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UK Home Insurance market report

"New technology has the potential to substantially boost consumer engagement by providing policyholders with a means to take greater control of their home insurance policies, leaving behind the passive products of the past. With start-ups waiting in the wings, insurers must rise to the occasion and use the technology to their advantage to build brand trust and advocacy, as well as forge new partnerships with tech suppliers and specialist insurance providers to maximize reach."
- Deborah Osguthorpe, Category Director, UK Financial Services Research

This report examines the following areas:

  • Insurtech firms are starting an app-based revolution with 'on-demand' cover
  • Insurers can leverage digital platforms to drive customer service renaissance
  • Connected home systems must heed consumer concerns to maximise potential

Brexit will be a major source of uncertainty for the next few years. Any impact on the home insurance sector is likely to be fairly limited in terms of existing business, as people will be reluctant to forego cover. However, a squeeze in incomes due to higher prices and slower wage growth could increase the amount of 'shoparound' behaviour. Mintel's research shows that this has been fairly static over the last four years, but could increase as people find that their budget is reduced. Lower housing transactions will also reduce the potential for new business.

Beyond this, the market is currently grappling with new technology as insurers try to figure out how to embrace this technology to manage and reduce risk, as well as develop more customer-centric policies. The decline in home ownership is also driving innovation as insurers try to engage with a younger, more transitory demographic by developing more flexible products.

This Report examines the UK home insurance market, providing insight into market issues, competitor activity and consumer attitudes towards home insurance. It looks at the size of the market and provides a forecast for the next five years. Presenting Mintel's exclusive consumer research, the Report examines home insurance ownership and looks at the factors that influence people
to stay or switch. It also looks at consumer behaviour around renewal and factors influencing choice of home insurance provider, as well as attitudes towards the connected home and insurance.

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Table of contents

  1. Overview

    • What you need to know
    • Executive Summary

        • Home insurance GWPs contract by 6%...
          • Figure 1: Forecast of GWP, for domestic home insurance, fan chart 2011-21
        • …but are expected to have grown in 2016
          • Home insurance premiums see first increases since 2011
            • Claims costs remained flat in 2015
              • Companies and brands
                • Lloyds Banking Group and Direct Line Group lead the way
                  • Figure 2: Underwriting share for domestic property market, by GWP, 2015
                • Purposeful partnerships
                  • Insurtech disruption start-ups descend on the home insurance market
                    • The consumer
                      • Almost two thirds have a home insurance policy
                        • Nearly two thirds of consumers renewed with existing provider
                          • Figure 3: Action taken at last home insurance renewal, 2013-16
                          • Figure 4: Factors influencing most recent policy renewal, September 2016
                        • Over half of consumers want more information on connected home devices
                          • Figure 5: Attitudes towards connected home products, September 2016
                        • What we think
                        • Issues and Insights

                          • Insurtech firms are starting an app-based revolution with ‘on-demand’ cover
                            • The facts
                              • The implications
                                • Insurers can leverage digital platforms to drive customer service renaissance
                                  • The facts
                                    • The implications
                                      • Connected home systems must heed consumer concerns to maximise potential
                                        • The facts
                                          • The implications
                                          • The Market – What You Need to Know

                                            • Home insurance GWPs contract by 6%...
                                              • …but are expected to have grown in 2016
                                                • Home insurance premiums see first increases since 2011
                                                  • Claims costs remained flat in 2015
                                                    • Bancassurance remains a key channel
                                                    • Market Size and Forecast

                                                      • Gross written premiums decline by 6%
                                                        • Underwriting ratio signals a period of adjustment for home insurance
                                                          • Figure 6: Gross and net written premiums – Domestic home insurance, 2005-16
                                                          • Figure 7: Domestic property insurance underwriting ratio, 2005-16
                                                        • Market forecast and possible impact of Brexit
                                                          • Figure 8: Forecast of GWP, for domestic home insurance, fan chart 2011-21
                                                          • Figure 9: Forecast of GWP, for domestic home insurance, 2011-21
                                                        • Forecast methodology
                                                          • The impact of the EU referendum vote
                                                              • Figure 10: Alternative market scenarios for the post-Brexit domestic home insurance GWP, at current prices, 2016-21
                                                            • Premiums bounced back quickly after 2009 slump
                                                              • Brexit – A source of uncertainty
                                                              • Channels to Market

                                                                • Online remains the dominant sales channel
                                                                  • Figure 11: Home insurance purchase method, September 2016
                                                                • Direct sales grew in 2015, while broker sales continued to fall
                                                                  • Bancassurance now accounts for less than a quarter of sales
                                                                    • Figure 12: Domestic property insurance, by GWP, by distribution channel, 2011-15
                                                                • Market Drivers

                                                                  • Premium prices on the up for the first time since 2011
                                                                    • Figure 13: Average home insurance market premiums, Q1 2012-Q3 2016
                                                                  • Claims costs remained flat in 2015
                                                                    • Figure 14: Gross domestic claims incurred 2006-15
                                                                    • Figure 15: Distribution of domestic home insurance claims, by gross value, by type of peril 2011-16
                                                                  • Flood claims peaked in Q4 2015 due to major storms
                                                                    • Figure 16: Volume and value of flood claims for domestic property insurance, Q1 2013-Q2 2016
                                                                  • Flood Re backs 53,000 policies in its first six months
                                                                    • Property insurance fraud is on the rise
                                                                      • Heavy PCW use is inflating premiums
                                                                      • Regulatory and Legislative Changes

