This brief provides an overview of insurance providers' strategies for selling add-on policies, with a focus on motor breakdown, home emergency and legal expenses cover. The brief includes market size and profitability information as well as analysis of the competitive landscape. Future opportunities and challenges for the add-on market are also discussed.



Report Highlights
Insurers follow two strategies in regards to add-on insurance products. First, add-on policies can be provided free of charge with motor or household insurance policies. Second, add-on policies can be provided as optional extras. The first strategy treats add-ons as value adders, while the second strategy treats add-ons as revenue generators. Insurance providers are an important distribution channel for breakdown cover, with over half of consumers who arranged their own breakdown cover doing so via an insurance provider. Insurance providers have a natural point of sale for this extra cover, accounting for the fact that so much breakdown cover is distributed via this channel. Household insurance providers are thought to distribute a significant number of home emergency insurance policies. Interviews with industry executives for this brief suggest that insurers experience up-sell rates of between 10 and 30 per cent when selling home emergency insurance policies alongside buildings policies.


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Table 1: Penetration of roadside assistance, H2 2006 9
Table 2: Insurers are estimated to have sold breakdown cover to around 10 million cars in 2006 10
Table 3: Penetration of roadside assistance by age, 2006 12
Table 4: Penetration of roadside assistance, by household income, 2006 13
Table 5: Distribution of roadside assistance cover by channel, H2 2006 15
Table 6: Partnerships between breakdown companies and top 10 private motor insurers 16
Table 7: Ranking of the top roadside assistance companies, H2 2006 16
Table 8: The top 10 private motor insurers' offering of motor breakdown insurance 18
Table 9: Examples of brokers, bank and affinities that offer breakdown cover motor insurance policies, H1 2007 19
Table 10: Domestic property insurance claims by peril, 2002-6 23
Table 11: Gross claims incurred for domestic property weather claims, 2002-6 25
Table 12: Home emergency insurance offering of the top 10 household insurers 27
Table 13: Examples of brokers, banks and affinities that offer home emergency insurance with home insurance policies, 2007 28
Table 14: British Gas Services turnover and operating profit, 2005-6 30
Table 15: British Gas Services contracts in force, 2005-6 31
Table 16: Homeserve's revenue and operating profit, 2006-7 32
Table 17: Homeserve's UK utility policies-in-force, 2006-7 35
Table 18: Home emergency advertising spend by competitor, 2006 37
Table 19: Home emergency advertising send, by medium, 2006 38
Table 20: Legal expenses insurance offering of the top 10 private motor insurers 42
Table 21: Examples of brokers, banks and affinities that offer motor legal expenses insurance with motor insurance policies, 2007 43
Table 22: Legal expenses insurance offering of the top 10 private motor insurers 45
Table 23: Examples of brokers, banks and affinities that offer family legal expenses insurance with household insurance policies, 2007 46
Table 24: Legal expenses premium income by competitor, 2001-5 48
Table 25: Registered cars by body type in the UK, 2002-6 50
Table 26: Homeserve's utility partners, 2007 53
Table 27: The size of UK households by the number of people, 1971-2005 53
Table 28: Trends in household tenure for England, 1995-2005 54


Figure 1: More Th>n offers free breakdown cover as standard on its motor policies 4
Figure 2: More Th>n draws attention to the fact that home emergency insurance is included as standard when outlining its home insurance offering to potential Internet customers 5
Figure 3: Three quarters of consumers are covered by roadside assistance 9
Figure 4: Insurers are estimated to have sold breakdown cover to around 10 million cars in 2006 10
Figure 5: The proportion of consumers with roadside assistance cover increases with age 12
Figure 6: The proportion of consumers with roadside assistance cover is highest among higher income groups 13
Figure 7: Over half of consumers with roadside assistance cover arranged cover through an insurance provider 14
Figure 8: Most of the top 10 private motor insurers sell breakdown cover as an optional extra 17
Figure 9: Home emergency policies cover a variety of emergencies that can befall house owners 21
Figure 10: The total cost of domestic property claims fell slightly in 2006, as a result of a reduction in weather-related claims 23
Figure 11: The cost of weather insurance claims fell in 2006 for domestic property 24
Figure 12: The top 10 household insurers offer home emergency in different ways 26
Figure 13: Revenue from central heating services products accounted for the majority of British Gas Service's total revenue in 2006 29
Figure 14: The most popular British Gas policy is the Central heating service contract 31
Figure 15: Homeserve offers a range of insurance policies which are sold direct and by utility companies 33
Figure 16: Homeserve had 5.8 million utility branded policies in force in the UK in March 2007 34
Figure 17: Homeserve was the largest advertiser of home emergency insurance in 2006 36
Figure 18: Direct mail is the most popular medium for advertising home emergency insurance 38
Figure 19: Most of the top 10 private motor insurers sell legal expenses insurance as an optional extra on motor policies 41
Figure 20: Most of the top 10 household insurers sell legal expenses insurance as an optional extra on home insurance policies 44
Figure 21: Das, Direct Line and Brit were the largest legal expenses underwriters in 2005 47

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