2023
9
UK Home Insurance Market Report 2023
2023-03-02T03:09:56+00:00
OX1155337
2195
160995
[{"name":"Insurance","url":"https:\/\/store.mintel.com\/industries\/finance\/financial-services\/insurance"}]
Report
en_GB
"The rising cost of claims and hardening reinsurance rates are forcing home insurers to exert greater pricing discipline. At the same time, consumers are struggling with rising household bills and…

UK Home Insurance Market Report 2023

£ 2,195 (Excl.Tax)

Description

“The rising cost of claims and hardening reinsurance rates are forcing home insurers to exert greater pricing discipline. At the same time, consumers are struggling with rising household bills and becoming more price-sensitive. Providers, therefore, need to ensure they offer sufficient choice and flexibility to allow customers to easily find and adjust cover to suit their budget.”

– Sarah Hitchcock, Associate Consultant – Financial Services, February 2023

This Report will look at the following areas:

  • The size of the domestic property insurance market by gross written premium.
  • Recent claims performance and industry-wide underwriting result.
  • Recent market innovation and insurtech developments.
  • Take-up of home insurance, by type, and take-up of/interest in common policy add-ons.
  • Customer engagement and propensity to opt out of auto-renewal.
  • Customer renewal intentions and most important factors affecting policy selection.

Table of Contents

  1. Overview

    • Key issues covered in this Report
    • Products covered in this Report
  2. Executive Summary

    • The five-year outlook for the home insurance market
      • Figure 1: Outlook for the UK domestic property insurance market, 2023-27
    • The market
    • Hardening premium rates will help drive growth, which has been lacking in recent years
      • Figure 2: Forecast of gross written domestic property insurance premiums, 2017-27
    • Underwriting losses are all too common in this market…
      • Figure 3: Domestic property underwriting ratio, 2013-21
    • …reflecting a high claims bill
    • Expected downturn in the housing market will impact new home insurance business
    • Profile of private renters is changing
    • Companies and brands
    • Top five insurance groups control over half the market
    • Insurtechs make modest gains…
    • …prompting new strategic partnerships
    • The consumer
    • Contents insurance has a higher take-up rate than buildings cover, reflecting a larger target audience
      • Figure 4: Ownership of home and other specialist property insurance, 2022
    • Over three times as many customers saw their premium increase than decrease at their last renewal
      • Figure 5: What happened to premium at last renewal, by policy type, 2022
    • Most policyholders stuck with their insurer at their last renewal
      • Figure 6: Switched or stayed with existing provider at last renewal, by policy type, 2022
    • Low level of product engagement can cause problems further down the line
      • Figure 7: Level of engagement with product information, 2022
    • Around two fifths of policyholders are choosing to opt out of auto-renewal…
    • …while three fifths are planning to shop around when their policy is next up for renewal
      • Figure 8: Intention to switch or stick with existing provider at next renewal, by policy type, 2022
    • More customers expect to remove optional extras than add them
      • Figure 9: Intentions to review or make changes at next renewal, 2022
    • Accidental damage and personal belongings cover are the most popular add-ons
      • Figure 10: Ownership of and interest in optional policy extras, 2022
    • Price is really important, but other pull factors exist
      • Figure 11: Most important features of a home insurance policy, 2022
  3. Issues and Insights

    • Switching activity has fallen…
    • …but the need to demonstrate value and reward loyalty grows
    • Pledging to fix premiums for 2-3 years will appeal to many
    • Tapping into the rental market: don’t be too narrow
  4. Market Size and Performance

    • The market has failed to grow GWP over the past decade…
    • …despite a substantial rise in reinsurance costs
      • Figure 12: Size of the domestic property, by gross and net written premium, 2013-22
      • Figure 13: Domestic property gross and net written premium and proportion of reinsurance ceded, 2013-22
  5. Market Forecast

    • Pressures mount for home insurers
      • Figure 14: Outlook for the UK domestic property insurance market, 2023-27
    • Moderate growth in GWP forecast
      • Figure 15: Market forecast for gross written domestic property insurance premiums, 2017-27
      • Figure 16: Forecast of gross written domestic property insurance premiums, 2022-27
    • Learnings from the last income squeeze
    • Forecast methodology
  6. Claims Incurred and Underwriting Result

    • 2022 is set to record the first annual increase in domestic property claims since 2007…
      • Figure 17: Number of domestic property claims notified, 2013-22
    • …although the average claim value has grown faster than inflation
      • Figure 18: Average value of a domestic property claim paid, 2013-22
    • Burst pipes and leaks account for the largest share of the claims bill…
    • …although weather-related and subsidence claims rose strongly in 2022
      • Figure 19: Proportional distribution of gross domestic property claims incurred, by type of peril, 2017-22
    • Acquisition costs continue to edge lower
      • Figure 20: Domestic property outgoings and underwriting result, 2017-21
    • The market made a loss in three of the past four years
      • Figure 21: Domestic property underwriting ratio, 2013-21
  7. Channels to Market

    • Brokers and direct sales continue to generate the lion’s share of household premiums
      • Figure 22: Proportional distribution of gross domestic property premiums, by sales channel, 2017-21
    • Price comparison sites impact around two in three home insurance sales
  8. Market Drivers

