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Home Insurance - UK - October 2010

This report considers the trends in the overall market for home insurance, as well as the factors that influence the individual sectors. A SWOT analysis summarises the current condition of the market and the challenges that it faces in the future. Data from the ABI are used to assess the size of the market, with Mintel also estimating sector splits and forecasting growth rates over the next five years. We also look at the key players in the market and the evolving distribution channels, before concluding with a consumer-focused analysis of product ownership, levels of cover held and people’s general attitudes towards home insurance.

  • There needs to be greater emphasis on creating contents policies aimed specifically at renters. The ongoing struggle for first-time buyers to get onto the property ladder will mean that the private rented sector will continue to grow.
  • The slowdown hasn't been all bad news for the home insurance market. Customer churn will have been reduced by the stagnation of the mortgage market, since moving house or remortgaging acts as a trigger to reviewing insurance cover.
  • Providers need to continue to focus on building loyalty, with the aggregator's growing focus on the home insurance market otherwise in danger of driving higher levels of churn.
  • Mintel expects that home insurance sales will fall by 3% in 2010 (slightly less than the 4% decline in 2009), due to the difficult trading environment, fears about the knock-on effect of public spending cuts and the continuing trend of rising premiums.
  • Overall, three quarters of UK adults have home insurance, with homeowners and homebuyers being much more likely to have a policy than renters. However, renters are more likely to own standalone contents cover – with ownership levels having increased over the last decade – demonstrating the growth potential in this sector.
  • There's scope to upsell comprehensive policies even to the price-driven aggregator users. Across the board, consumers stress quality of cover over the lowest possible price.

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Table of contents

  1. Issues in the Market

      • Key issues
        • Abbreviations
        • Future Opportunities

          • Focussing on the growing renters market
            • Opportunities exist for more than just aggregators
            • Market in Brief

              • A fairly resilient market – GWP fell by just 4% in 2009
                • Figure 1: Estimated value of the domestic buildings and contents insurance sectors, by GWP, 2004-10
              • Contents premiums have increased significantly since mid-2008
                • Figure 2: Home insurance market average premiums (quarterly), January 2004-July 2010
              • Aggregators are becoming more influential
                • The stagnation of the housing market has had an impact
                  • Weather-related claims soared in 2007
                    • Figure 3: Gross claims incurred for the domestic property insurance sector, by type, 2004-09
                  • RBS Group reclaimed the top one spot from Aviva in 2009
                    • Figure 4: Underwriting GWP for the top ten domestic property insurance providers, 2007-09
                  • Total adspend has fallen by just 11% since 2007
                    • Bancassurers have increased their share of the market
                      • Figure 5: Domestic property insurance sales (GWP), by distribution channel, 2004-09
                    • Three quarters of UK adults own home insurance
                      • Figure 6: Types of home insurance owned, July 2010
                    • Young adults and high earners are more likely to use aggregators
                      • Price is key…but quality of cover is also very important
                        • Figure 7: Attitudes towards home insurance, July 2010
                    • Internal Market Environment

                      • Key points
                        • Average premiums have increased significantly…
                          • Figure 8: Home insurance market average premiums (quarterly), January 2004-July 2010
                        • …largely due to severe flooding in 2007
                          • Industry fears over long-term impact of climate change
                            • House rebuilding costs have fallen during the downturn
                              • Figure 9: Annual percentage change in house rebuilding cost index and RPI, January 2000-July 2010
                            • The price of consumer durables has fallen over the last decade...
                              • Figure 10: RPI and consumer durables indices, Q1 2000-Q2 2010
                            • …but people are accumulating more possessions
                              • Advances in fraud detection methods
                                • Figure 11: Detected general insurance fraud, by claims value, 2004-09
                              • Burglary has fallen over the last decade
                                • The growing importance of aggregators
                                  • The rise in IPT makes home insurance more expensive
                                  • Broader Market Environment

                                    • Key points
                                      • Some consumers are cancelling cover in tough times
                                        • Figure 12: PDI, consumer expenditure and savings, at current prices, 2005-15
                                      • The number of households continues to grow
                                        • Figure 13: Number of households (Great Britain), by size of household, 2000-31
                                      • Growth in the number of one-person households
                                        • Figure 14: Household estimates and projections, by composition – England, 2000-15
                                      • The number of homeowners continues to fall
                                        • Figure 15: Household tenure in England, 2001-08/09
                                      • Problems in the mortgage market may impact sales
                                        • Figure 16: Number of mortgage approvals for house purchase, by sector, January 2004-April 2010
                                    • SWOT Analysis

                                        • Figure 17: Home insurance – SWOT analysis, 2010
                                    • Who’s Innovating?

