Description
The UK Home Insurance industry report identifies consumer attitudes towards home insurance, and non-financial switching incentives in the UK. This market report covers the home insurance market size, market forecast, market segmentation and industry trends for the Home Insurance market in the UK.
Current Market Landscape
While demand for home insurance has not been severely impacted by COVID-19, the economic circumstances caused by the pandemic are having a knock-on effect. The sharp rise in inflation occurring during the past year of the pandemic is pushing up the cost of servicing claims.
- 27% of all UK home insurance policyholders switched providers at their last renewal, rising to 40% among those who experienced a premium price increase.
- The percentage of total advertising money for TV ads rose to 67% of all spend in 2021.
- Among the 45% of UK adults who own both contents and building insurance, 92% own a combined policy with a single provider.
The current market is largely fragmented, with many of the largest insurers selling under their own brands while underwriting policies of third-party providers. Intense price competition among home insurance providers has made many customers highly price sensitive.
Future Market Trends in Home Insurance
The rising incidence of major weather events causing major storm and flood damage is making it even more challenging for insurers to generate reliable year-on-year profits. Raising premiums would help to smooth out volatility, however, intense competition among providers and price sensitive consumers means providers must be careful about how they go about this.
The integration of smart device technology into home insurance policies will enable insurers reduce claims costs, which in turn will allow them to keep premiums competitive. There is an opportunity to drive up adoption of these high-tech proactive home insurance policies by targeting younger generations, who are by far the most open to sharing data from smart devices with insurers.
Read on to discover more details or take a look at all of our UK Financial Services market research.
Quickly understand
- The impact of COVID-19 on the home insurance market.
- The size of the UK home insurance market and a forecast of gross written premiums for the next five years.
- How the introduction of new rules on pricing will impact market competition.
- Home insurance claims activity and its impact on underwriting results.
- Competitive strategies, innovation, and product development activity.
- Customer interest in non-financial switching incentives.
- Consumer attitudes towards flexible policy design and sharing smart device data to lower home insurance premiums and speed up claims handling.
Covered in this report
Products: Building insurance, contents insurance.
Brands: AVIVA, RSA Insurance Group, Lloyds Banking Group, Allianz, Direct Line Insurance Group, Ageas, National Farmers Union Mutual Insurance Society, AXA, Chubb Limited, Assurant Group, Admiral Group, American International Group, Hiscox, Covea Insurance, Zurich Insurance Group, esure Insurance Limited, Ocaso, Eccelsiastical Insurance Office, AA Underwriting Insurance Company, UIA.
Expert analysis from a specialist in the field
This report, written by George Zaborowski, a leading analyst in the Finanical Services sector, delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.
The UK home insurance market is at an inflection point. After years of stagnation, the value of gross written premiums is trending upwards. The significant rise in inflation over the last year is increasing the cost of claims, and in the process average premiums. Meanwhile, new regulation on premium pricing has fundamentally altered the competitive landscape. Providers will no longer be able to attract new business via deep discounts and are likely to turn to switching incentives like gifts instead. A greater focus on other attributes, such as customer service and claims handling, is also expected.
George Zaborowski
Senior Analyst
Table of Contents
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Overview
- Key issues covered in this Report
- COVID-19: market context
- Economic and other assumptions
- Products covered in this Report
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Executive Summary
- Impact on COVID-19 on Home Insurance
- Figure 1: Short-, medium- and long- term impact of COVID-19 on home insurance, 2022
- The market
- After a period of stagnation gross written premiums due to rise
- Figure 2: Market forecast for gross written domestic property insurance premiums, 2016-26
- Value of claims incurred rises 5% in 2020
- New FCA rules on pricing practices come into force
- Companies and brands
- Many brands sell home insurance, but underwriting is heavily concentrated
- Aviva remains the market leader while Allianz jumps into the top five
- Aviva-branded products sold via PCWs for first time
- Insurers launch flexible coverage offerings
- Effectiveness of TV ads enhanced by lockdowns
- The consumer
- Two thirds of adults hold a home insurance product
- Figure 3: Home insurance product ownership, 2021
- Just over a quarter switched providers at their last renewal…
- Figure 4: Switching behaviour at last renewal, by experience with premium at last renewal, 2021
- …and most plan to consider other offers at their upcoming renewal
- Figure 5: Likelihood to switch at next renewal, 2021
- Three in five would respond to a non-price related switching incentive
- Figure 6: Interest in switching incentives, 2021
- Home insurance customers mostly open to flexible premium pricing…
- Figure 7: Pricing preferences, 2021
- Flexible cover most enticing to younger customers
