Allianz could become the UK's second-largest insurer

allianz and legal general logos in heart

Allianz is set to be the UK’s second-largest general insurer after agreeing to take on the general insurance customers of LV and Legal & General in a deal worth over £800m. The deals could see the german insurer become a dominant player in home, car and business insurance.

Legal & General’s general insurance business is moving to Allianz for a price of £242m and the group is spending £578m more to boost its existing 49% stake in LV’s General Insurance arm to 100%. Meaning, it will become the outright owner if the deal is given the OK by the Financial Services Authority.

The UK general insurance market, one of the largest in the world, is pretty competitive these days. Premium costs are relatively low and there is a lot of choice on the market.

Fierce competition means profits have been down in recent years and are often generated more from add ons and extras than from the sale of policies.

The pressure is affecting companies in different ways.

a vacation home

Travel insurer Saga, for example, has had a bad time recently with its first-half profits plummeting from £110m in 2018 to £53m in 2019 after falling customer numbers forced it to make radical changes and slash prices.

In January, Co-op opted to abandon the sector and sold its underwriting business to Markerstudy for £185m.

Allianz is therefore making a big play at a difficult time. Its strategy may be a bet that sharing technology and resources across three customer bases will let it thrive while others flounder.

Who is Allianz?

Allianz Group is one of the world’s biggest insurers with an enormous 88-million-strong customer base.

In the UK it has provided car insurance, home insurance, pet insurance, travel and business cover.

However, since it started working with LV, Allianz no longer issues any new personal home or car insurance policies or renews existing ones under its own brand, these are now handled by LV.

The other major players in the market are Aviva, who is top with 10% of the market and Axa in third place with 8%. These companies will be watching very nervously to see what Allianz does next.

If the deals are approved, the German company will have 12 million customers in the UK and revenues of over £4bn a year.

With so many customers under one roof, Allianz could take advantage of a low expense ratio to offer lower prices, making the market even more competitive.

Expense ratio is just jargon for the difference between the amount of money an insurance company spends on running its business and the amount of money it gets from selling its premiums.

insurance market difficulty

Allianz has an expense ratio of as low as 10% in some of its interests compared to a ratio of over 30% as the norm for some UK insurers. This kind of efficiency gap gives it a lot of room to play with.

LV or Legal & General customers might not see savings in the short term, but Allianz may engage in price cuts on premiums in the medium term to retain existing customers and attract new ones.

Its competitors are not just the other giants, but a ragtag band of small and medium sized outfits desperately fighting for market share, especially on price-comparison sites.

New customers can benefit from notable discounts going through these price aggregators. Although we should warn you that, while the policy you buy might be cheaper at first glance, the cover you get and the fine print in the terms and conditions may vary in important ways from policies purchased direct from the insurer or a broker.

Insurers often offer reduced policies in order to get higher rankings on aggregators, so you may find yourself without proper cover when you need it.

What kind of service can customers expect?

While its difficult to say how much or how quickly Allianz’s corporate culture will affect its new customers, a survey of its treatment of existing ones should give a good idea of what is to come. First, let’s look at complaints data:

Allianz complaints comparison
  Complaints per 1,000 policies Total complaints opened % closed with 3 days % closed between 4 days and 8 weeks % Upheld
Allianz 2.52 14,496 26% 67% 71%
Aviva 8.5 142,581 31% 61% 74%
Legal & General Assurance Society Ltd 0.99 4,040 63.94% 34.45 1.61%
Legal & General Insurance Ltd 3.66 7,709 52.27% 46.23% 63.16%
Legal & General Partnership Services Ltd 17.37 416 8.47% 91.27% 11.72%
LVIC 1.59 7,990 43% 55% 62%
LVFS 2.77 2,791 20% 78% 60%

So, from the data we can see that Allianz received far fewer complaints than Aviva, but took a bit longer to deal with them and upheld slightly fewer of them.

Comparing Allianz to its potential acquisitions is a more complicated given the data for the two brands are unhelpfully split among five firms.

The figures are skewed somewhat by Legal & General Partnership Services Ltd’s large number of complaints for a smaller number of policies and its very poor record of handling complaints in good time.

The most notable point might be Legal & General’s greater reluctance to uphold complaints.

Away from the official data, customer feedback on consumer review website Trustpilot doesn’t look good for either of the two giants:

Trustpilot reviews
Insurer Number of reviews Stars Average rating
Allianz 59 1.5 Bad
Aviva 1,125 1.5 Bad
Legal & General 8,239 3.5 Average
LV 8,258 4.5 Excellent

Both Allianz and Aviva are rated bad and get a paltry one point five star rating out of five.

While Allianz only has 59 reviews on the site and Aviva just over 1,000, customers of Legal & General and LV are much more enthusiastic about rating their insurers, with both boasting over 8,000 reviews. LV comes out on top here with a four point five star rating and an average of Excellent.

What’s the final word?

So, current customers of Legal & General an LV might be disappointed with the level of customer service they can expect from their prospective insurance overlords at Allianz.

The new giant may be able to offer more competitive prices to sweeten existing or potential customers, but perhaps that size comes with a price to pay in terms of close attention to customer relationships. Bigger isn’t always better.

The two deals are expected to be finalized by the end of 2019.

Here at Selectra we have a lot more help to give you when it comes to choosing the best insurance provider for your needs. Feel free to take a look around.

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