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HOME INSURANCE - UK - DECEMBER 2017

Published By :

Mintel

Published Date : Dec 2017

Category :

Insurance

No. of Pages : N/A

The domestic home insurance market is mature and stable, albeit largely profitable. Innovation is needed to create real growth potential, especially in light of changing demographics and tenure patterns. Home ownership levels are falling and more people are living in the private rented sector. Insurers are thus starting to explore the possibilities brought about by developments in artificial intelligence and smart technology, in order to reach new audiences and find new income streams.

Table of contents
OVERVIEW
What you need to know
Products covered in this Report
EXECUTIVE SUMMARY
The market
GWP up by 4% in 2016
Figure 1: Gross written domestic property insurance premiums Fan chart, 2012-22
Recent years have seen a fall in the volume of claims
A varied distribution mix
Figure 2: Share of gross domestic property insurance premiums, by sales channel, 2016
The past decade has seen a fall in homeownership
Regulatory burden increases
Companies and brands
Top five underwriters control two thirds of the market
Aviva, Direct Line and LBG are the largest home insurance underwriters
Greater investment in product development and innovation
Market attracts new technology-focused entrants
The consumer
46% of internet users aged 18+ have both buildings and contents insurance
Figure 3: Reasons for not having contents insurance, by tenure, September 2017
Accidental damage cover is the most popular add-on
Figure 4: Top reason for not having accidental damage and home emergency cover, September 2017
14% of home insurance policyholders have made a claim
Figure 5: Customer experience of and satisfaction with claims handling, September 2017
while 76% have switched provider within the past five years
Figure 6: Length of time ago last switched policy, September 2017
53% are most persuaded by price when choosing a policy
Figure 7: Most influential factors determining product choice, September 2017
50% would consider installing a smart device to lower their premium
Figure 8: Interest in new smart solutions related to home insurance, September 2017
What we think
ISSUES AND INSIGHTS
Home insurance gets smart
The facts
The implications
Shift customer attention away from price alone
The facts
The implications
THE MARKET WHAT YOU NEED TO KNOW
GWP up by 4% in 2016
Recent years have seen a fall in the volume of claims
A varied distribution mix
The past decade has seen a fall in homeownership
Regulatory burden increases
MARKET SIZE AND FORECAST
Limited real premium growth
Figure 9: Gross and net written premiums UK domestic property insurance, 2007-17
Rise in reinsurance ceded
Five-year forecast: total premium income will remain flat
Figure 10: Gross written domestic property insurance premiums Fan chart, 2012-22
Figure 11: Forecast of gross written domestic property insurance premiums, 2012-22
Forecast methodology
CLAIMS INCURRED AND UNDERWRITING RESULT
Low volume of claims offset rising costs to maintain profitability in 2016
Figure 12: Total outgo and underwriting result UK domestic property insurance, 2012-16
The price of acquisition
Underwriting ratio increases to 5.7% in 2016
Figure 13: Domestic property insurance underwriting ratio, 2007-16
CHANNELS TO MARKET
Brokers maintain share
Figure 14: Share of gross domestic property insurance premiums, by sales channel, 2012-16
Web aggregators play a huge role in the distribution of home insurance
Figure 24: Information sources used prior to policy purchase or renewal, by home and motor insurance policyholders, September 2016
MARKET DRIVERS
Changing tenure patterns
Combined policies are the most popular type
Figure 15: Proportional distribution of home insurance sales, by product type, 2016
Lower claims volumes are helping to keep average premiums down
Figure 16: Average combined, buildings only and contents-only insurance premiums, 2012-17
however, this may not be sustainable given rising inflation
Lower claims frequency eases pressures on margins
Figure 17: Total number of domestic property claims, 2007-16
Most home insurance claims are for accidental damage
Figure 18: Proportional distribution of domestic property claims, by type of peril, 2016
Fraud repudiation rates have increased slightly over the past two years
Figure 19: Detected domestic home insurance fraud repudiation rates, 2007-16
REGULATORY AND LEGISLATIVE CHANGES
Introduction of a new levy means more affordable insurance for flood-risk properties
IPT reaches all-time high
Figure 20: Changes to the standard rate of IPT, 2011-16
New rules to improve transparency will result in greater customer churn
COMPANIES AND BRANDS WHAT YOU NEED TO KNOW
