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Home Insurance - UK - November 2009

  • Around 35 million people have home insurance, with combined buildings and contents cover the most common arrangement. Mintel’s consumer research shows no real sign of consumers cutting cover because of the slowdown – insurance is undoubtedly seen as an essential purchase for most.
  • When Mintel asked people about their claims history, as many said that they’d incurred an insurable loss within the last two years but decided not to claim (3.4 million) as said that they had actually made the claim. A few reminders that insurance is there for a reason, and that customers shouldn’t be afraid to claim could do wonders for customer satisfaction.
  • Many of the 4 million UK adults who say that they simply don’t have anything worth insuring, are also the least likely to be able to bear the cost of replacing their possessions. Stripped-down cover designed to take the top spots on the price comparison sites may be viewed as a threat by many providers, but stripped-down cover designed to expand the market could be a way to reach currently disinterested consumers.
  • If consumers are given a flexible package of home insurance benefits and options, and told to build their own policy, the resulting sense of ownership could do much to help build loyalty. When they’ve taken the trouble to design their own insurance policy, they’ll be hesitant to give it up for the sake of saving a few pounds.
  • Despite an increase in shopping around, considerably more people will pay more for quality cover (5 million) than those who think that low premiums are all that matter (3.8 million).
  • The better-off the individual, the more likely they are to say that it’s worth paying more for quality cover. This presents something of a challenge for insurers. The people who are most likely to say that they value premium cover are also the most likely to buy insurance online, and to obtain multiple quotes, both factors that tend to encourage price-driven switching.

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Table of contents

  1. Issues in the Market

      • Key issues
        • Abbreviations
        • Future Opportunities

          • Premium and Cutthroat
            • Playing to both ends of the market
              • The impact on home insurance
                • A move downmarket?
                  • Customisation
                    • Tailoring cover to suit the individual
                      • A question of positioning
                        • Encouraging claimants – what price a no claims bonus?
                          • The importance of quality
                          • Market in Brief

                            • Split between buildings and contents insurance has narrowed
                              • Figure 1: Estimated value of the domestic buildings and contents insurance sectors, by GWP, 2002-09
                            • Sharp turnaround in the underwriting cycle in 2008
                              • Figure 2: The home insurance underwriting cycle+, 1998-2008
                            • Weather still the main cause of claims in 2008
                              • Figure 3: Gross incurred claims for the domestic property insurance market, by the major perils, at current prices, 1996-2008
                            • Majority of consumers report arranging contents insurance offline…
                              • Figure 4: How consumers arranged last home contents insurance policy, July 2009
                            • The big four insurers generate 63% of GWP
                              • Figure 5: Underwriting market share for domestic property insurance, 2008*
                            • Competition induced rise in adspend appears to have peaked
                              • Few signs of policy cancellations
                                • Figure 6: Life or home insurance policies, July 2009
                              • Retention a problem, but not a disaster
                                • Strong faith in the product – “you’d be a fool not to have home insurance”
                                • Internal Market Environment

                                  • Key points
                                    • Premium pricing – buildings up, contents level
                                      • Figure 7: Home insurance premiums, 2004-09
                                    • House rebuilding costs fall…
                                      • Figure 8: Annual % change in house rebuilding cost index and RPI, 1998-2009
                                    • Climate change and flooding are major concerns for industry
                                      • Flooding
                                        • The impact of climate change
                                          • Cost of contents has fallen over the last decade
                                            • Figure 9: RPI and consumer durables indices, 1999-2009
                                          • But level of contents ownership has increased
                                            • Figure 10: Percentage of households with consumer durable products, 1998/99 and 2007
                                          • Underinsurance remains a problem
                                            • Burglary figures increase…
                                              • … and fraud is expected to become more prevalent
                                                • Figure 11: Estimated value of undetected fraudulent general insurance claims, 2008
                                              • But industry is making progress on fraudulent claims
                                              • Broader Market Environment

                                                • Key points
                                                  • The number of households continues to increase…
                                                    • Figure 12: Number of households (Great Britain), by size of household, 1990-2031
                                                  • … but household structure continues to evolve
                                                    • Figure 13: Household estimates and projections: by composition in England, 2000-15
                                                  • Growth in both the owner-occupied and private rental markets
                                                    • Figure 14: Tenure trends in England and Wales, 2000-08
                                                  • Housing market slowdown has knock-on effect for home insurance
                                                    • Figure 15: UK housing market – number of transactions, average house prices and number of years between moves, 2004-09
                                                  • The impact of the slowdown
                                                    • The industry perspective
                                                      • The consumer perspective
                                                        • Online channels increase in importance…
                                                          • Figure 16: British internet penetration at home/work/place of study or elsewhere, 2003-09
                                                        • … but have an impact on pricing and switching activity
                                                          • A more intrusive style of regulation?
                                                          • Competitive Context

                                                            • Key points
                                                              • Self-insurance the only real alternative
                                                              • Strengths and Weaknesses in the Market

                                                                  • Figure 17: Home insurance – SWOT analysis, 2009
                                                              • Who’s Innovating?

