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Home Insurance - UK - December 2014

“Home insurance can be a hostile market for new entrants because it is hard for brands to create sufficiently distinct identities for themselves, and because consumers place such importance on strong reputations and previous experience.”

Rich Shepherd, Financial Services Research Analyst

This report covers the following issues:

  • Is lack of differentiation a problem for insurers?
  • A good claims service is the best service
  • Direct Line shows that brand still plays a major role in the Moneysupermarket era

Home insurance premiums have fallen over the past two years. However, generally favourable economic and weather conditions have also meant that claims costs have fallen, helping keep policies profitable. While home insurance is not immune from consumers’ budget cuts, providers seem to have survived the economic downturn largely unscathed, and are now looking towards increasing premium prices to restore growth.

The almost universal requirement for mortgage holders to have buildings insurance, coupled with the obviously valuable nature of contents cover, make home insurance one of the most widely-held financial services products. This report explores the domestic property insurance in depth, and excludes commercial property insurance.

The report includes a detailed look at the size of the market, as well as a forecast for the next five years, and a breakdown of the major players and their market share. Major market drivers are discussed, and the report looks at promotional activities of the market as a whole and the biggest-spending providers. A SWOT analysis is included, as are key trends and issues. Finally, Mintel’s exclusive consumer research looks at ownership of different insurance products, and the sources of information used by consumers to research their home insurance policies. There is a discussion of the actions taken by consumers the last time their policy was up for renewal, what they plan to do next time, and the impact of making a claim on switching behaviour. Finally, there is analysis of the most important factors considered by consumers when they choose a home insurance policy.

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • Home insurance market set for a return to growth over the coming years
              • Figure 1: Gross written domestic property insurance premiums – fan chart, 2009-19
            • Market factors
              • Home insurance premiums continue to fall
                • Figure 2: Average home insurance market and shoparound* premiums (quarterly basis) January 2009 – October 2014
              • Falling claims maintain profit despite reduction in income…
                • Figure 3: Gross domestic home insurance claims, by value, 2009-13
              • … but winter storms have impacted expenses
                • Figure 4: Distribution of domestic home insurance claims, by gross value, by type of peril, 2009-13
              • Companies and products
                • Direct Line Group is the biggest player in the home insurance market
                  • Figure 5: domestic property insurance market share, by GWP, 2013
                • Brand promotion
                  • Figure 6: Total adspend in the home insurance market, 2010-14
                • The consumer
                  • Two thirds of people have home insurance
                    • Figure 7: Ownership of home insurance and other general insurance products, September 2014
                  • Most policyholders researched home insurance online
                    • Figure 8: Sources used to get information to help choose last home insurance policy, September 2014
                  • Two thirds stayed with their existing insure at their last renewal
                    • Figure 9: Actions taken at last home insurance renewal, September 2014
                  • Three quarters of home insurance claimants were satisfied with their last claim
                    • Figure 10: Satisfaction with most recent home insurance claim, September 2014
                  • Most policyholders will give their existing insurer the first chance at renewal
                    • Figure 11: Expected renewal plans for next home insurance policy, September 2014
                  • Trust is the most important factor for consumers
                    • Figure 12: Important factors affecting choice of home insurance policy, September 2014
                  • What we think
                  • Issues and Insights

                      • Is lack of differentiation a problem for insurers?
                        • The facts
                          • The implications
                            • A good claims service is the best service
                              • The facts
                                • The implications
                                  • Direct Line shows that brand still plays a major role in the Moneysupermarket era
                                    • The facts
                                      • The implications
                                      • Trend Application

                                        • No claims discounts give the chance to make a deal
                                          • Consumer will choose value over price for the right policy
                                            • Talk to the next generation through their parents
                                            • Market Drivers

                                              • Key points
                                                • Premium prices continue to fall
                                                  • Figure 13: Average home insurance market and shoparound* premiums (quarterly basis) January 2009 – October 2014
                                                • Inflation drops but wage rises remain low
                                                  • Figure 14: Annual percentage change in CPI and AWE (regular pay), monthly basis, January 2009 – October 2014
                                                • Home insurance claims fall further
                                                  • Figure 15: Total domestic home insurance claims, 2009-13
                                                • Winter storms cause big rise in weather-related claims in 2014
                                                  • Figure 16: Distribution of domestic home insurance claims, by gross value, by type of peril, 2009-13
                                                • Flood Re to offer help for flood-threatened consumers
                                                  • Detected fraud dropped in 2013
                                                    • Figure 17: Domestic home insurance claims fraud detected, 2009-13
                                                  • Innovation centres around increased cover for affluent consumers
                                                  • SWOT Analysis

