The European property and casualty business has never looked so attractive. In the past few years, companies have stopped relying on gains in their investment portfolios and started deriving solid profits from rising premiums and skillful underwriting. Yet this overall positive news obscures a significant but little-noticed trend: some segments of the industry are greatly outperforming others. Three leading business models—which we term lean operators, strong brands and distributors, and product experts—have increasingly captured market share from incumbents. These models pose a threat to traditional, multiline insurance companies and are forcing them to rethink their strategies.¹

Nowhere is the trend more apparent than in the United Kingdom, Europe's most dynamic insurance market. Here, the most successful companies adhere to one of the three models and consequently enjoy higher growth and a lower combined ratio² than their multiline competitors. But this is not exclusively a UK phenomenon; companies using these new models have gained dominance in other parts of Europe, including France and Spain.

Lean operators—including Direct Line, a unit of the Royal Bank of Scotland (RBS) and one of the top companies in Europe using this model—mainly sell auto insurance and rely on low costs and competitive underwriting....