                                                                • Key points
                                                                  • True product innovation is rare
                                                                    • Halifax launches community website for home insurance
                                                                      • AXA goes beyond post-codes with ‘geo-coding’ underwriting tool
                                                                        • RIAS introduces ‘Key Protection’ home insurance add-on
                                                                          • Sainsbury’s links home insurance cover with its reward program
                                                                            • MORE TH>N boosts customer service by streamlining claims process…
                                                                              • … and also makes choosing a policy more straightforward
                                                                                • Aviva teams up with Norfolk Police in the Safer Street project
                                                                                • Trade Perspective

                                                                                    • The slowdown in the economy and housing market
                                                                                      • Consumers have become more price-conscious
                                                                                        • Credit crunch has brought the issue of trust to the forefront
                                                                                          • More need for cover if property theft levels rise during the recession…
                                                                                            • … but the number of fraudulent claims also likely to increase
                                                                                              • Aggregators
                                                                                                • Aggregators playing a bigger role in the market
                                                                                                  • High volumes necessary in order to justify being on aggregators
                                                                                                    • Aggregator brand just as important as insurer brand
                                                                                                      • Growth and retention
                                                                                                        • Marketing tactics focus on gaining market share
                                                                                                          • Devaluing products through discounting
                                                                                                            • Past claim experience makes a huge difference
                                                                                                              • Many may find they are under-insured when making a claim
                                                                                                                • Top-end market needs to be targeted differently than the value end
                                                                                                                  • Other issues
                                                                                                                    • Level of coverage outside the home still a confusing area for customers
                                                                                                                    • Market Size and Forecast

                                                                                                                      • Key points
                                                                                                                        • Drop in the value of reinsurance ceded leads to 3% rise in NWP in 2008
                                                                                                                          • Figure 18: GWP, NWP and reinsurance ceded on home insurance, 1998-2008
                                                                                                                        • Sharp turnaround in the underwriting cycle in 2008
                                                                                                                          • Figure 19: The home insurance underwriting cycle+, 1998-2008
                                                                                                                        • Quick return to profitability aided by consistent cost control
                                                                                                                          • Figure 20: Home insurance claims, expense and combined ratios (%), 1998-2008
                                                                                                                        • Net claims incurred decline by 27% on previous year
                                                                                                                          • Figure 21: Domestic property insurance underwriting result, 2001-08
                                                                                                                        • Split between buildings and contents insurance has narrowed
                                                                                                                          • Figure 22: Estimated value of the domestic buildings and contents insurance sectors, by GWP, 2002-08
                                                                                                                        • Forecast
                                                                                                                          • Figure 23: Forecast of the value of the domestic buildings and contents insurance sectors, by GWP, 2004-14
                                                                                                                        • Factors used in the forecast
                                                                                                                        • Claims Experience

                                                                                                                          • Key points
                                                                                                                            • Weather remains the main cause of claims in 2008
                                                                                                                              • Figure 24: Gross incurred claims for the domestic property insurance market, by the major perils, at current prices, 1996-2008
                                                                                                                            • Storm damage typically behind most weather-related claims
                                                                                                                              • Figure 25: Gross incurred claims for weather damage, 1998-2008
                                                                                                                            • Industry fears of more frequent high-damage weather events
                                                                                                                              • Wetter weather helps lower subsidence claims
                                                                                                                                • Fire claim values pushed up by more expensive household items
                                                                                                                                  • UK economic difficulties could cause theft claims to rise
                                                                                                                                    • Fraudulent claims also likely to increase
                                                                                                                                    • Market Share

                                                                                                                                      • Key points
                                                                                                                                        • 63% of GWP controlled by the big four insurers
                                                                                                                                          • Figure 26: Underwriting market share for domestic property insurance, 2008*
                                                                                                                                        • Aviva continues to lose ground while Lloyds jumps up the table
                                                                                                                                          • Figure 27: Underwriting market share for the domestic property insurance, 2005-08
                                                                                                                                      • Companies and Products

