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Home Insurance - UK - December 2015

“Home insurance owners have benefitted over the last few years, as intense price competition has driven down the cost of premiums. The market continues to be extremely price driven, with online sources making it easy for consumers to compare quotes and switch providers. However, brand and service remain important factors when choosing a home insurance provider. Therefore, as premium costs begin to rise, insurers will need to compete on areas other than price in order to attract and retain customers.”
– Jessica Galletley, Financial Services Analyst

This report examines the following areas:

  • Efforts to improve transparency are welcomed by consumers
  • Longer term products could tackle churn but will not end price sensitivity
  • The ‘Connected Home’ will transform insurance

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Table of contents

  1. Overview

    • What you need to know
    • Executive Summary

        • The market
          • Home Insurance gross premiums shrink by 6%
            • Figure 1: Gross home insurance premiums (UK business only), FAN CHART 2010-20
          • The majority of policies are purchased online
            • Figure 2: Home insurance purchase methods, April 2015
          • Summer Budget reveals 3.5% insurance premium tax increase
            • Companies and brands
              • Direct Line Group is the UK’s biggest home insurance underwriter
                • Figure 3: Domestic property insurance market share, by GWP, 2014
              • The consumer
                • Nearly two thirds have a home insurance policy
                  • Figure 4: Home insurance ownership, by type of policy, September 2015
                • Nearly a third switched at last renewal
                  • Figure 5: Actions taken at last home insurance renewal, September 2015
                • 40% use price comparison websites to check competitiveness of renewal
                  • Only a fifth will certainly renew with existing provider
                    • Figure 6: Expected renewal plans for next home insurance policy, September 2015
                  • Widespread support for greater renewal transparency
                    • What it means
                    • Issues and Insights

                      • Efforts to improve transparency are welcomed by consumers
                        • The facts
                          • The implications
                            • Longer term products could tackle churn but will not end price sensitivity
                              • The facts
                                • The implications
                                  • The ‘Connected Home’ will transform insurance
                                    • The facts
                                      • The implications
                                      • The Market – What You Need to Know

                                        • Market devalues by 6%
                                          • Consumers are most likely to purchase a policy online
                                            • Price competition drives down premiums
                                              • Fraud costs halve since 2010
                                              • Market Size and Forecast

                                                • Gross Written Premiums down by 6%
                                                  • Figure 7: Gross and net written premiums – domestic home insurance, 2004-15
                                                • Underwriting ratios maintain profitability
                                                  • Figure 8: Domestic property insurance underwriting ratio, 2005-14
                                                • Market forecast
                                                  • Figure 9: Gross written premium – domestic home insurance, fan chart 2010-20
                                                  • Figure 10: Gross written premium – domestic home insurance, 2010-20
                                                • Forecast methodology
                                                • Channels to Market

                                                  • The majority of policies are purchased online
                                                    • Figure 11: Home contents insurance purchase methods, April 2015
                                                  • Direct sales improved in 2014
                                                    • Intermediary sales drop by 10% over past five years
                                                      • Policies sold via bancassurance declined
                                                        • Figure 12: Domestic Property Insurance, by GWP, by distribution channel, 2010-14
                                                    • Market Drivers

                                                      • Premium prices have continued to fall
                                                        • Summer Budget reveals 3.5% insurance premium tax increase
                                                          • Figure 13: Average home insurance market premiums (quarterly basis) January 2010-October 2015
                                                        • Claims costs drop by 5%
                                                          • Figure 14: Gross domestic claims incurred, 2005 - 14
                                                        • Claims fraud drops by 22%
                                                          • Weather related claims grow by 69%
                                                            • Accidental damage
                                                              • Figure 15: Distribution of domestic home insurance claims, by gross value, by type of peril, 2010-15
                                                            • FCA review presentation of add-ons to consumers
                                                              • Flood RE details confirmed
                                                              • Key Players – What You Need to Know

                                                                • Direct Line Group is the UK’s biggest home insurance underwriter
                                                                  • Insurers continue to focus on digital…
                                                                    • …and look for ways of building trust
                                                                      • Advertising spend drops by 13%
                                                                      • Market Share

                                                                        • Direct Line Group claims the biggest underwriter share
                                                                          • Figure 16: Top 15 domestic property insurance parent groups, by GWP, 2014
                                                                        • Top 10 insurers have nearly four fifths of the market
                                                                          • RSA close the gap
                                                                            • Figure 17: Top 10 domestic property insurance parent groups, by GWP, 2012-14
                                                                        • Competitive Strategies

