UK H1 personal lines results: What we learnt



Dougie Willins, an analyst in our Market Intelligence team, takes a look at the main themes arising from the H1 2019 results of four of the UK’s largest personal lines insurers.

Slow growth driven by claims inflation and soft market conditions

Insurers have prioritised profitability ahead of customer acquisition thanks to rising claims inflation and soft market conditions over the past 12 months. This has resulted in the low levels of growth in premium income and customer numbers seen in H1 results.

Low single digit premium growth was reported by Hastings (+3.4%) and Admiral (+1.6%), while Aviva (-1.4%) and DLG (-4.2%) saw an overall decline. The slowdown in the rate of growth for Hastings will likely mean that they miss their target of 3 million policies in force by the end of the year (their latest results showed a modest increase of only 4% in the past six months to 2.81 million customers).

Industry data from the ABI shows that record levels of motor claims have been paid out in recent quarters, aligning with announcements from both Hastings and DLG that claims inflation is currently running at the upper-end of their long-term forecasts (between 4% and 7%). The increase in claims expense has been growing over the last few years primarily because of the growing cost of technology in modern vehicles, especially that situated in the bodywork. However, some of our clients are now reporting that the weakness of Sterling has now become another significant factor given that almost all car parts are imported into the UK.

Despite the challenging claims environment, the ABI has reported five consecutive quarters of year-on-year decline in motor average premium.

There was some respite in household results, however, as benign weather conditions in the first half of 2019 resulted in a c.20-point improvement to combined operating ratios relative to the harsh claims environment delivered by the “Beast from the East” in 2018.

Ogden discount rate decision dents profitability with motor premiums expected to rise in H2

The government’s decision to revise the Ogden discount rate (which determines how much claimants with long-term severe injuries are compensated) from -0.75% to -0.25% in July came as a surprise to insurers with the majority expecting a new rate at between 0% and +1% following earlier industry discussions. 

All insurers shown in the chart above released reserves in FY2018 results at a 0% Ogden discount rate in anticipation of the announcement this year. The result of this has been a large hit to profits ranging from £8.4m (Hastings) to £45m (Aviva) as insurers recalibrate their claims reserves to the new rate.

Moving forwards the -0.25% discount rate will ultimately increase the amount insurers are required to reserve for long-term bodily injured claims.

We are now seeing signs of price increases in the wider market with the latest motor data from both the ABI and premium index showing that premiums increased in Q2 on the previous three months. Interestingly, Admiral attributed their recent slowdown in growth to increasing motor rates by low-to-mid single digits in H1 – a move they believe was ahead of the rest of the market. 

Overall, whilst premiums may not yet be at the same level as 12 months ago, it looks increasingly likely that that motor premiums are on the rise.

Digital investments retain importance amidst cost pressures 

Given the profitability challenges facing insurers it is unsurprising that cost reduction appeared as a theme in half year results. However, insurers have also reported significant progress in digital initiatives, highlighting their strategic importance.

DLG reported that they are on track to meet their cost savings target, bringing down operating expenses below £700m by FY2019. In addition to this, DLG announced progress on multiple digital programmes, notably, the launch of their new motor brand (‘Darwin’) which is designed for price comparison websites. They also announced a strategic partnership between Churchill and digital bank Starling to distribute contents insurance through their banking mobile app.

Hastings reported a further increase in the number of total loss claims handled digitally, up to 57% from 23% six months ago. Further success has been achieved relating to customer loyalty with a custom-built tool helping Hastings to achieve a 5-percentage point increase in retention rate in the past 12 months.

Whilst there was no large announcement from Admiral regarding digital in their insurance business, the launch of the loans business in 2017 has seen a large investment in technology. Admiral’s investment has enabled 99% of loans to be acquired digitally, capitalising on the growing customer demand for digital acquisition.

Finally, further to their announcement earlier this year to restructure the business and achieve run-rate cost reduction of £300m by 2022, Aviva reported a £34m investment in bringing together UK Digital and UK GI as it seeks to fully integrate the two businesses.


In the intensely competitive UK personal lines market, we are seeing early signs of the motor market hardening in response to the inflationary cost pressures of repairs and the revised Ogden discount rate. 

Looking forward, there is likely to be some premium deflation as the Civil Liabilities Bill is set to limit whiplash claims costs from April next year and insurers will be expected to pass these savings on to customers.

Taking these factors into account, inflationary cost pressures are likely to continue to move ahead of premium growth and sustain pressure on insurers’ profitability. 

We believe that insurers with the greatest digital capabilities are best placed to succeed in this market. Unlocking the power of data will deliver competitive advantage across the value chain from market leading pricing capabilities and innovative propositions to advanced fraud detection and automated claims processing.

Want to know more about the Oxbow Partners Market Intelligence product?

Our Market Intelligence product helps the management of UK insurers understand their company’s performance and market trends. Our quarterly reports contain both detailed quantitative and qualitative analysis aligned to each subscriber’s strategy. To find out more, please email us.



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About the author

Dougie Willins is a Senior Consultant at Oxbow Partners and an analyst on our Market Intelligence product. You can reach him at

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