                                                                                                                                        • Major players
                                                                                                                                          • Aviva UK Insurance
                                                                                                                                              • Figure 28: Personal gross written premiums (GWP) and operating profit, by channel, 2008
                                                                                                                                            • Royal Bank of Scotland Insurance
                                                                                                                                              • Royal & SunAlliance (RSA)
                                                                                                                                                • Lloyds Banking Group
                                                                                                                                                  • Zurich Insurance
                                                                                                                                                    • AXA Insurance
                                                                                                                                                        • Figure 29: AXA, gross revenues for property and casualty insurance in the UK, by channel, 2007 and 2008
                                                                                                                                                      • Key Intermediaries
                                                                                                                                                        • Acromas Holding Ltd
                                                                                                                                                          • Swinton Group
                                                                                                                                                          • Brand Communication and Promotion

                                                                                                                                                            • Key points
                                                                                                                                                              • Adspend appears to have reached a plateau in 2008
                                                                                                                                                                • Figure 30: Advertising expenditure on home insurance (including buildings and contents), 2005-Q2 2009
                                                                                                                                                              • Direct Line tops the table accounting for 16% of total adspend
                                                                                                                                                                • Figure 31: Top 20 advertisers of home insurance (including buildings and contents), 2006-08
                                                                                                                                                              • Aviva adspend back up in Q2 2009 after price comparison site exit
                                                                                                                                                                • Most advertisers use direct mail and TV to promote products
                                                                                                                                                                  • Figure 32: Advertising expenditure on home insurance (including buildings and contents), by media type, 2008
                                                                                                                                                              • Brand Elements

                                                                                                                                                                  • Key points
                                                                                                                                                                    • Brand map
                                                                                                                                                                        • Figure 33: Attitudes towards and usage of home insurance brands, August 2009
                                                                                                                                                                      • Brand qualities of home insurance brands
                                                                                                                                                                        • Lloyds TSB has authority, but Churchill most genuine
                                                                                                                                                                          • Figure 34: Personalities of various home insurance brands, August 2009
                                                                                                                                                                        • Experience of home insurance brands
                                                                                                                                                                          • Direct Line has most experience, but Lloyds shows recent growth
                                                                                                                                                                            • Figure 35: Consumer usage of various home insurance brands, August 2009
                                                                                                                                                                          • Brand intentions for home insurance brands
                                                                                                                                                                            • Direct Line most considered, Lloyds and Tesco put some off
                                                                                                                                                                              • Figure 36: Consideration of various home insurance brands, August 2009
                                                                                                                                                                            • Brand satisfaction for home insurance brands
                                                                                                                                                                              • Tesco and Direct Line most pleasing
                                                                                                                                                                                • Figure 37: Satisfaction with various home insurance brands, August 2009
                                                                                                                                                                              • Brand commitment to home insurance brands
                                                                                                                                                                                • Lloyds TSB polarises opinion
                                                                                                                                                                                  • Figure 38: Commitment to various home insurance brands, August 2009
                                                                                                                                                                                • Lloyds TSB
                                                                                                                                                                                  • What the consumer thinks
                                                                                                                                                                                    • Figure 39: Attitudes towards the Lloyds TSB brand, August 2009
                                                                                                                                                                                  • MORE TH>N
                                                                                                                                                                                    • What the consumer thinks
                                                                                                                                                                                      • Figure 40: Attitudes towards the MORE TH>N brand, August 2009
                                                                                                                                                                                    • Direct Line
                                                                                                                                                                                      • What the consumer thinks
                                                                                                                                                                                        • Figure 41: Attitudes towards the Direct Line brand, August 2009
                                                                                                                                                                                      • Tesco
                                                                                                                                                                                        • What the consumer thinks
                                                                                                                                                                                          • Figure 42: Attitudes towards the Tesco brand, August 2009
                                                                                                                                                                                        • Aviva
                                                                                                                                                                                          • What the consumer thinks
                                                                                                                                                                                            • Figure 43: Attitudes towards the Aviva brand, August 2009
                                                                                                                                                                                          • Churchill
                                                                                                                                                                                            • What the consumer thinks
                                                                                                                                                                                              • Figure 44: Attitudes towards the Churchill brand, August 2009
                                                                                                                                                                                          • Channels to Market