                                      • Key points
                                        • Aviva unveils new technology to assess flood risk…
                                          • …while Motaquote launches a policy specifically for high-risk homes
                                            • Adopting a more personalised approach to cover
                                              • M&S goes green on home insurance
                                                • A nice little freebie from Legal & General
                                                • Market Size and Forecast

                                                  • Key points
                                                    • Gross written premiums fell by 4% in 2009
                                                      • Figure 18: Domestic property insurance GWP, NWP and reinsurance ceded, 2000-10
                                                    • Profitability in the sector has been restored since 2007...
                                                      • Figure 19: Domestic property insurance underwriting ratio*, 2000-09
                                                    • …helped by lower claims and better cost control
                                                      • Figure 20: Domestic property insurance underwriting result, 2004-09
                                                    • Buildings insurance accounts for just over half of total GWP
                                                      • Figure 21: Estimated value of the domestic buildings and contents insurance sectors, by GWP, 2004-10
                                                    • Forecast
                                                      • Figure 22: Forecast value of the domestic buildings and contents insurance sectors, by GWP, 2005-15
                                                    • Factors used in the forecast
                                                    • Claims Experience

                                                      • Key points
                                                        • Water damage claims have almost doubled since 2004
                                                          • Figure 23: Gross claims incurred for the domestic property insurance sector, by type, 2004-09
                                                        • Weather-related claims have fallen over the last two years
                                                          • Figure 24: Gross claims incurred for weather damage, by type, 2004-09
                                                      • Market Share

                                                        • Key points
                                                          • RBS Group regained the top spot in 2009
                                                            • Figure 25: Underwriting GWP for the top ten domestic property insurance providers, 2007-09
                                                        • Companies and Products

                                                          • Aviva
                                                            • RBS Insurance
                                                              • Lloyds Banking Group
                                                                • RSA
                                                                  • AXA
                                                                  • Brand Communication and Promotion

                                                                    • Key points
                                                                      • Home insurance adspend has held up relatively well
                                                                        • Figure 26: Topline advertising expenditure on home insurance, 2006-09
                                                                      • RBS Insurance dominates the advertising space
                                                                        • Figure 27: Top 20 advertisers of home insurance, 2007-09
                                                                      • Direct mail is the largest category of adspend
                                                                        • Figure 28: Advertising expenditure on home insurance, by media type, 2009
                                                                    • Channels to Market

                                                                      • Key points
                                                                        • The bancassurance sector continues to shine
                                                                          • Figure 29: Domestic property insurance sales (GWP), by distribution channel, 2004-09
                                                                        • Aggregators account for 14% of sales…
                                                                          • Figure 30: How purchased buildings and/or contents insurance, 2008-10
                                                                        • …but conversion rates could still be improved
                                                                          • The telephone remains the dominant purchase method
                                                                            • Figure 31: Methods used to purchase buildings and/or contents insurance, 2010
                                                                        • Product Ownership and Methods of Arranging Cover

                                                                          • Key points
                                                                            • Three quarters of people own home insurance…
                                                                              • Figure 32: Types of home insurance owned, July 2010
                                                                            • …with standalone contents policies becoming more popular
                                                                              • Figure 33: Ownership of buildings and contents insurance policies, by type, 2006-10
                                                                            • A product that is principally aimed at homeowners
                                                                              • Figure 34: Types of home insurance owned, by demographics, July 2010
                                                                            • Customer churn less pronounced than in the motor market
                                                                              • Figure 35: Number of years with current provider, 2010*
                                                                            • The phone is still king when it comes to home insurance
                                                                              • Figure 36: Methods used to arrange home contents insurance, July 2010
                                                                            • Renters could be a key target for bancassurers
                                                                              • Figure 37: Methods used to arrange home contents insurance, by demographics, July 2010
                                                                          • Level of Cover Held

                                                                            • Key points
                                                                              • A third of people don’t know their level of contents cover…
                                                                                • Figure 38: Level of contents cover held, July 2010
                                                                              • …and a similar proportion are unsure about their buildings cover
                                                                                • Figure 39: Level of buildings cover held, July 2010
                                                                              • Inertia is more prominent in the pre-/no family lifestage
                                                                                • Figure 40: Level of contents cover held, by demographics, July 2010
                                                                              • People who aren’t married tend to have a lower level of cover
                                                                                • People with a combined policy tend to have higher cover
                                                                                  • Figure 41: Level of contents cover held, by types of policy owned, July 2010
                                                                                • High-value customers prefer to arrange cover via the internet
                                                                                  • Figure 42: Methods used to arrange home contents insurance, by level of contents cover held, July 2010
                                                                              • Attitudes towards Home Insurance

                                                                                • Key points
                                                                                  • It’s not all about price…
                                                                                    • Figure 43: Attitudes towards home insurance, July 2010
                                                                                  • Shopping around, and regular reviews
                                                                                    • ABs are more concerned with the quality of cover…
                                                                                      • Figure 44: Attitudes towards home insurance, by demographics, July 2010
                                                                                    • …while homebuyers are more price-sensitive
                                                                                      • Combined policyholders are more likely to shop around
                                                                                        • Figure 45: Attitudes towards home insurance, by types of home insurance owned, July 2010
                                                                                      • Possible potential to upgrade aggregator users?
                                                                                        • Figure 46: Attitudes towards home insurance, by methods used to arrange contents insurance, July 2010
                                                                                      • People with lower levels of cover are driven by price
                                                                                        • Figure 47: Attitudes towards home insurance, by level of buildings cover held, July 2010
                                                                                    • Targeting Opportunities