                                                                            • Improving digital services
                                                                              • Lloyds Banking Group
                                                                                • Aviva
                                                                                  • L&G
                                                                                    • Product development in the name of fairness
                                                                                      • RBS and NatWest
                                                                                        • AXA
                                                                                          • Insurance gets social
                                                                                            • TSB offers modular insurance in new partnership with Aviva
                                                                                              • PCWs compete for business
                                                                                              • Advertising and Marketing Activity

                                                                                                • Overall advertising spend down 13%
                                                                                                  • Figure 18: Total above-the-line, online display and direct mail adspend in the home insurance market, 2010/11 – 2014/15
                                                                                                • Significant reductions in spend on direct mail
                                                                                                  • Figure 19: Total above-the-line, online display and direct mail adspend in the home insurance market, by media type, 2010/11– 2014/15
                                                                                                • Direct Line tops adspend list
                                                                                                  • Figure 20: Top 20 above-the-line, online display and direct mail advertisers of home insurance, 2012/13–2014/15
                                                                                                • Specialist providers increase advertising spend
                                                                                                  • Insurers compete for online presence
                                                                                                    • Nielsen Media Research coverage
                                                                                                    • The Consumer – What You Need to Know

                                                                                                      • Two thirds have a home insurance policy
                                                                                                        • Majority stayed with existing provider but not without shopping around
                                                                                                          • 40% use price comparison websites to check competitiveness of renewal
                                                                                                            • Lack of loyalty towards home insurers
                                                                                                              • Widespread support for greater renewal transparency
                                                                                                              • Home Insurance Ownership

                                                                                                                • Nearly two thirds have a home insurance policy
                                                                                                                  • Figure 21: Ownership of home insurance and other general insurance products, September 2015
                                                                                                                • Most people opt for combined cover
                                                                                                                  • Figure 22: Home insurance ownership, by policy type, September 2015
                                                                                                                • Less than half of those renting have home contents insurance
                                                                                                                  • Figure 23: Home insurance ownership, by housing situation, September 2015
                                                                                                                • Students are in danger of being underinsured
                                                                                                                  • Equal ownership across the income scale
                                                                                                                    • Figure 24: Home ownership by household income, September 2015
                                                                                                                • Most Recent Policy Renewal Outcome

                                                                                                                  • Nearly two thirds stayed with their existing provider
                                                                                                                    • Figure 25: Actions taken at last home insurance renewal, September 2015
                                                                                                                  • Higher premium costs incentivises switching
                                                                                                                  • Factors Influencing Most Recent Policy Renewal

                                                                                                                    • Pricing is the key reason to stay
                                                                                                                      • A fifth of consumers were offered a price match
                                                                                                                        • Good service is a stronger deterrent to switching
                                                                                                                          • Active approach at renewal
                                                                                                                            • Figure 26: Reasons for staying with existing provider, September 2015
                                                                                                                        • Most Recent Renewal Behaviour

                                                                                                                          • Price comparison websites as an information source
                                                                                                                            • Bargaining for a better deal
                                                                                                                              • Only 15% check the value of their personal belongings
                                                                                                                                • A quarter pay their premiums annually
                                                                                                                                  • Figure 27: Actions at last purchase or renewal of home insurance policy, September 2015
                                                                                                                              • Expected Plan at Next Renewal

                                                                                                                                • One in five is planning to renew with existing provider
                                                                                                                                  • Only one in twenty will switch
                                                                                                                                    • Figure 28: Expected renewal plans for next home insurance policy, September 2015
                                                                                                                                  • Those who stayed, are more likely to renew again
                                                                                                                                    • Figure 29: Expected renewal plans for next home insurance policy, by actions taken at last renewal, September 2015
                                                                                                                                • Factors Affecting Choice of Home Insurance Provider

                                                                                                                                  • Renewal premium transparency is valued by consumers
                                                                                                                                    • Ability to access an advisor over the phone is important for all ages
                                                                                                                                      • Comparisons are important
                                                                                                                                        • Discounts for home security measures
                                                                                                                                            • Figure 30: Factors influencing choice of provider, September 2015
                                                                                                                                        • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                          • Abbreviations
                                                                                                                                            • Consumer research methodology
                                                                                                                                            • Appendix – Market Size and Forecast

                                                                                                                                              • Additional market forecast data
                                                                                                                                                • Figure 31: Best and worst case scenario forecast - Gross written premium – domestic home insurance, 2015-2020
                                                                                                                                              • Forecast Methodology

                                                                                                                                              Home Insurance - UK - December 2015

                                                                                                                                              US $2,648.76 (Excl.Tax)