                                                                                                                                                                                            • Key points
                                                                                                                                                                                              • Independent intermediaries holding their ground
                                                                                                                                                                                                • Figure 45: The distribution of home insurance by proportion of GWP per channel, 1992-2008
                                                                                                                                                                                              • Bank and building society channel starting to get less competitive
                                                                                                                                                                                                • Majority of consumers report arranging contents insurance offline…
                                                                                                                                                                                                  • Figure 46: How consumers arranged last home contents insurance policy, July 2009
                                                                                                                                                                                                • … but eventually, arranging policies online will be the norm
                                                                                                                                                                                                  • Aggregators to play a big role in the market
                                                                                                                                                                                                    • Brokers have been able to use aggregator websites to their advantage
                                                                                                                                                                                                      • But aggregators do have their drawbacks
                                                                                                                                                                                                      • The Consumer – Product Ownership

                                                                                                                                                                                                        • Key points
                                                                                                                                                                                                          • A slight fall in ownership – the impact of the slowdown?
                                                                                                                                                                                                              • Figure 47: Ownership of buildings and contents insurance policies, 2006-09
                                                                                                                                                                                                            • Little sign of an increase in cancellations
                                                                                                                                                                                                              • Figure 48: Life or home insurance policies, July 2009
                                                                                                                                                                                                            • Three in ten remain without cover
                                                                                                                                                                                                                • Figure 49: Home insurance policies by affluence, income, working status and housing tenure, July 2009
                                                                                                                                                                                                              • Capital cover?
                                                                                                                                                                                                                  • Figure 50: Home insurance policies by gender, age, lifestage, special group and region, July 2009
                                                                                                                                                                                                              • The Consumer – Purchasing Behaviour

                                                                                                                                                                                                                • Key points
                                                                                                                                                                                                                    • Figure 51: Number of quotes consumers obtained when buying or renewing their last home contents policy, July 2009
                                                                                                                                                                                                                  • Lower cost – less incentive to switch
                                                                                                                                                                                                                      • Figure 52: Products purchased or quoted for through a price comparison sites, September 2009
                                                                                                                                                                                                                    • Higher value – but loyalty suffers
                                                                                                                                                                                                                        • Figure 53: Number of quotes obtained for last bought or renewed home contents policy, by socio-economic status and household income, July 2009
                                                                                                                                                                                                                      • A generation gap?
                                                                                                                                                                                                                          • Figure 54: Number of quotes obtained for last bought or renewed home contents policy, by gender, age, special group and internet access, July 2009
                                                                                                                                                                                                                        • The internet boom continues
                                                                                                                                                                                                                            • Figure 55: How arranged last home contents insurance policy, 2003-09
                                                                                                                                                                                                                          • The paradox of price – premium customers opting for the low-cost option
                                                                                                                                                                                                                            • Demonstrating service through an impersonal medium
                                                                                                                                                                                                                                • Figure 56: How arranged last home contents insurance policy, by socio-economic group, working status, household income, household tenure and internet access, July 2009
                                                                                                                                                                                                                              • The generational shift towards the internet
                                                                                                                                                                                                                                  • Figure 57: How arranged last home contents insurance policy, by gender, age, lifestage, special group and region, July 2009
                                                                                                                                                                                                                              • The Consumer – Attitudes and Targeting Opportunities

                                                                                                                                                                                                                                • Key points
                                                                                                                                                                                                                                  • Prepared to pay more for cover
                                                                                                                                                                                                                                      • Figure 58: Attitudes towards home insurance, July 2009
                                                                                                                                                                                                                                    • Topping up cover
                                                                                                                                                                                                                                      • Is it all about control?
                                                                                                                                                                                                                                        • Insurance for people with little to insure
                                                                                                                                                                                                                                            • Figure 59: Attitudes towards home insurance, by ownership, July 2009
                                                                                                                                                                                                                                          • Keeping claims costs down – but at what cost?
                                                                                                                                                                                                                                            • Reviewing cover – as much about peace of mind as premiums
                                                                                                                                                                                                                                              • Age, affluence, the importance of adequate cover…
                                                                                                                                                                                                                                                  • Figure 60: Selected attitudes towards home insurance, by age and socio-economic group, July 2009
                                                                                                                                                                                                                                                • … and the argument for quality standards online
                                                                                                                                                                                                                                                  • Price, not perks
                                                                                                                                                                                                                                                    • Finding the balance between price and quality
                                                                                                                                                                                                                                                      • Figure 61: Home insurance target groups, July 2009
                                                                                                                                                                                                                                                      • Figure 62: Life or home insurance policies, by target groups, July 2009
                                                                                                                                                                                                                                                    • Claims experience – driving a switch to quality?
                                                                                                                                                                                                                                                        • Figure 63: Attitudes towards home insurance, by target groups, July 2009
                                                                                                                                                                                                                                                      • Mid-thirties – time to think about quality?
                                                                                                                                                                                                                                                        • Price-driven – but it’s not reflected in buying behaviour
                                                                                                                                                                                                                                                            • Figure 64: Number of quotes obtained for last bought or renewed home contents policy, by target groups, July 2009
                                                                                                                                                                                                                                                          • Reaching the disengaged
                                                                                                                                                                                                                                                              • Figure 65: How arranged last home contents insurance policy, by target groups, July 2009
                                                                                                                                                                                                                                                          • Appendix – Market Share