                                                      • Figure 18: Home insurance market SWOT, December 2014
                                                  • Market Size and Forecast

                                                    • Key points
                                                      • Falling premiums are stifling the market…
                                                        • Figure 19: Gross and net written premiums – domestic home insurance, 2003-14
                                                      • … but policies remained profitable in 2013
                                                        • Figure 20: Domestic property insurance underwriting ratio, 2003-13
                                                      • Market Forecast
                                                        • Figure 21: Gross written domestic property insurance premiums – fan chart, 2009-19
                                                        • Figure 22: Forecast of gross written premiums – domestic property insurance, 2009-19
                                                      • Forecast methodology
                                                        • Fan chart explanation
                                                        • Market Share

                                                          • Key points
                                                            • Direct Line Group is the market leader in home insurance
                                                              • Figure 23: Largest 15 parent groups active in the domestic property insurance market, by GWP, 2013
                                                            • Lloyds falls to third place
                                                              • Figure 24: Top six domestic property insurance parent groups, by GWP, 2011-13
                                                          • Companies and Products

                                                            • Direct Line Group
                                                              • Company description
                                                                • Home insurance product range
                                                                  • Recent financial performance
                                                                    • Figure 25: Key financial data for Direct Line Group (Home), 2012 and 2013
                                                                    • Figure 26: Key financial data for Direct Line Group (Home), H1 2013 and H1 2014
                                                                  • Recent activity
                                                                    • Aviva
                                                                      • Company description
                                                                        • Home insurance product range
                                                                          • Recent financial performance
                                                                            • Figure 27: Key financial data for Aviva (UK and Ireland, General Insurance), 2012 and 2013
                                                                            • Figure 28: Key financial data for Aviva (UK and Ireland, General Insurance), H1 2013 and H1 2014
                                                                          • Recent activity
                                                                            • Lloyds Banking Group
                                                                              • Company description
                                                                                • Home insurance product range
                                                                                  • Recent financial performance
                                                                                    • Figure 29: Key financial data for Lloyds Banking Group (General Insurance), 2012 and 2013
                                                                                    • Figure 30: Key financial data for Lloyds Banking Group (General Insurance), H1 2013 and H1 2014
                                                                                  • Recent activity
                                                                                    • RSA Group
                                                                                      • Company description
                                                                                        • Home insurance product range
                                                                                          • Recent financial performance
                                                                                            • Figure 31: Key financial data for RSA (UK Personal, Household), 2012 and 2013
                                                                                            • Figure 32: Key financial data for RSA (UK Personal, Household), H1 2013 and H1 2014
                                                                                          • Recent activity
                                                                                            • AXA
                                                                                              • Company description
                                                                                                • Home insurance product range
                                                                                                  • Recent financial performance
                                                                                                    • Figure 33: Key financial data for AXA (UK and Ireland, Property and Casualty), 2012 and 2013
                                                                                                    • Figure 34: Key financial data for AXA (UK and Ireland, Property and Casualty), H1 2013 and H1 2014
                                                                                                  • Recent activity
                                                                                                  • Brand Communication and Promotion

                                                                                                    • Key points
                                                                                                      • Total adspend
                                                                                                        • Figure 35: Total adspend in the home insurance market, 2010-14
                                                                                                      • Half of all adspend is spent on direct mail
                                                                                                        • Figure 36: Total adspend in the home insurance market, by media type, 2012-14
                                                                                                      • Direct Line is the biggest advertiser in the home insurance market
                                                                                                        • Figure 37: Top 20 advertisers of home insurance, 2012-14
                                                                                                      • A note on adspend
                                                                                                      • Channels to Market

                                                                                                        • Key points
                                                                                                          • Most policyholders shop online for home insurance
                                                                                                            • Figure 38: Channels used to purchase last home contents policy, September 2014
                                                                                                          • Intermediated sales fell again in 2013
                                                                                                            • Figure 39: Domestic property insurance, by GWP, by distribution channel, 2009-13
                                                                                                        • Home Insurance Ownership

