Too good to be true?

- Insurance Age staff
- 31 Aug 1998
- Indicative reading time: 5 minutes

The mature driver sector has traditionally attracted insurers because of its low claims experience and high customer loyalty. However, Andrew Newman asks whether the bubble has burst, with insurers moving away from mature driver-specific products.

The current standing of the mature driver sector highlights two
significant turning points in the UK motor market's journey through the
past decade. Firstly, it can no longer be assumed that better profit on
the bottom line will automatically follow from broking or writing low risk
business. Remember those now forgotten organisations with the
death-or-glory mission statements which decreed that was exactly how they
would secure market domination by Year 2000? Secondly, to reach a target
audience such as older drivers, it is no longer essential to brand a
product specifically for them.

Statistics continue to prove that older drivers are involved in less
accidents than their younger counterparts, enough to justify the discounts
available. As an example, the level of reduction available to mature male
drivers with Norwich Union is in the range of 15-20% on average risks.

A male or female driver representing an average risk, driving a group 11
or 12 vehicle, aged between 55-60 years old would qualify for a discount
between 13% and 17%. Even male and female risks aged over 75 qualify for a
10% discount.

Although discounting is justified, the pricing potential of the overall
market has been overwhelmed in the past by the sheer number of players
seeking these motorists. It was as recent as 1996 that the first serious
suggestions appeared in print that mature drivers were no longer the cream
of the private car underwriting portfolio. Many players had long since
moved away, to establish alternative niches.

One sector which included older drivers very successfully was that of the
cherished vehicle, but otherwise competition forced diversification away
from sole reliance on mature driver risks by brokers and insurers
alike.

The result of fewer insurers opting to build their overall market share
primarily from the mature driver sector was enough for some players to
remedy uneconomic rating. Sue Winston, press officer at Norwich Union,
believes the mature driver sector has now become less competitive than
some niche areas, such as non-standard. Dianne Smith, marketing manager at
Norman Insurance, agrees there has been some easing of competitive
pressure. "The traditional Norman motor niche has always targeted low
premium/low risk business, which our low expense ratio allows us to write
profitably. We have been putting in regular premium increases over the
past 18 months, without unduly affecting incoming new business, and this
includes older drivers. We are pricing adequately, while still proving
competitive, which could be due to the market drift to higher premium
business".

While not necessarily agreeing there is any significant slackening in the
intense competition for this class of business, Simon Hickman, marketing
officer at Hibernian, confirms its mature driver product is alive and
kicking. He says strong growth has pushed premium income up 43% over the
year, with claim frequency some 34% lower than the Hibernian overall book
of private motor business. "We pride ourselves on the level of statistical
information we have, and while we would sometimes prefer quicker speed to
market, we feel that the future holds good for smaller insurers who
understand, and can react reasonably quickly, in their specialist market,"
says Mr Hickman.

Potential for brokers

There is no doubting the potential for brokers, despite the activities of
affinities such as Age Concern Insurance Services, Saga Services, Help the
Aged Insurance Services, and the Retirement Insurance Advisory
Service.

Drivers over 50 are notoriously content to stay with their chosen
insurer.

One survey suggested less than half seek an alternative renewal
quotation.

Richard Hart, from the corporate relations department of ITT London &
Edinburgh, believes there is plenty of scope for brokers to extend their
advisory service into their local community, especially for the over-50
age group. In a recent presentation organised by West Sussex County
Council for the over-50s, supported by ITT London & Edinburgh, it became
apparent that there is a great lack of awareness of the type of
information that brokers are ideally placed to provide. For example,
over-50s are prepared to take action to reduce their premiums, but are
largely unaware of the possibilities offered by a voluntary excess,
restriction in drivers, and car security.

"In one case, an elderly lady driver had purchased a steering lock,
believing this to come under the heading of an immobiliser," says Mr Hart.
"Another factor is a general unawareness that once they reach a certain
age, older drivers cannot switch to an alternative insurer so easily."

The message to get across is that the approach to age 70 is not the best
time to consider changing at renewal. ITT London & Edinburgh offers some
relief here, being willing to consider any elderly driver at whatever age.
Motor manager Paul Gray confirms there is no upper age limit in their
underwriting terms, for any of their motor products, including FastTrack.
"Provided DVLA are happy to issue a licence, we can offer a quotation, and
we do not always need a medical certificate," he comments.

