UK Insurance Industry

The United Kingdom is the largest insurance market in Europe. The UK insurance industry is also the third largest in the World with an 8 percent share in 2003. The size of the UK insurance industry was USD239 billion in 2003, of which life insurance was USD148 billion and non-life was USD91 billion. The UK insurance industry posted a growth rate of 2 percent in 2003, down from 8 percent growth in 2002 . The significant decline in life insurance premium greatly affected the overall insurance premium growth. The compound annual growth rate of the UK insurance market during 1999 to 2003 was 6 percent.

 In the UK, the life insurance share of total business is more than non-life business, but it has been declining in recent years. The life insurance premium share of the total insurance premium was 62 percent in 2003 as against an impressive 76 percent in 2000. The hefty increase in non-life premium rates improved the share of non-life premiums. The share of non-life insurance premiums in the total business increased to 38 percent in 2003 from 24 percent in 2000. The number of insurance companies in the UK stood at 806 in 2002, of which 592 are non-life insurance players.

Up to 2002, the insurance business in the UK was regulated under the Insurance Companies Act 1982 while business conduct of life insurers was regulated under the Financial Services Act 1986. However, since December 2001, authorization and prudential regulation of all insurance firms and conduct of business regulation of life insurance firms became the responsibility of the Financial Services Authority (FSA).

Long-term insurance includes life insurance and pension business. Pension policies represent 57 percent of this market in terms of market revenue. The remaining 43 percent is the regular and single premium business of life policies The pension sector is growing at a phenomenal rate. Since 1996, the value of occupational pensions, for example, have more than tripled. This market is expected to grow by nearly 50 percent by 2006.

Major Players in the UK Insurance Industry

The UK life insurance industry has become increasingly concentrated. For instance, the ten largest UK composite insurers accounted for 68 percent of the total market annual premium income in 2002 with the top five named below accounting for 50% of the total.

• Norwich Union
• Prudential
• Barclays
• Standard Life
• Halifax

The non-life insurance business referred to as general insurance, covers a wide range of risks. Motor insurance generates nearly a quarter of the general insurance income.
The top ten players account for only 31 percent of the total premiums in the British general insurance industry showing how fragmented the market is. At the last count, the sector had as many as 600 companies. The top five players named below accounted for only 15.6% of the total premium income in this sector

• Norwich Union
• Royal & Sun Alliance
• AXA
• Zurich
• Churchill Group

Key Trends in the UK Insurance Industry
The major trends in the UK insurance market are as follows:

Introduction of stakeholder pension: In response to mounting pressure on the welfare state and public funding of retirement benefits in the UK, the Government has, with a view to encourage private pension provision, initiated the launch, in 2001, of the Stakeholder Pension, a flexible low-cost private pension plan.

Cross border business: In the life insurance sector, European business is stagnating as population has seen little or no growth. Therefore, companies are entering countries where opportunities exist. The firms see opportunities in Asian countries, which have the largest concentration of population in the world. Life insurers are setting up subsidiaries in those regions to fuel growth.

Offshoring: Offshore insurance markets have experienced strong growth over the past decade. According to a 2003 Deloitte survey, the top 100 global financial services institutions expect to move GBP335 billion (USD570 billion) of their operations and 2 million jobs offshore by 2008.

Changing role of brokers: Brokers play a key role in the non-life insurance market in the UK. Despite increasing competition, brokers and intermediaries still retain the largest share of insurance distribution in the UK, particularly for commercial business.

There have also been a number of insurance mergers and acquisitions in recent years resulting in the concentration of business in the hands of the largest broking groups

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