To measure the level of competition, we follow a similar approach to analysis of UK deposit takers.
The period covers the introduction of price comparison websites, as well as big changes to the regulatory regime such as the implementation of Solvency II, which regulates the finances of insurance companies and how they are run. Over the last 25 years, there have been big structural shifts in the insurance industry, making a current perspective on the level of competition timely. However, there are examples in practice where competition has not worked in this way. the level of security for the policyholder) or vice versa. In theory, when the level of competition improves it can make products more valuable by increasing affordability, while maintaining quality (e.g. Why is the level of competition important? Protection and savings products offered by insurers are valuable because they allow consumers to smooth consumption over their lives and avoid the risk of large losses. Qualitative analysis has been done on specific markets but an overview of competition across the whole UK insurance market has not been extensively explored.
According to the ABI, the UK insurance market is the largest in Europe and the fourth largest in the world.ĭespite the size of the UK market, there is little public information about the level of competition in insurance. In 2017, there were £197 billion net earned premiums in the life market and £67 billion in the non-life market. In July 2020 there were 375 UK-based, and 806 non-UK branches authorised by the Prudential Regulation Authority (PRA) to sell insurance in the UK. The UK has a particularly large insurance market. However, competition regulators have found practices in specific markets that harm consumers. We take an exploratory approach to address the question, applying benchmarks used in competition research to a unique set of reporting data across multiple UK insurance regulatory regimes, with the hope of stimulating further work. We find competition generally works well in UK life and non-life insurance markets, despite increases in life market concentration over the past 25 years. But how much competition in insurance markets is there? There are very few studies that address this question (see here for a summary), unlike for banking where there is a wide literature. Fraser Drew, David Humphry, Michael Straughan and Eleanor Watsonįor most of us buying insurance nowadays, price comparison websites offer plenty of choice.
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