- Under-35s will drive the adoption of proactive InsurTech policies
- Figure 8: Level of agreement with statements about home insurance, 2021
- Impact on COVID-19 on Home Insurance
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Issues and Insights
- New rules on pricing have altered the market’s competitive dynamics
- Smart devices are the future of home insurance
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Market Size and Performance
- Impact on COVID-19 on Home Insurance
- Figure 9: Short-, medium- and long-term impact of COVID-19 on home insurance, 2022
- Premium growth remains flat
- Figure 10: Domestic property gross and net written premium, 2016-21
- Impact on COVID-19 on Home Insurance
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Market Forecast
- Near-term rise in the value of gross written premiums expected
- Figure 11: Market forecast for gross written domestic property insurance premiums, 2016-26
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- Figure 12: Market forecast for gross written domestic property insurance premiums, 2016-26
- Market drivers and assumptions
- Figure 13: Key drivers affecting Mintel’s market forecast, 2015-26
- Forecast methodology
- Near-term rise in the value of gross written premiums expected
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Claims Incurred
- Value of claims incurred rose by 5% in 2020
- Figure 14: Value of domestic home insurance claims incurred, 2015-20
- Average claim value continues to rise ahead of inflation
- Figure 15: Average value of a domestic property claim notified, 2015-20
- Escape of water continues to account for largest share of claims
- Weather-related claims more than double in 2020
- Figure 16: Proportional distribution of gross domestic property claims incurred, by value of claims, 2015-20
- Value of claims incurred rose by 5% in 2020
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Average Premiums
- Average premiums hit a new high in 2021
- Figure 17: Average home insurance premium, Q1 2012-Q3 2021
- Increase being driven by rising cost of combined policies
- Figure 18: Average home insurance premium, by type of policy, 2012-21
- Average premiums have regularly been falling in real terms
- Figure 19: Annual change in average premiums and all items CPI, 2012-20
- Average premiums hit a new high in 2021
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Underwriting Result
- 2020 a loss-making year for the home insurance market
- Weather events impact profitability
- Rising commission and expenses
- Figure 20: Domestic property outgoings and underwriting result, 2015-20
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Channels to Market
- Proportion of policies sold direct rises to 32% in 2020
- Figure 21: Proportional distribution of gross domestic property premiums, by sales channel, 2015-20
- Aviva changes course and now offers home insurance via PCWs
- Proportion of policies sold direct rises to 32% in 2020
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Market Drivers
- A volatile couple of years for the housing market
- Figure 22: UK Monthly residential housing transactions, January 2016-November 2021
- The rise of ‘generation rent’
- Figure 23: Housing tenure, by age, 2019/20
- Working from home has become the norm for many
- Figure 24: Proportion of people working from home, 2021
- Effects of climate change
- Inflationary pressures are intensifying
- A volatile couple of years for the housing market
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Regulatory and Legislative Changes
- FCA puts an end to the ‘loyalty penalty’
- FCA fair value rules come into effect
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Market Share
- Top five experience a small decline in market dominance
- Figure 25: Top 20 domestic property underwriters – UK, by share of total market GWP, 2019-20
- Aviva the longstanding market leader
- Allianz storms into top five after takeover of LV= and L&G GI business
- RSA acquired by overseas brands
- Figure 26: Underwriting arrangements, January 2022
- Top five experience a small decline in market dominance
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Competitive Strategies
- Aviva-branded products offered on PCWs for first time
- InsurTech Hiro rebrands as Locket
- Biba and OneClickCover partner to launch new scheme for brokers
- Recent company sales and acquisitions linked to home insurance sector
- RSA UK business taken over by Intact Financial Corporation
- Aviva sells off overseas entities to focus on its core markets
- Leakbot plans to go public via reverse merger
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Launch Activity and Innovation
- More insurers launch products with added flexibility
- Urban Jungle targets new homeowners with buildings and contents policy
- Lloyds launches pay monthly contents policy
- John Lewis launches modular home insurance policy
- Zurich UK introduces “Flood Resilience Toolkit”
- GoCompare helping to connect sharing economy and home insurance
- Amazon to start offering contents insurance to UK SMEs
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Advertising and Marketing Activity
- Adspend has fallen during the past two years
- Figure 27: Total above-the line, online display and direct mail advertising expenditure on home insurance and related products, 2016/17-2020/21
- Confused.com and Direct Line remain the leading advertisers
- Figure 28: Total above-the line, online display and direct mail advertising expenditure on home insurance and related products, by advertiser, 2018/19-2020/21
- Insurers take a generalised approach to advertising home insurance
- Figure 29: Total above-the line, online display and direct mail advertising expenditure on home insurance and related products, by category, 2016/17-2020/21
