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Home Insurance - UK - October 2011

“After making successful inroads into the personal motor sector, price comparison sites are turning their attention to home insurance. This is leading to a growing proportion of household business being written through aggregator sites, to the detriment of direct sales.”

– Sarah Hitchcock, Senior Analyst – Financial Services

Some key questions answered in the report include:

  • What impact are aggregators having on this market?
  • How is the economic downturn affecting cover levels?
  • How can the industry reduce the level of underinsurance?
  • In what ways can insurers sweeten the pill of rate rises?
  • Is there scope to reduce or eliminate admin fees for making minor policy changes?

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Table of contents

  1. Introduction

      • Product definitions and report coverage
        • Abbreviations
        • Executive Summary

            • The market
              • Gross premium income continue to climb
                • Figure 1: Forecast of domestic property premiums – fan chart, 2006-16
              • Market segmentation
                • Key factors
                  • Sluggish housing market hampers new business
                    • Factors impacting on claims
                      • Recent claims experience
                        • Figure 2: Number and value of claims incurred – domestic property, 2005-10
                      • New initiatives to tackle fraud
                        • Company, brands and innovation
                          • Home insurance is a fairly consolidated market…
                            • … with limited scope for product innovation
                              • Home insurers cut back on advertising
                                • Intermediaries increase their distribution share
                                  • Figure 3: Proportional distribution of gross domestic property insurance premiums, by channel, 2005-10
                                • The consumer
                                  • More people have contents than buildings cover
                                    • Figure 4: Ownership of home insurance and related products, August 2011
                                  • A significant minority of homeowners have no insurance cover
                                    • Approaches to buying and reviewing cover
                                      • Switching behaviour and intentions
                                        • Figure 5: Switching experience and intentions, August 2011
                                      • Claims tendency
                                        • Product selling points
                                          • Figure 6: Most sought-after factors when arranging home insurance, August 2011
                                        • What we think
                                        • Issues in the Market

                                            • What impact are aggregators having on this market?
                                              • How is the economic downturn affecting cover levels?
                                                • How can the industry reduce the level of underinsurance?
                                                  • In what ways can insurers sweeten the pill of rate rises?
                                                    • Is there scope to reduce or eliminate admin fees for making minor policy changes?
                                                    • Future Opportunities

                                                      • Time to prove that there’s more to insurance than price
                                                        • Trend: declining levels of brand loyalty
                                                        • Internal Market Environment

                                                          • Key points
                                                            • Cost of buildings insurance has risen steadily since 2007
                                                              • Figure 7: Average home insurance market and shoparound premiums (quarterly basis), January 2005-July 2011
                                                            • Higher rebuild costs exert pressure on premiums
                                                              • Figure 8: Annual percentage change in house rebuilding cost index (HRCI) and RPI, January 2005-July 2011
                                                            • Deflated consumer durables prices help to keep contents premiums low
                                                              • Figure 9: RPI and consumer durables index, 1999 Q1-2011 Q2
                                                            • Incidence of claims have fallen over the past four years, helping to lower the overall claims bill
                                                              • Figure 10: Total number of domestic property claims and cost incurred, 2005-10 and 2010 H1-2011 H1
                                                            • Top household perils relate to the weather and escape of water
                                                              • Figure 11: Proportional distribution of domestic property claims, by type of peril, 2007-10 and 2011 H1
                                                            • Domestic property fraud savings declined marginally in 2010
                                                              • Figure 12: Detected general insurance fraud, by claims value, 2005-10
                                                          • Broader Market Environment

