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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
      • Products covered in this Report
      • Executive Summary

          • The market
            • GWP up by 4% in 2016
              • Figure 1: Gross written domestic property insurance premiums – Fan chart, 2012-22
            • Recent years have seen a fall in the volume of claims
              • A varied distribution mix
                • Figure 2: Share of gross domestic property insurance premiums, by sales channel, 2016
              • The past decade has seen a fall in homeownership
                • Regulatory burden increases
                  • Companies and brands
                    • Top five underwriters control two thirds of the market
                      • Aviva, Direct Line and LBG are the largest home insurance underwriters
                        • Greater investment in product development and innovation
                          • Market attracts new technology-focused entrants
                            • The consumer
                              • 46% of internet users aged 18+ have both buildings and contents insurance
                                • Figure 3: Reasons for not having contents insurance, by tenure, September 2017
                              • Accidental damage cover is the most popular add-on
                                • Figure 4: Top reason for not having accidental damage and home emergency cover, September 2017
                              • 14% of home insurance policyholders have made a claim …
                                • Figure 5: Customer experience of and satisfaction with claims handling, September 2017
                              • … while 76% have switched provider within the past five years
                                • Figure 6: Length of time ago last switched policy, September 2017
                              • 53% are most persuaded by price when choosing a policy
                                • Figure 7: Most influential factors determining product choice, September 2017
                              • 50% would consider installing a smart device to lower their premium
                                • Figure 8: Interest in new smart solutions related to home insurance, September 2017
                              • What we think
                              • Issues and Insights

                                • Home insurance gets smart
                                  • The facts
                                    • The implications
                                      • Shift customer attention away from price alone
                                        • The facts
                                          • The implications
                                          • The Market – What You Need to Know

                                            • GWP up by 4% in 2016
                                              • Recent years have seen a fall in the volume of claims
                                                • A varied distribution mix
                                                  • The past decade has seen a fall in homeownership
                                                    • Regulatory burden increases
                                                    • Market Size and Forecast

                                                      • Limited real premium growth
                                                        • Figure 9: Gross and net written premiums – UK domestic property insurance, 2007-17
                                                      • Rise in reinsurance ceded
                                                        • Five-year forecast: total premium income will remain flat
                                                          • Figure 10: Gross written domestic property insurance premiums – Fan chart, 2012-22
                                                          • Figure 11: Forecast of gross written domestic property insurance premiums, 2012-22
                                                        • Forecast methodology
                                                        • Claims Incurred and Underwriting Result

                                                          • Low volume of claims offset rising costs to maintain profitability in 2016
                                                            • Figure 12: Total outgo and underwriting result – UK domestic property insurance, 2012-16
                                                          • The price of acquisition
                                                            • Underwriting ratio increases to 5.7% in 2016
                                                              • Figure 13: Domestic property insurance underwriting ratio, 2007-16
                                                          • Channels to Market

                                                            • Brokers maintain share
                                                              • Figure 14: Share of gross domestic property insurance premiums, by sales channel, 2012-16
                                                            • Web aggregators play a huge role in the distribution of home insurance
                                                              • Figure 24: Information sources used prior to policy purchase or renewal, by home and motor insurance policyholders, September 2016
                                                          • Market Drivers

                                                            • Changing tenure patterns
                                                              • Combined policies are the most popular type
                                                                • Figure 15: Proportional distribution of home insurance sales, by product type, 2016
                                                              • Lower claims volumes are helping to keep average premiums down …
                                                                • Figure 16: Average combined, buildings only and contents-only insurance premiums, 2012-17
                                                              • …however, this may not be sustainable given rising inflation
                                                                • Lower claims frequency eases pressures on margins
                                                                  • Figure 17: Total number of domestic property claims, 2007-16
                                                                • Most home insurance claims are for accidental damage
                                                                  • Figure 18: Proportional distribution of domestic property claims, by type of peril, 2016
                                                                • Fraud repudiation rates have increased slightly over the past two years
                                                                  • Figure 19: Detected domestic home insurance fraud repudiation rates, 2007-16
                                                              • Regulatory and Legislative Changes

                                                                • Introduction of a new levy means more affordable insurance for flood-risk properties
                                                                  • IPT reaches all-time high
                                                                    • Figure 20: Changes to the standard rate of IPT, 2011-16
                                                                  • New rules to improve transparency will result in greater customer churn
                                                                  • Companies and Brands – What You Need to Know

                                                                    • Top five underwriters control two thirds of the market
                                                                      • Aviva, Direct Line and LBG are the largest home insurance underwriters
                                                                        • Greater investment in product development and innovation
                                                                          • Market attracts a new technology-focused entrant
                                                                            • Adspend steady
                                                                            • Market Share

                                                                              • Aviva was the largest home insurance underwriter in 2016
                                                                                • Figure 21: Top 20 domestic property underwriters – UK, by share of total market GWP – ABI members only, 2016
                                                                              • A crowded marketplace
                                                                                • Figure 22: Company bought home contents insurance from (selected brands), September 2017
                                                                              • Aviva and Direct Line Group have the largest customer share
                                                                              • Competitive Strategies and Innovation