Branded products

As to branded products for older drivers, the separate contracts which
still appear can usually be traced back to the time when it was necessary
to keep such specialist products in the broker's eye, usually by making
sure the appropriate glossy underwriting guide was close to hand. This was
before premiums had moved completely to screen, and such branding took off
in a big way in the mature driver sector, with a plethora of "30/40/50/60
Plus" type products.

The arrival of screen displayed premiums diminished the importance of the
branding phase, allowing named products to be undercut by non-branded
quotations. The policy benefits, originally piloted in the mature driver
sector, such as courtesy cars and helplines, have now been extended to all
age groups.

Mr Gray at ITT London & Edinburgh believes brokers do not require a
stand-alone product for older drivers. "We issued such a policy called
Vigilant some years ago, and although many of the policies are still in
force, in today's market a branded older drivers' contract is not
necessary," he explains.

According to Norman Insurance, while a specifically branded contract for
older drivers is not necessary, the branded policy concept has its place.
Norman's niche products cater for a variety of risk factors, of which age
is just one, and the insurer considers it is particularly competitive in
the 45-60 age band with its Master Motorist contract.

Norwich Union now has one motoring product, Private Car Club, which
provides substantial age related discounts to older drivers. At one time
the Motoring Gold Single Vehicle Contract was a policy applicable to
retirees with no part time occupation, aged between 55 and 70.

Ms Winston confirms: "We withdrew our dedicated mature driver product to
avoid confusion for brokers. We believe that brokers prefer to have just
one NU quote on a screen, with the peace of mind of knowing that this
product is all encompassing and fully specified. We wanted to simplify the
quote process for the broker and avoid quoting against ourselves with
multiple NU products. By offering mature drivers our standard car
products, we can ensure that they benefit from the full range of features
available with this product".

These benefits include breakdown cover, available as an option provided by
the RAC. The policyholder qualifies as a passenger or driver in any other
private car. There is a free courtesy car during accident repair, a
three-year guarantee of repairs, and free European breakdown cover.

Club Service includes automatic notification of claims to a personal
incident manager by the Club Line, keeping the insured or broker updated
on the progress of a claim.

Motorwise 40+, marketed by Hibernian, is a specific contract for the
mature driver sector. It provides specific benefits such as 30 days free
European cover, additional £20,000 personal accident extension, loyalty
discount, 24-hour accident repair service, and courtesy car provision.

A trend of more recent years has been to drop the age of maturity.
Contracts for the over-30s are not unknown, featuring insurers such as
Avon and Northern Star. Now that older drivers can be offered a standard
policy with appropriate discount, the cut-off age itself is no longer
geared to any branding restriction, so that age discounting now often
starts at age 27 or 28, according to individual insurer statistics.

Rating factors

Other factors, apart from age, are nevertheless becoming important when
rating mature drivers. Occupational and lifestyle factors are exerting a
greater influence. Paul Garland, agency manager at Northern Star, cites
the second family car as one of their target markets. "The ownership of
such a vehicle usually involves mature drivers, in exactly the lifestyle
situation we prefer," he explains.

Direct writing of mature driver business remains brokers' major
competitive threat, particularly when associated with an affinity group.
The concept of the affinity is particularly strong with older people, and
organisations that represent their interests elsewhere - be it lifestyle,
the workplace, or leisure - find themselves with a loyal and captive
audience. It is also an audience that could become inaccessible to other
distribution channels.

The obvious answer is for brokers to set up affinities of their own.

The ITT London & Edinburgh initiative with 'over-50s', provides an example
of how messages can be carried into the local community, especially for
older age groups. The broking strength is to provide the type of
information these groups need, and there are always insurers and agency
brokers willing to help find a suitable home for any broker affinity idea
- which naturally includes mature drivers.


TYPE OF ACCIDENT BY AGE
Age of driver     % accidents involving   % accidents between
                         single vehicle         10pm and 12pm
17-21                                16                    11
22+                                   8                     6
All age groups                       11                     7
Source: Department of Transport.

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