    • Changing tenure patterns are steadily altering product portfolios
    • 65% of dwellings in England are owner-occupied
    • Increasing numbers of 45-64 year olds rent
      • Figure 23: Housing tenure, by age, 2022
    • Housing market downturn will have an adverse impact on new home insurance business
    • Average premiums fell in 2022 but are set to rise in 2023…
      • Figure 24: Average domestic property insurance premiums, at current prices, by policy type, 2017-21
    • …mainly due to rising inflation and the effects of climate change
    • Premiums may need to rise more steeply than before
  9. Market Share

    • 10 insurance groups control just over four fifths of the market
      • Figure 25: Top 20 domestic property underwriters – UK, by share of total market GWP, 2020 and 2021
    • 2021 saw little change in the underwriter rankings
    • Numerous distributors make the market highly competitive
  10. Competitive Strategies and Innovation

    • Insurers are focused on maintaining margins as they adapt to new pricing rules
    • Insurtech firms set on expansion: Policy Expert and Urban Jungle
    • Others to watch include Getsafe and Locket
    • Aviva partners with Lemonade to provide digital home contents insurance
    • AXA revamps its home insurance proposition, offering greater flexibility
    • Amazon launches a new insurance portal that could pose a threat to the leading price comparison sites
    • New embedded insurance possibilities
  11. Advertising and Marketing Activity

    • Home insurers increase above-the-line adspend
      • Figure 26: Total above-the-line, online display and direct mail advertising expenditure on home insurance and related products, by sub-category, 2019-22
    • Greater advertising focus on multi-product lines
    • TV advertising accounts for the largest slice of adspend
      • Figure 27: Proportional distribution of above-the-line, online display and direct mail adspend on home insurance and multi-product ranges, by media type, 2021 and 2022
    • Price comparison sites ramp up their advertising
      • Figure 28: Top 15 above-the-line advertisers of home insurance and multi-product ranges, 2021 and 2022
    • Nielsen Ad Intel coverage
  12. Product Ownership

    • A third of UK adults have neither buildings nor contents cover
      • Figure 29: Ownership of most widely held general insurance products (top seven only), 2022
    • Significant cross-sell potential
    • 18% of UK adults have specialist property insurance
      • Figure 30: Ownership of specialist property insurance, 2022
    • Almost a quarter of mortgage holders are potentially breaking the terms of their agreement
      • Figure 31: Ownership of home and other specialist property insurance, by tenure, 2022
    • 35% of renters have tenants insurance
  13. Customer Experience at Last Renewal

    • Contents-only customers are least likely to have seen their premium increase…
      • Figure 32: What happened to premium at last renewal, by policy type, 2022
    • …although premiums went up for two fifths of all policyholders
      • Figure 33: What happened to premium at last renewal, by policy type (rebased)*, 2022
    • 74% of policyholders chose to stay with their insurer at renewal…
      • Figure 34: Switched or stayed with existing provider at last renewal, by policy type, 2022
    • …while 22% switched
    • Contents-only policyholders are least likely to switch
  14. Customer Engagement

    • Most customers fail to read key policy information prior to purchase
      • Figure 35: Level of engagement with product information, 2022
    • Regular communication can help inform and improve engagement
    • 41% of policyholders have chosen to opt out of auto-renewal
      • Figure 36: Proportion of customers who have opted out of auto-renewal, 2022
    • Opting out is linked to engagement
      • Figure 37: Proportion of customers who have opted out of auto-renewal, by level of engagement with product information, 2022
    • Not all customers have found it easy to opt out
      • Figure 38: Actual or perceived ease of opting out of auto-renewal, 2022
  15. Intentions to Switch or Make Changes at Next Renewal

    • Most plan to shop around before deciding whether to stick or switch
      • Figure 39: Intention to switch or stick with existing provider at next renewal, by policy type, 2022
    • Many stay out of convenience rather than loyalty
      • Figure 40: Segmentation of customer base, by policy type, 2022
    • 10% of customers plan to start paying monthly
    • Consumers are split on plans for add-ons
      • Figure 41: Intentions to review or make changes at next renewal, by policy type, 2022
  16. Take-up of Optional Extras

    • Accidental damage cover is the most popular add-on
      • Figure 42: Ownership of and interest in optional policy extras, 2022
      • Figure 43: Ownership of optional policy extras – summary chart, 2022
    • The appeal of other add-ons varies across the age range
    • Scope to increase take-up of home emergency cover
    • Under-45s show the greatest interest in cyber cover
    • 24% of policyholders have all four of the most common extras
      • Figure 44: Ownership of and interest in multiple policy extras, 2022
  17. Key Selling Points

    • 65% of policyholders say cost is the top consideration when buying home insurance
      • Figure 45: Most important features of a home insurance policy, by policy type, 2022
    • Many value the inclusion of accidental damage cover
    • Offering interest-free monthly payments will set brands apart
    • Free gifts are nowhere near as tempting as a pledge to fix premiums
    • Discounts for installing smart home devices mainly interest under-45s
  18. Appendix – Data Sources and Abbreviations

    • Abbreviations
    • Consumer research methodology
  19. Appendix – Forecast Methodology

    • Market forecast prediction intervals
      • Figure 46: Forecast of gross written domestic property insurance premiums – best- and worst-case scenarios, 2022-27
    • Market drivers and assumptions
    • Forecast methodology

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