, the highest figure since the ABI started collecting this data back in 2013.

In turn, insurers have had to bump up the prices of premiums – the ABI revealed that the average price paid for private comprehensive motor insurance surged 21% to £511 in Q2 2023, the highest level since records started in 2012.

Amid these pressures, consultancy Ernst and Young (EY) predicted that 2023 would see the UK motor insurance sector achieve a net combined ratio of 108.5%

And with Richard Reed, head of UK general insurance at EY, warning that there was a “need for the sector to rebalance its books”, a competitively priced premium can be difficult to achieve.

“It is a really tough market,” Chris Sandilands, partner at business consultancy Oxbow Partners, said.

“The market is going to be submitting an underwriting loss this year and even next year, it is only just going to get to break even, in our forecast.

“Undoubtedly, it is a very tough market to make money in.”

Stephen Kennedy, director of insurance pricing at pricing consultancy Pearson Ham, added that the FCA’s general insurance pricing reform had also made it harder to be competitive.

Introduced in January 2022, the reform aimed to protect consumers by abolishing price walking, preventing insurers from offering cheaper policies to new customers while increasing prices for existing policyholders.

“So, whenever you make a price change, you have to apply that change to the renewable book as well as the new business book,” Kennedy said.

“So, it is a bit of an investment to put a price reduction in. If you want to try and drive some volume, then it is going to impact profitability because you are going to have to put prices down for renewal customers as well as new business customers.

“Although you are driving new business customers, you are reducing the value of the back book, so it is a pretty tough situation for them to be in.”


Back in March, RSA said it was leaving the personal lines motor market because the UK remained competitive and “requires significant scale to drive meaningful out-performance”.

And David Nichols, head of retail at Zurich, said the insurer was floating its proposals with the UK personal lines market continuing to be “intensely competitive”.

As a result of increased pressures and economic headwinds, Kennedy said he could understand why insurers could find it difficult to be competitive in the sector.

“The pressure of additional regulations, the spiralling cost of claims, the tough market and the way pricing needs to be done makes it quite difficult to be able to compete,” he said.

“So, I can understand some of the reasons why people might see this as the right time to get out.”

Humphreys added that the motor market had become “more concentrated”, with the competitive nature of the sector making it harder for some to increase their books.

“There is some highly successful direct players out there who have probably gained an advantage over others who do not have the sophistication in personalised pricing models or distribution capability,” he said.

“Consequently, they have seen their books get smaller.

“[And] because motor is a very small margin business, you need economies of scale to compete.”

Boosting competitiveness

So, what can insurers do to be more competitive in the motor market? According to Adam Winslow, Aviva’s chief executive of general insurance in the UK and Ireland, there is no “single silver bullet” to being competitive.

Adam Winslow

Adam Winslow, Aviva

However, there are a range of things insurers can do to help them grab a larger share of the market.

According to Sandilands, a key element of this is being “really clear” on what the distribution strategy is.

And he noted that, because of the nature of distribution, the skills needed in the personal lines market were “fundamentally different” to other parts of the market.

“It’s one of those markets where you just have to deliver effectively and efficiently across all parts of the value chain,” he said.

“If you are trading through a PCW, then you need to be really good at high velocity data, pricing and optimisation.

“That has very specific requirements around the technology needed, who you need to employ and the kinds of capability you need.”

Humphreys added that a strong product offering and brand strategy was important for insurers to have as well as making “significant investment” in advanced pricing tools and software.

“You need to be able to invest in the lifetime value of a customer,” he said.

“So, it is about having that clear strategy, the brand and the alignment of pricing so that you are not constantly churning business every year because that’s just expensive.”