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UK Niche Insurance

A new series of research reports about niche insurance lines in the UK indicates that these generally offer better growth prospects for underwriters than mainstream motor, household and commercial lines insurance, and that for most of them distribution via affinity and corporate partners is key to success.

In total, the series covers 20 different niche insurance products ranging from motor cycle insurance to boat, yacht and pleasure craft cover, and from landlord rent guarantee policies to tax investigation insurance. In total, premiums associated with these 20 niche lines are likely to exceed GBP 5 billion by 2018 with their predicted weighted compound annual growth rate from 2014 to 2018 averaging out at 3.3% in nominal terms given that premiums were worth a total of around GBP 4.4 billion in the former year.

"Worth over GBP 1 billion in gross written premiums in 2014, the most valuable of these 20 markets is that for non-standard and listed property insurance", commented Francisco Leitão, Consultant at Finaccord. "However, in descending order of their forecast growth rate, those predicted to increase in value most rapidly in future are extended warranties for cars, landlord rent guarantee insurance, caravan and park home insurance, classic car insurance, landlord property insurance, excess protection insurance, and pet and personal equine insurance, premiums for all of which should rise at a nominal compound annual rate of more than 5% between 2014 and 2018. In fact, across the 20 niche policy types investigated, only GAP insurance is likely to fall in value up to 2018 with this probable decline due to new regulations affecting sale of this product via car dealers."

Separate research released by Finaccord in recent weeks indicates that the predicted compound annual growth rate of 3.3% up to 2018, while not sounding especially high, is nonetheless better than that forecast for personal motor, household and commercial lines insurance in the UK (at a respective 1.2%, 3.1% and 1.4% over the same period from 2014 to 2018). 

A further notable finding from the research series is that distribution via affinity and corporate partners is important to winning business in most of these 20 niche lines. In fact, as an unweighted average across all 20 of them, around 46% of new sales are attributable to such partners (including aggregators) ranging up to 90% or more in the case of extended warranties for cars and GAP insurance, both of which are mainly sold through the automotive trade (i.e. car dealers and manufacturers). Distribution via brokers (including those acting as tied agents or IFAs) is also very significant at an unweighted average of around 39% of new sales of these policies peaking at approximately 90% in the case of key person cover and related types of life protection insurance sold to business customers and at around 80% for bicycle insurance. On the other hand, an unweighted average of only 15% of new business is secured through direct sales by underwriters with a maximum of around 40% in the case of van insurance.

"Our research shows that there is usually a significant number of affinity and corporate partnerships for these niche insurance products the nature of which varies by product type", concluded Francisco Leitão. "These can vary from holiday rental companies for holiday and second home insurance to jewellers in the case of jewellery and watch insurance, and from universities for student contents insurance to retailers offering wedding lists when it comes to wedding and personal event insurance. Some of these relationships are controlled by underwriters but the majority have been set up by brokers and, clearly, holding the right partnerships is important for achieving success in many of these niche markets, especially as most of the products are not especially suited to being sold through the aggregator channel."


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