Insurance services

The AA acts as an intermediary between those seeking insurance cover and insurance underwriters and earns a commission at the point of sale. As an insurance broker the AA assume no underwriting risk, but works with one or more underwriters who compete for the risk. However, in January 2016 the AA launched its own motor underwriting business to complement existing broker operations from the start of the new financial year.

Market share

In 2015 the industry wrote around £11bn of motor insurance premiums and £7bn of home insurance premiums, with the AA accounting, by volume, for approximately 4% and 3% of these markets respectively.

Competition

The UK motor and home insurance markets experience high levels of competition. As well as the number of participants, the wide availability of distribution platforms contributes to increasing competition.

Along with brand, pricing is a key consideration for customers, particularly for motor insurance. After three successive years of motor premium rate reductions, 2015 saw an increase in rates and a subsequent rise in customer churn levels. Home insurance also remains competitive but premiums have continued to fall during the year as weather has been benign.

Customers

Our insurance business serves both roadside Members and non-Members. At the end of 2015, approximately 9% of our roadside Membership base had motor insurance with us and 6% had home insurance.

Insurance brokers compete with each other and direct insurers through a range of channels. Price comparison websites (PCWs) amount to up to 70% of the market in motor insurance. In home insurance they are less dominant largely because home insurance policies are less homogenous and also less expensive than their motor counterparts.

Market drivers

In the UK, motor insurance is a legal requirement and market volumes are strongly influenced by the number of vehicles and licensed drivers. The number of cars, motorists and overall cost of motoring are key volume drivers.

The residential property market drives the home insurance market as insurance is typically taken when purchasing a property. Mortgage lending, house price momentum and new build volumes are all factors to consider.

Home insurance providers offer a range of related products, including home emergency, maintenance and repair cover for boilers, blocked pipes and roof damage.

Market share