                                                            • Key points
                                                              • Changing social and lifestyle factors influence buying habits…
                                                                • Figure 13: Domestic property insurance – market drivers and inhibitors, 2011
                                                              • … but housing slowdown impacts on demand from new customers…
                                                                • …while the economic downturn prompts some consumers to cut back on cover
                                                                  • Figure 14: Agreement with statements about cutting back on home insurance, August 2011
                                                                • Government cuts spending on flood defences
                                                                  • Figure 15: Total government expenditure on flood and coastal defence, 2000/01-2010/11
                                                                • Incidence of reported domestic property crime continue to fall
                                                                  • Figure 16: Recorded burglary and property crime, England and Wales, 2005/06-2010/11
                                                                • Decline in dwelling fires is a positive development
                                                                  • Figure 17: Total number of fires and proportion relating to dwellings, England and Wales, 2005/06-2010/11
                                                              • Competitive Context

                                                                • Key points
                                                                  • There are no adequate alternatives to home insurance
                                                                    • Figure 18: Ownership of home insurance, by tenure, August 2011
                                                                • Market SWOT Analysis

                                                                    • Figure 19: UK domestic property insurance market – SWOT analysis, 2011
                                                                • Who’s Innovating?

                                                                  • Key points
                                                                    • Limited scope for real product innovation
                                                                      • Price and level of cover are the main differentiators
                                                                        • Up-selling via additional options is rife
                                                                          • Technical advances pave the way for online account management…
                                                                            • … and to better assess flood risk
                                                                              • ‘Green’ insurance has emerged, but remains relatively niche
                                                                              • Market Size and Forecast

                                                                                • Key points
                                                                                  • Gross premiums up by 4% in 2010
                                                                                    • Figure 20: Gross and net written premiums – domestic property insurance, 2001-10
                                                                                  • Sector split
                                                                                    • Domestic household market records a small underwriting loss in 2010…
                                                                                      • Figure 21: Domestic property insurance underwriting ratio, 2001-10
                                                                                    • … as net claims incurred increase by 14%
                                                                                      • Figure 22: Gross and net written premiums – domestic property insurance, 2005-10
                                                                                    • Solid premium growth expected in 2011
                                                                                      • Five-year forecast
                                                                                        • Figure 23: Gross written domestic property insurance premiums – fan chart, 2006-16
                                                                                        • Figure 24: Forecast of gross written premiums – domestic property insurance, 2006-16
                                                                                      • Forecast methodology
                                                                                        • Fan chart explanation
                                                                                        • Market Share

                                                                                          • Key points
                                                                                            • RBS retains its market leader position
                                                                                              • Figure 25: Largest 15 parent groups active in the domestic property market, by GWP, 2010
                                                                                            • Aviva moves down one place to third position after a fall in premium income
                                                                                              • Figure 26: Top eight domestic property insurance parent groups, by GWP, 2009-10
                                                                                          • Companies and Products

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

                                                                                                        • Key points
                                                                                                          • Home insurance providers continue to cut back on advertising
                                                                                                            • Figure 27: Topline advertising expenditure on home insurance, 2007-11
                                                                                                          • Direct mail typically accounts for more than half of industry adspend
                                                                                                            • Figure 28: Advertising expenditure on home insurance, by media type, 2009-11
                                                                                                          • Direct Line and Churchill invest the most in advertising
                                                                                                            • Figure 29: Top 15 advertisers of home insurance, 2009-11
                                                                                                        • Channels to Market

                                                                                                          • Key points
                                                                                                            • Independent intermediaries continue to grow their distribution share
                                                                                                              • Figure 30: Domestic property insurance sales (GWP), by distribution channel, 2005-10
                                                                                                            • One in four internet users have purchased home insurance via a price comparison site
                                                                                                              • Figure 31: Insurance products researched or bought via price comparison sites, April 2011
                                                                                                            • Just four brands dominate the aggregator arena
                                                                                                              • Figure 32: Unique visitor numbers to major aggregator sites, year to April 2011
                                                                                                          • Ownership of Home Insurance