                                                                                      • Key points
                                                                                        • Cover-orientated Consumers focus on quality…
                                                                                          • Figure 48: Attitudes towards home insurance, by target groups, July 2010
                                                                                        • …while Savvy Switchers are more price-sensitive
                                                                                          • The Apathetic Majority are less likely to have cover
                                                                                            • Figure 49: Types of home insurance owned, by target groups, July 2010
                                                                                          • Savvy Switchers are big fans of aggregators
                                                                                            • Figure 50: Methods used to arrange home contents insurance, by target groups, July 2010
                                                                                          • There is little to distinguish between groups in terms of cover
                                                                                            • Figure 51: Level of buildings and contents cover held, by target groups, July 2010
                                                                                          • Regular Reviewers and Savvy Switchers have similar profiles…
                                                                                            • Figure 52: Target groups, by demographics, July 2010
                                                                                          • …with age and tenure being the only distinguishing factors
                                                                                          • Appendix – Brand Communication and Promotion

                                                                                              • Figure 53: Advertising expenditure on home insurance, by media type, 2007-09
                                                                                          • Appendix – Product Ownership and Methods of Arranging Cover

                                                                                              • Figure 54: Types of home insurance owned, by demographics, July 2010
                                                                                              • Figure 55: Methods used to arrange home contents insurance, by demographics, July 2010
                                                                                          • Appendix – Level of Cover Held

                                                                                              • Figure 56: Level of contents cover held, by demographics, July 2010
                                                                                              • Figure 57: Level of contents cover held, by level of buildings cover held, July 2010
                                                                                              • Figure 58: Level of buildings cover held, by demographics, July 2010
                                                                                          • Appendix – Attitudes towards Home Insurance

                                                                                              • Figure 59: Attitudes towards home insurance, by demographics, July 2010
                                                                                              • Figure 60: Attitudes towards home insurance, by demographics, July 2010 (continued)
                                                                                          • Appendix – Targeting Opportunities

                                                                                              • Figure 61: Target groups, by demographics, July 2010

                                                                                          Companies Covered

                                                                                          • Asda Group Ltd
                                                                                          • Association of British Insurers
                                                                                          • Automobile Association (AA)
                                                                                          • Aviva Plc
                                                                                          • AXA PPP healthcare
                                                                                          • AXA UK plc
                                                                                          • Bank of England
                                                                                          • Barclays Bank plc
                                                                                          • Bluefin
                                                                                          • Bradford & Bingley plc
                                                                                          • British Broadcasting Corporation (BBC)
                                                                                          • Churchill Insurance
                                                                                          • Co-operative Bank
                                                                                          • Co-operative Group
                                                                                          • ComparetheMarket.com
                                                                                          • Confused.com
                                                                                          • Department for Environment, Food & Rural Affairs
                                                                                          • Direct Line Group Limited
                                                                                          • Esure
                                                                                          • Financial Services Authority (The)
                                                                                          • Fortis Insurance Limited
                                                                                          • Green Flag Motoring Assistance
                                                                                          • HBOS plc (Halifax Bank of Scotland)
                                                                                          • Hiscox Plc
                                                                                          • IKEA
                                                                                          • J. Sainsbury
                                                                                          • Kantar Media
                                                                                          • Kingfisher UK & Ireland
                                                                                          • Legal & General Assurance Society Limited
                                                                                          • Lloyds Banking Group
                                                                                          • Lloyds TSB Insurance
                                                                                          • LV=
                                                                                          • Market & Opinion Research International (MORI)
                                                                                          • Marks & Spencer
                                                                                          • Marks & Spencer Financial Services plc
                                                                                          • MoneySupermarket.com Limited
                                                                                          • MORE TH>N
                                                                                          • Nationwide Building Society
                                                                                          • NatWest
                                                                                          • NISRA
                                                                                          • Norwich Union
                                                                                          • Privilege Insurance
                                                                                          • Retirement Insurance Advisory Service (RIAS)
                                                                                          • Royal Bank of Scotland Group plc
                                                                                          • RSA
                                                                                          • Saga Services (finance)
                                                                                          • Sainsbury's Bank
                                                                                          • Sheilas' Wheels
                                                                                          • Swiftcover
                                                                                          • Tesco Personal Finance Limited
                                                                                          • Tesco Plc
                                                                                          • The National Insurance and Guarantee Corporation Limited
                                                                                          • UK Athletics
                                                                                          • UKI Partnerships
                                                                                          • Waitrose
                                                                                          • West Bromwich Building Society
                                                                                          • Wm Morrison Supermarkets
                                                                                          • Zurich Financial Services

                                                                                          Home Insurance - UK - October 2010

                                                                                          US $2,648.76 (Excl.Tax)