                                                                                • Distribution developments
                                                                                  • Aviva’s strong performance in 2016 linked to two new partnership agreements …
                                                                                    • … while new deal with HSBC will deliver further growth opportunities
                                                                                      • Allianz withdraws from direct insurance market
                                                                                        • LV= ceases to sell its ABC Home Insurance product via the broker channel
                                                                                          • Digital innovation
                                                                                            • Aviva’s Ask It Never initiative
                                                                                              • Legal & General launches SmartQuote tool
                                                                                                • Neos: a new digital disruptor with a focus on prevention instead of payout
                                                                                                  • PolicyCastle’s new smart and personalised service
                                                                                                    • Other product launches
                                                                                                      • Admiral launches combined home and motor policy for added convenience
                                                                                                        • Vanquis enters home insurance market
                                                                                                        • Advertising and Marketing Activity

                                                                                                          • Home insurance industry spends around £100 million a year on above-the-line advertising
                                                                                                            • Figure 23: Total above-the line, online display and direct mail advertising expenditure on home insurance and related products, by product category, 2012/13-16/17
                                                                                                          • Direct mail and TV advertising attract the greatest investment
                                                                                                              • Figure 24: Above-the line, online display and direct mail advertising expenditure on home insurance and related products, by media type, 2014/15-16/17
                                                                                                              • Figure 25: Adspend split by media type, 2016/17
                                                                                                            • Direct Line remains the biggest investor in above-the-line advertising
                                                                                                              • Figure 26: Top 10 above-the-line advertisers of home insurance and related products, 2012/13-2016/17
                                                                                                            • Nielsen Ad Intel coverage
                                                                                                            • The Consumer – What You Need to Know

                                                                                                              • 46% of internet users aged 18+ have buildings and contents insurance
                                                                                                                • 46% of home insurance policyholders have accidental damage cover
                                                                                                                  • 14% have made a claim…
                                                                                                                    • …while 76% have switched provider within the past five years
                                                                                                                      • 53% are most persuaded by price when choosing a policy
                                                                                                                        • 50% would consider installing a smart device to lower their premium
                                                                                                                        • Product Ownership

                                                                                                                          • 68% of UK adult internet users have home insurance
                                                                                                                            • Figure 27: Ownership of general insurance products, September 2017
                                                                                                                          • Around a quarter of adults whose home is being bought with a mortgage lack buildings cover
                                                                                                                            • A third don’t have contents insurance because they can’t afford it
                                                                                                                              • Figure 28: Reasons for not having contents insurance, by tenure, September 2017
                                                                                                                          • Policy Add-ons

                                                                                                                            • Accidental damage cover is the most popular add-on
                                                                                                                              • Figure 29: Cover add-ons taken out with home insurance, September 2017
                                                                                                                            • A home emergency add-on tends to be cheaper than standalone cover
                                                                                                                              • 12% of renters have home emergency cover as part of their contents insurance
                                                                                                                                • Lack of perceived need is top reason for not having accidental damage and home emergency cover
                                                                                                                                  • Figure 30: Top reason for not having accidental damage and home emergency cover, September 2017
                                                                                                                              • Claims Experience

                                                                                                                                • Home insurers benefit from a relatively low claims frequency
                                                                                                                                  • Figure 31: Proportion of household policyholders who have made a claim in the past five years, September 2017
                                                                                                                                • Under-45s are much more likely to claim
                                                                                                                                  • Parents are also more likely to claim
                                                                                                                                    • Lower claims frequency has helped to offset a higher average claim payout over the past few years
                                                                                                                                      • 68% of policyholders saw their premium rise after making a claim
                                                                                                                                        • Figure 32: Customer experience of and satisfaction with claims handling, September 2017
                                                                                                                                    • Switching Activity

                                                                                                                                      • 30% of policyholders have switched home insurer in the past year
                                                                                                                                        • Figure 33: Length of time ago last switched policy, September 2017
                                                                                                                                    • Factors Influencing Product Selection

                                                                                                                                      • Pricing is fundamental
                                                                                                                                        • Figure 34: Most influential factors determining product choice, September 2017
                                                                                                                                    • Gauging Interest in Smart Solutions

                                                                                                                                      • 50% of policyholders would consider installing a smart home device to lower their premium …
                                                                                                                                        • …while 42% like the idea of buying a discounted smart device as part of their insurance package
                                                                                                                                          • 45% are interested in cyber security cover
                                                                                                                                            • Figure 35: Interest in new smart solutions related to home insurance, September 2017
                                                                                                                                        • Appendix – Data Sources and Abbreviations

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

                                                                                                                                                • Total market forecast – Best- and worst-case scenarios
                                                                                                                                                  • Figure 36: Forecast of domestic home insurance gross written premiums – best- and worst-case scenarios, 2017-22
                                                                                                                                                • Forecast methodology