Top five underwriters control two thirds of the market
Aviva, Direct Line and LBG are the largest home insurance underwriters
Greater investment in product development and innovation
Market attracts a new technology-focused entrant
Adspend steady
MARKET SHARE
Aviva was the largest home insurance underwriter in 2016
Figure 21: Top 20 domestic property underwriters UK, by share of total market GWP ABI members only, 2016
A crowded marketplace
Figure 22: Company bought home contents insurance from (selected brands), September 2017
Aviva and Direct Line Group have the largest customer share
COMPETITIVE STRATEGIES AND INNOVATION
Distribution developments
Avivas strong performance in 2016 linked to two new partnership agreements
while new deal with HSBC will deliver further growth opportunities
Allianz withdraws from direct insurance market
LV= ceases to sell its ABC Home Insurance product via the broker channel
Digital innovation
Avivas Ask It Never initiative
Legal & General launches SmartQuote tool
Neos: a new digital disruptor with a focus on prevention instead of payout
PolicyCastles new smart and personalised service
Other product launches
Admiral launches combined home and motor policy for added convenience
Vanquis enters home insurance market
ADVERTISING AND MARKETING ACTIVITY
Home insurance industry spends around 100 million a year on above-the-line advertising
Figure 23: Total above-the line, online display and direct mail advertising expenditure on home insurance and related products, by product category, 2012/13-16/17
Direct mail and TV advertising attract the greatest investment
Figure 24: Above-the line, online display and direct mail advertising expenditure on home insurance and related products, by media type, 2014/15-16/17
Figure 25: Adspend split by media type, 2016/17
Direct Line remains the biggest investor in above-the-line advertising
Figure 26: Top 10 above-the-line advertisers of home insurance and related products, 2012/13-2016/17
Nielsen Ad Intel coverage
THE CONSUMER WHAT YOU NEED TO KNOW
46% of internet users aged 18+ have buildings and contents insurance
46% of home insurance policyholders have accidental damage cover
14% have made a claim
while 76% have switched provider within the past five years
53% are most persuaded by price when choosing a policy
50% would consider installing a smart device to lower their premium
PRODUCT OWNERSHIP
68% of UK adult internet users have home insurance
Figure 27: Ownership of general insurance products, September 2017
Around a quarter of adults whose home is being bought with a mortgage lack buildings cover
A third dont have contents insurance because they cant afford it
Figure 28: Reasons for not having contents insurance, by tenure, September 2017
POLICY ADD-ONS
Accidental damage cover is the most popular add-on
Figure 29: Cover add-ons taken out with home insurance, September 2017
A home emergency add-on tends to be cheaper than standalone cover
12% of renters have home emergency cover as part of their contents insurance
Lack of perceived need is top reason for not having accidental damage and home emergency cover
Figure 30: Top reason for not having accidental damage and home emergency cover, September 2017
CLAIMS EXPERIENCE
Home insurers benefit from a relatively low claims frequency
Figure 31: Proportion of household policyholders who have made a claim in the past five years, September 2017
Under-45s are much more likely to claim
Parents are also more likely to claim
Lower claims frequency has helped to offset a higher average claim payout over the past few years
68% of policyholders saw their premium rise after making a claim
Figure 32: Customer experience of and satisfaction with claims handling, September 2017
SWITCHING ACTIVITY
30% of policyholders have switched home insurer in the past year
Figure 33: Length of time ago last switched policy, September 2017
FACTORS INFLUENCING PRODUCT SELECTION
Pricing is fundamental
Figure 34: Most influential factors determining product choice, September 2017
GAUGING INTEREST IN SMART SOLUTIONS
50% of policyholders would consider installing a smart home device to lower their premium
while 42% like the idea of buying a discounted smart device as part of their insurance package
45% are interested in cyber security cover
Figure 35: Interest in new smart solutions related to home insurance, September 2017
APPENDIX DATA SOURCES AND ABBREVIATIONS
Data sources
Abbreviations
Consumer research methodology
APPENDIX MARKET SIZE AND FORECAST
Total market forecast Best- and worst-case scenarios
Figure 36: Forecast of domestic home insurance gross written premiums best- and worst-case scenarios, 2017-22
Forecast methodology

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