- Effectiveness of TV ads enhanced by lockdowns
- Figure 30: Total above-the line, online display and direct mail advertising expenditure on home insurance and related products, by media type, 2016/17-2020/21
- New ‘It takes Aviva’ brand campaign unveiled
- Figure 31: It takes Aviva campaign, Aviva
- Admiral launches two new animated multi-cover TV ads
- Figure 32: Admouth multi-cover insurance ad campaign, Admiral
- Urban Jungle’s new campaigns focus on generation rent and fair insurance
- Figure 33: Tom the renter home contents insurance ad campaign, Urban Jungle
- Figure 34: Finally, fair insurance ad campaign, Urban Jungle
- Nielsen Ad Intel coverage
- Adspend has fallen during the past two years
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Home Insurance Ownership
- Two in three adults own a home insurance product
- Figure 35: Home insurance product ownership, 2021
- Most who hold both types of cover hold a combined policy
- Figure 36: Combined home contents/buildings policy ownership, 2021
- Ownership remains deficient among renters
- Over-reliance on homeowners fosters intense competition
- Figure 37: Home insurance product ownership, by housing tenure, 2021
- Londoners least likely to own home insurance
- Figure 38: Home insurance product ownership, by region, 2021
- Two in three adults own a home insurance product
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Home Insurance Decision Making Responsibility
- Most home insurance owning households have one decision maker
- Figure 39: Who makes home insurance decisions, 2021
- Presence of children influences decision making responsibilities
- The need for more nuance in advertising
- Figure 40: Who makes home insurance decisions, by gender, age, housing tenure and lifestage, 2021
- Most home insurance owning households have one decision maker
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Experience at Last Renewal
- Three fifths of combined policyholders saw premiums rise at renewal
- Figure 41: Experience with premium at last renewal, 2021
- Most policyholders consider competitors at renewal…
- …and just over a quarter end up switching
- Figure 42: Switching behaviour at last renewal, 2021
- Premium rises induce switching activity
- Figure 43: Switching behaviour at last renewal, by experience with premium at last renewal, 2021
- New regulation on pricing could reduce the incentive to switch
- Three fifths of combined policyholders saw premiums rise at renewal
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Likelihood to Switch
- Two thirds plan to shop around at renewal
- Contents-only owners are more loyal, but insurers cannot be complacent
- Figure 44: Likelihood to switch at next renewal, 2021
- Nearly half who did not shop around previously, now plan to
- Figure 45: Likelihood to switch at next renewal, by switching behaviour at last renewal, 2021
- Over-55s the most likely to shop around
- Figure 46: Likelihood to shop around at next renewal, by age, 2021
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Switching Incentives
- Three in five would consider a non-price related switching incentive
- Free smart home security the most popular incentive
- Figure 47: Interest in switching incentives, 2021
- Interest in smart devices strongly skewed toward under-35s
- Over-55s will be harder to convince using incentives
- Figure 48: Interest in switching incentives, by age, 2021
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Pricing Preferences
- An openness to mixing and matching policy features…
- Figure 49: Pricing preferences, 2021
- …but under-35s want most features automatically priced in
- Younger people value pricing that reflects their digital lifestyles
- Figure 50: Preference for having features automatically included in the price, by age, 2021
- An openness to mixing and matching policy features…
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Attitudes towards Home Insurance
- Switching at renewal is widely seen as the path to the best deals…
- …yet many still prefer to have the option to auto-renew
- Figure 51: Agreement with statements about home insurance, 2021
- Product flexibility is most appealing to under-35s
- Figure 52: Agreement with statements about home insurance, 2021
- Simple quoting procedures do not necessarily inspire confidence
- Figure 53: Level of agreement with statements about home insurance, 2021
- Standard cybercrime cover may help speed up adoption of smart devices
- Young people the most likely to see the benefit of sharing data
- Figure 54: Agreement with statements about home insurance, 2021
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Appendix – Data Sources, Abbreviations and Supporting Information
- Abbreviations
- Consumer research methodology
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Appendix – Forecast Methodology
- Market forecast and prediction intervals
- Figure 55: Market forecast for gross written domestic property insurance premiums, 2021-26
- Figure 56: Market forecast for gross written domestic property insurance premiums, 2016-26
- Market drivers and assumptions
- Figure 57: Key drivers affecting Mintel’s market forecast, 2021-26
- Forecast methodology
- Market forecast and prediction intervals
About the report
This market report provides in-depth analysis and insight supported by a range of data. At the same time, introductory and top-level content is provided to give you an overview of the issues covered.
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Data
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*databooks not available with UK B2B Industry reports.
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