                                                                                                                                                                                                                                                              • Figure 66: Underwriting market share for domestic property insurance, 2008
                                                                                                                                                                                                                                                          • Appendix – The Consumer: Product Ownership

                                                                                                                                                                                                                                                              • Figure 67: Home insurance policies, by demographics, July 2009
                                                                                                                                                                                                                                                          • Appendix – The Consumer – Purchasing Behaviour

                                                                                                                                                                                                                                                              • Figure 68: Number of quotes obtained for last bought or renewed home contents policy, by demographics, July 2009
                                                                                                                                                                                                                                                              • Figure 69: How arranged last home contents insurance policy, by demographics, July 2009
                                                                                                                                                                                                                                                          • Appendix – The Consumer – Attitudes and Targeting Opportunities

                                                                                                                                                                                                                                                              • Figure 70: Most popular attitudes towards home insurance, by demographics, July 2009
                                                                                                                                                                                                                                                              • Figure 71: Next most popular attitudes towards home insurance, by demographics, July 2009 (continued)
                                                                                                                                                                                                                                                              • Figure 72: Target groups, by demographics, July 2009

                                                                                                                                                                                                                                                          Companies Covered

                                                                                                                                                                                                                                                          • Abbey
                                                                                                                                                                                                                                                          • Aioi Insurance Co. Ltd.
                                                                                                                                                                                                                                                          • Amtrust Financial
                                                                                                                                                                                                                                                          • Asda Group Ltd
                                                                                                                                                                                                                                                          • Association of British Insurers
                                                                                                                                                                                                                                                          • Automobile Association (AA)
                                                                                                                                                                                                                                                          • Aviva Plc
                                                                                                                                                                                                                                                          • AXA UK plc
                                                                                                                                                                                                                                                          • Bankinter, S.A.
                                                                                                                                                                                                                                                          • Berkshire Hathaway Inc
                                                                                                                                                                                                                                                          • Birmingham Midshires
                                                                                                                                                                                                                                                          • Brit Insurance Holdings PLC
                                                                                                                                                                                                                                                          • British Market Research Bureau (BMRB)
                                                                                                                                                                                                                                                          • Cheltenham & Gloucester plc
                                                                                                                                                                                                                                                          • Co-operative Group
                                                                                                                                                                                                                                                          • Direct Line Group Limited
                                                                                                                                                                                                                                                          • Financial Services Authority (The)
                                                                                                                                                                                                                                                          • First Direct
                                                                                                                                                                                                                                                          • Fortis Insurance Limited
                                                                                                                                                                                                                                                          • Gfk NOP
                                                                                                                                                                                                                                                          • Gresham Insurance Company
                                                                                                                                                                                                                                                          • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                                                                                                          • HSBC Private Bank (UK) Limited
                                                                                                                                                                                                                                                          • Legal & General Group PLC
                                                                                                                                                                                                                                                          • Lloyds Banking Group
                                                                                                                                                                                                                                                          • Marks & Spencer
                                                                                                                                                                                                                                                          • MoneySupermarket.com Limited
                                                                                                                                                                                                                                                          • NatWest
                                                                                                                                                                                                                                                          • Norwich Union
                                                                                                                                                                                                                                                          • Office for National Statistics
                                                                                                                                                                                                                                                          • OgilvyOne Worldwide Ltd.
                                                                                                                                                                                                                                                          • Royal Bank of Scotland Group plc
                                                                                                                                                                                                                                                          • RSA
                                                                                                                                                                                                                                                          • Sainsbury's Bank
                                                                                                                                                                                                                                                          • Scottish Widows Bank plc
                                                                                                                                                                                                                                                          • Sterling Insurance Group
                                                                                                                                                                                                                                                          • Tesco Personal Finance Limited
                                                                                                                                                                                                                                                          • The Chartered Insurance Institute
                                                                                                                                                                                                                                                          • The National Insurance and Guarantee Corporation Limited
                                                                                                                                                                                                                                                          • ZenithOptimedia UK
                                                                                                                                                                                                                                                          • Zurich Financial Services

                                                                                                                                                                                                                                                          Home Insurance - UK - November 2009

                                                                                                                                                                                                                                                          £1,995.00 (Excl.Tax)