18% of home insurance holders have reviewed their cover as a result of the COVID-19 outbreak, rising to 38% of 18-34 year olds.

While the impact of COVID-19 on home insurance is small relative to other markets, a renewed focus on value will lead many to review their cover. This is especially true of the under-35s who are most likely to have experienced a hit to their finances. The essential nature of home insurance means few will cancel their policy completely, but some will switch or cut back on add-ons they don’t need to reduce costs, further exacerbating the already intense level of price competition in the sector.

The new national lockdown announced on 4 January will have limited additional impact on the market besides further intensifying consumer focus on value. The pattern of claims is likely to reflect the period of the first lockdown when more time spent at home led to an increase in accidental damage as well as fires, while there was a decline in claims for theft. However, the timing of this lockdown - in winter rather than spring - means that weather-related claims are likely to overshadow the lockdown-related shift in claims.

The home insurance market faces a number of challenges including changing attitudes towards ownership, rising numbers of long-term renters, increasingly unpredictable weather events and growing threats to the home from cyberattack.

These threats also present new opportunities for insurers to protect households and break away from the intense price competition inherent in a market with such stable levels of customer penetration. The growing private rental market offers a particularly significant opportunity for growth for any company than can effectively tap into it – just 36% of private renters currently have home insurance cover in place.

• The impact of COVID-19 on the home insurance market.

• The size of the domestic home insurance market as well as a five-year forecast covering gross written premiums.

• The changing nature of claims and its impact on profitability in the sector.

• Competitive strategies, innovations and launch activity within the domestic home insurance market.

• Ways to encourage switching in home insurance without relying so much on price competition.

• Attitudes of consumers towards the changing nature of home insurance including integration of the smart home and expansion into cyberspace.

The first COVID-19 cases were confirmed in the UK at the end of January, with a small number of cases in February. As the case level rose, the government ordered the closure of non-essential stores on 20 March.

A wider lockdown requiring people to stay at home except for essential shopping, exercise and work ‘if absolutely necessary’ followed on 23 March. It wasn't until 15 June that non-essential stores were allowed to reopen, followed by pubs, restaurants, hotels and hairdressers on 4 July, and many beauty businesses on 13 July.

By September, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a full month-long lockdown from 5 November and Scotland introducing a new five-level system of coronavirus restrictions.

Despite these restrictions, however, case numbers continued to increase. All four UK nations tightened restrictions in January 2021, effectively leading to a full UK-wide lockdown. There is no defined end date for the lockdown, although the legislation regarding to the English lockdown that was presented to Parliament extends to 31 March.

The UK’s vaccination programme started on 8 December 2020, and with both the Pfizer-BioNTech and the Oxford-AstraZeneca vaccines licenced for use in the UK, the government aims to offer a vaccine to 15 million people by mid-February.

Much of this Report was prepared in December 2020, before the announcement of the January lockdown, and when the extent of the vaccine rollout was less clear.

However, the content was reassessed and, where necessary, adjusted on 7 January, in order to ensure that our analysis and our forecast expectations still hold true.

Our core assumptions on the path of the pandemic had always included an expectation of severe disruption to markets and consumers’ lifestyles well into 2021, with a strong likelihood that the virus would still be with us even into 2022. Although the second wave of infections and subsequent lockdown puts us towards the negative end of our initial expectations, these developments are still broadly consistent with our previous assumptions.

Similarly, Mintel had factored in the likelihood that an effective vaccine would be available from early- to-mid 2021. The licensing of the Pfizer-BioNTech and Oxford-AstraZeneca vaccines puts us slightly ahead of that assumption, but the challenge associated with rolling out a new vaccination programme to millions of people means that our previous assumptions are still broadly consistent with the new reality.

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its November 2020 Fiscal Sustainability Report. The scenario suggests that UK GDP will have fallen by 11.3% in 2020, recovering by 5.5% in 2021 and 6.6% in 2022. GDP isn’t expected to return to pre-COVID levels until Q4 2022. The central scenario has unemployment peaking at 7.5% in Q2 2021.

The current uncertainty means that there is wide variation on the range of forecasts, however, and this is reflected in the OBR’s own scenarios. In its upside scenario, economic activity returns to pre-COVID-19 levels by Q4 2021. Its more negative scenario, by contrast, would mean that GDP doesn’t recover until Q3 2024.

From the start of the outbreak, we have made the assumption that an effective vaccine would not be widely available until well into 2021. On 9 November, Pfizer and BioNTech announced highly encouraging results from trials of their vaccine, followed by similarly positive results from Moderna. As a result, the first vaccinations were administered in the UK on 8 December 2020, but a full rollout will take many months, meaning that Mintel is still making the assumption that we will be living with COVID for some time to come.

This Report is focused on the UK domestic home insurance market. This includes both buildings cover and contents cover which can be purchased either separately or together in a combined policy. The definition of the two policy types is as follows:

• Buildings insurance covers the structure of a home and any permanent fixtures and fittings such as fitted kitchen units and bathroom suites.

• Contents insurance covers the costs of replacing or repairing possessions if they are damaged, destroyed or stolen.

Home insurance policies can also include a wide range of add-ons such as home emergency cover, boiler cover, accidental damage cover, legal expenses cover or cybercrime cover. Policies can also be extended to cover contents outside of the home.