                                                                                                            • Key points
                                                                                                              • Survey background
                                                                                                                • Home and motor are the most common types of insurance product held
                                                                                                                  • Figure 33: Ownership of home and other types of general insurance, by age, August 2011
                                                                                                                • Proportion of people with buildings cover has fallen slightly over the past two years
                                                                                                                  • Figure 34: Trends in ownership of home insurance, 2009-11
                                                                                                                • Significant opportunities to cross-sell and up-sell
                                                                                                                  • Figure 35: Ownership of home and other common types of general insurance, by age, August 2011
                                                                                                              • Buying Behaviour and Approach to Cover

                                                                                                                • Key points
                                                                                                                  • More than two fifths of policyholders are not confident of being adequately covered
                                                                                                                    • Figure 36: Agreement with statements about buying home insurance and approach to cover, August 2011
                                                                                                                • Policy Renewal and Switching Activity

                                                                                                                  • Key points
                                                                                                                    • Customers are much more likely to shop around than accept the renewal premium offered by their existing provider
                                                                                                                      • Figure 37: Agreement with statements about renewing home insurance, August 2011
                                                                                                                    • Men are more likely to shop around and to review their cover than women
                                                                                                                      • Figure 38: Agreement with statements about renewing home insurance, by gender and age, August 2011
                                                                                                                    • Around half of all contents policyholders have changed providers within the past three years
                                                                                                                      • Figure 39: Agreement with statements about switching home insurance providers, August 2011
                                                                                                                    • The pitfalls of focusing too much on price
                                                                                                                      • Switching intentions are fairly consistent across the gender and age spectrum
                                                                                                                        • Figure 40: Agreement with statements about switching home insurance providers, by gender and age, August 2011
                                                                                                                    • Claims Experience

                                                                                                                      • Key points
                                                                                                                        • More than half of policyholders have made a claim on their buildings policy
                                                                                                                          • Figure 41: Agreement with statements about home insurance policy access and claims experience, August 2011, August 2011
                                                                                                                        • Around one in four customers have online access to their policy
                                                                                                                          • Claims by the over-55s are more likely to be accepted
                                                                                                                            • Figure 42: Agreement with statements about home insurance claims experience, by gender and age group, August 2011
                                                                                                                        • Policy Selling Points

                                                                                                                          • Key points
                                                                                                                            • Most people just want ‘good value for money’
                                                                                                                              • Figure 43: Most sought-after factors when arranging home insurance, August 2011
                                                                                                                            • The under-35s are most persuaded by price
                                                                                                                              • Figure 44: Most sought-after factors when arranging home insurance, by gender and age, August 2011
                                                                                                                          • Appendix – Ownership of Home Insurance by Demographics

                                                                                                                              • Figure 45: Ownership of home insurance, by demographics, August 2011
                                                                                                                          • Appendix – Policyholder Profile

                                                                                                                              • Figure 46: Demographic profile of home insurance policyholders versus profile of the total sample, August 2011

                                                                                                                          Companies Covered

                                                                                                                          • Aviva Plc
                                                                                                                          • AXA UK plc
                                                                                                                          • Barclays Bank plc
                                                                                                                          • Churchill Insurance
                                                                                                                          • Direct Line Group Limited
                                                                                                                          • Grupo Santander Central Hispano S.A.
                                                                                                                          • HBOS plc (Halifax Bank of Scotland)
                                                                                                                          • Homeserve Plc
                                                                                                                          • HSBC Private Bank (UK) Limited
                                                                                                                          • J. Sainsbury
                                                                                                                          • Lloyds Banking Group
                                                                                                                          • Lloyds TSB Insurance
                                                                                                                          • MORE TH>N
                                                                                                                          • Norwich Union
                                                                                                                          • Privilege Insurance
                                                                                                                          • Royal Bank of Scotland Group plc
                                                                                                                          • RSA
                                                                                                                          • Sheilas' Wheels
                                                                                                                          • Swiftcover
                                                                                                                          • The National Insurance and Guarantee Corporation Limited
                                                                                                                          • The Select & Protect Program Limited
                                                                                                                          • Towergate Partnership

                                                                                                                          Home Insurance - UK - October 2011

                                                                                                                          £1,750.00 (Excl.Tax)