                                                                                                          • Key points
                                                                                                            • Two thirds have some home insurance
                                                                                                              • Figure 40: Ownership of home insurance and other general insurance products, September 2014
                                                                                                            • Home insurance is not immune from personal budget cuts
                                                                                                              • Figure 41: Ownership of home insurance policies, by current financial situation, September 2014
                                                                                                            • Over-45s are more likely to have insurance
                                                                                                              • Figure 42: Ownership of home insurance policies, by age, September 2014
                                                                                                            • Policy ownership is lower in London
                                                                                                              • Six in 10 renters have no home insurance
                                                                                                              • Home Insurance Research Sources

                                                                                                                • Key points
                                                                                                                  • Most people research home insurance online
                                                                                                                    • Figure 43: Sources used to get information to help choose last home insurance policy, September 2014
                                                                                                                  • Just a third went direct to insurers
                                                                                                                    • Mortgage point-of-sale is under-exploited
                                                                                                                      • The importance of recommendation
                                                                                                                        • Figure 44: Consumers who used recommendations from friends/family to help choose their most recent home insurance policy, by age, September 2014
                                                                                                                    • Most Recent Renewal Behaviour

                                                                                                                      • Key points
                                                                                                                        • Less than a third changed providers at their last renewal…
                                                                                                                          • Figure 45: Actions taken at last home insurance renewal, September 2014
                                                                                                                        • … but is this loyalty?
                                                                                                                          • PCWs are the biggest prompts for switching
                                                                                                                            • Figure 46: Percentage of home insurance policyholders who switched their insurer at their last renewal, by selected sources of policy information, September 2014
                                                                                                                        • The Impact of Claims on Switching Behaviour

                                                                                                                          • Key points
                                                                                                                            • Around half have claimed on home insurance
                                                                                                                              • Figure 47: Time since last home insurance claim, September 2014
                                                                                                                            • More than three quarters of claimants were satisfied with their last claim
                                                                                                                              • Figure 48: Satisfaction with most recent home insurance claim, September 2014
                                                                                                                            • Claims dissatisfaction is a strong push factor
                                                                                                                              • Figure 49: Percentage of home insurance policyholders who switched their insurer at their last renewal, by satisfaction with most recent home insurance claim, September 2014
                                                                                                                          • Next Renewal Plans

                                                                                                                            • Key points
                                                                                                                              • Two thirds will give their existing insurer the first chance to renew
                                                                                                                                • Figure 50: Expected renewal plans for next home insurance policy, September 2014
                                                                                                                              • Only one in 20 intend to switch…
                                                                                                                                • ... but there is potential for change
                                                                                                                                  • One in 10 previous switchers expect to move again
                                                                                                                                    • Figure 51: Expected renewal plans for next home insurance policy, by action at last renewal, September 2014
                                                                                                                                • Factors Affecting Choice of Home Insurance Policy

                                                                                                                                  • Key points
                                                                                                                                    • Trustworthiness is the most important factor when choosing insurers
                                                                                                                                      • Figure 52: Importance of factors affecting choice of home insurance policy, September 2014
                                                                                                                                    • Price is still a huge consideration…
                                                                                                                                      • … especially for lower earners
                                                                                                                                        • Figure 53: Percentage of consumers who say that "Offering the cheapest quote" is either very important or somewhat important when choosing a home insurance policy, by gross annual household income, September 2014
                                                                                                                                      • Importance of previous experience could be suppressing churn
                                                                                                                                        • When it comes to insurance, familiarity doesn’t breed contempt
                                                                                                                                        • Appendix – Market Size and Forecast

                                                                                                                                            • Figure 54: Best- and worst-case forecast of gross written premiums – domestic property insurance, 2009-19

                                                                                                                                        Companies Covered

                                                                                                                                        • Aviva Plc
                                                                                                                                        • AXA UK plc
                                                                                                                                        • Direct Line Group Limited
                                                                                                                                        • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                        • Lloyds Banking Group
                                                                                                                                        • NatWest
                                                                                                                                        • Royal Bank of Scotland Group plc
                                                                                                                                        • RSA
                                                                                                                                        • Swiftcover

                                                                                                                                        Home Insurance - UK - December 2014

                                                                                                                                        US $2,672.70 (Excl.Tax)