                                                                        • FCA finalises rules for transparency in general insurance
                                                                          • IPT doubles in 18 months
                                                                            • Figure 17: Insurance premium tax, 1994-2017
                                                                          • CMA launched study into Digital Comparison Tools
                                                                            • FCA drops investigation on social media data harvesting
                                                                            • Companies and Brands – What You Need to Know

                                                                              • Lloyds Banking Group is UK’s biggest home insurance underwriter
                                                                                • Insurtech moves up the agenda
                                                                                  • Purposeful partnerships
                                                                                    • Insurtech disruption start-ups descend on the home insurance market
                                                                                    • Underwriter Share

                                                                                      • Lloyds Banking Group takes over as UK’s biggest home insurance underwriter
                                                                                        • Direct Line loses two distribution partners
                                                                                          • Top 10 insurers hold over 80% of market
                                                                                            • Figure 18: Top 10 domestic property insurance parent groups, by GWP, 2013-15
                                                                                        • Competitive Strategies

                                                                                            • Pursuing purposeful partnerships
                                                                                              • L&G and Prestige
                                                                                                • AXA link with Trov
                                                                                                  • Aviva partners with HomeServe
                                                                                                  • Launch Activity and Innovation

                                                                                                      • New apps are set to disrupt the market
                                                                                                        • Neos
                                                                                                          • so-sure launches disruptive peer-to-peer social insurance app
                                                                                                            • Ageas brings the convenience to contents insurance
                                                                                                              • Cocoon – Protecting with ‘subsound’ technology
                                                                                                                • Direct Line launches new Emergency Plumber Cover
                                                                                                                • Advertising and Marketing Activity

                                                                                                                  • Overall above-the-line advertising spend declines 11%
                                                                                                                    • Figure 19: Total above-the-line, online display and direct mail adspend in the home insurance market, 2011/12-2015/16
                                                                                                                  • Direct mail spend reduced by a quarter
                                                                                                                    • Figure 20: Total above-the-line, online display and direct mail adspend in the home insurance market, by media type, 2011/12-2015/16
                                                                                                                  • Direct Line tops adspend list despite cutbacks
                                                                                                                    • NFU doubles advertising spend in a single year
                                                                                                                      • Figure 21: Top 20 above-the-line, online display and direct mail advertisers of home insurance, 2013/14-2015/16
                                                                                                                    • Nielsen Ad Intel coverage
                                                                                                                    • The Consumer – What You Need to Know

                                                                                                                      • Almost two thirds have a home insurance policy
                                                                                                                        • Half of consumers research policies online
                                                                                                                          • Nearly two thirds of consumers renewed with existing provider
                                                                                                                            • Over half of consumers want more information on connected home devices
                                                                                                                            • Home Insurance Ownership

                                                                                                                              • Overall home insurance ownership falls below two thirds
                                                                                                                                • Figure 22: Insurance product ownership, September 2016
                                                                                                                                • Figure 23: Insurance product ownership, by age, September 2016
                                                                                                                              • ‘Generation rent’ leading to decrease in home insurance policies
                                                                                                                                • Vast majority of consumers prefer combined cover
                                                                                                                                  • Figure 24: Home insurance ownership, by type of policy, September 2016
                                                                                                                                • Londoners less likely to have home insurance
                                                                                                                                • Home Insurance Research Methods

                                                                                                                                  • Half of consumers research policies online
                                                                                                                                    • Younger consumers more likely to solicit advice from family and friends
                                                                                                                                      • Telephone enquiries still common for over-65s
                                                                                                                                        • Figure 25: Home insurance research methods, September 2016
                                                                                                                                    • Most Recent Policy Renewal Behaviour

                                                                                                                                      • Nearly two thirds of consumers stayed with existing provider at last renewal
                                                                                                                                        • Figure 26: Actions taken at last home insurance renewal, September 2016
                                                                                                                                      • Those with combined policies more likely to switch
                                                                                                                                        • Figure 27: Actions taken at last home insurance renewal, by type of policy, September 2016
                                                                                                                                      • PCWs fuelling home insurance churn rates
                                                                                                                                        • Switching rates have stabilised
                                                                                                                                          • Figure 28: Action taken at last home insurance renewal, 2013-16
                                                                                                                                      • Factors Influencing Recent Policy Renewal

                                                                                                                                        • Price remains a key determinant for policy renewal…
                                                                                                                                          • …but consumers reward insurers’ good service with renewals
                                                                                                                                            • Convenience and time pressure are drivers of renewals
                                                                                                                                              • Figure 29: Reasons for staying with existing provider, September 2016
                                                                                                                                            • Shopping around driven by price
                                                                                                                                              • Figure 30: Factors influencing most recent policy renewal, September 2016
                                                                                                                                          • Factors Affecting Future Choice of Home Insurance

                                                                                                                                            • More than half of policyholders prefer to stick with established brands
                                                                                                                                              • New tech start-ups could divide loyalties
                                                                                                                                                • Figure 31: Factors influencing choice of home insurance provider, September 2016
                                                                                                                                            • Attitudes towards Connected Home Products

                                                                                                                                              • Millennials are most interested in trialling connected home devices
                                                                                                                                                • Figure 32: Attitudes towards connected home products, September 2016
                                                                                                                                              • A range of smart home devices are of interest
                                                                                                                                                • Consumers expect discounts for a lowering risk profile
                                                                                                                                                  • Connected home providers must allay consumer fears over data
                                                                                                                                                  • Appendix – Data Sources, Abbreviations and Supporting Information

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

                                                                                                                                                          • Additional market forecast data
                                                                                                                                                            • Figure 33: Best and worst case scenario forecast for domestic home insurance GWPs, 2016-21
                                                                                                                                                          • Forecast Methodology