Table of Contents
Issues in the Market
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- Key issues covered in the report
- Abbreviations
Insights and Opportunities
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- Renters represent untapped market
- Combining insurance products to increase profits and offer convenience
- Incentives to drive down claims and attract consumers
- No-frills home insurance
- Technology advances provide opportunities for product extras
- Positive customer interaction could strengthen brands
Market in Brief
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- Home insurance sector set to increase profitability
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- Figure 1: Domestic property, insurance underwriting result, NWPs, 2000-06
- Favourable claims costs help to maintain profitability
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- Figure 2: Gross incurred claims for the domestic property insurance market, by the major perils, at current prices, 1996-2006
- Aviva and RBS account for 40% of total GWPs
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- Figure 3: Underwriting market share for domestic property insurance, 2005
- Trends in UK households pose opportunities and risks for insurers
- Technology has significant impact on distribution channels
- Over a third of consumers arrange cover directly from insurer
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- Figure 4: Arrangement of last home insurance policy, by distribution channel, April 2007
- Internet sales lead to increased customer churn
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- Figure 5: Length of time with current home contents insurance provider, April 2007
- Internet sales increase sharply, as branch sales continue to fall
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- Figure 6: Method used to arrange current home contents policy, 2003-07
Fast Forward Trends
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- Trend 1: Help, I need Somebody
- Definition
- Context
- What Next?
- Trend 2: Premium vs Cut-Throat Island
- Definition
- Context
- What Next?
- Trend 3: CornerShop Bank
- Definition
- Context
- What Next?
Broader Market Environment
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- Key points summary:
- A growing number of potential targets
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- Figure 7: Number of households, by size of household, 1991-2012
- Growing demand for smaller houses has impact for insurance industry
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- Figure 8: Proportion of housebuilding completions, by number of bedrooms, 1991/92-2005/06
- Housing demand increasing risk profiles?
- Demand for smaller properties affects insurance premiums
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- Figure 9: Households, by type of dwelling, 2005
- UK desire to own property is positive for home insurance market
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- Figure 10: Number of GB dwellings, by tenure, 1981-2005
- Changing pattern of mortgage activity impacts home insurance market
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- Figure 11: Number of new loans for home purchase, including number of loans for FTB, 1999-2006
- Opportunities and challenges from growth in buy-to-let properties…
- …and from increased desire to own second home
- Positive trends for PDI and consumer expenditure but caution required
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- Figure 12: Total PDI and consumer e xpenditure, at 2002 prices, 2002-12
Internal Market Environment
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- Key points summary:
- Far-reaching FSA regulation described as ‘overkill’
- Various measures used to determine sum insured
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- Figure 13: RPI, consumer durables and house rebuilding index, January 1997-January 2007
- Cost of rebuilding continues to rise above inflation…
- …although consumer durables index continues to fall
- Other factors influencing cost of premium
- Discounts provided for security deterrents
- Contents cover undercutting other insurances?
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- Figure 14: Average annual premium for household insurance, 2003/04-2005/06
- Implications
- People aged 50-64 spend most on household insurance premiums
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- Figure 15: Average annual premium for household insurance, by age, 2005/06
- Ownership of consumer durables increases across population
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- Figure 16: Percentage of households with consumer durable products, 1998/99 and 2005/06
- Changing lifestyles present challenges and opportunities for insurers
- iPod generation fully embraces technology
- 40% of people now work from home
- Home is source of pride for many
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- Figure 17: Consumer spending on glassware/tableware/household utensils, household textiles, furniture/furnishings, 2001-06
Competitive Context
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- Self-insurance chosen over wasted premiums
- Cost is a deterrent to purchasing insurance for many
- Consumer apathy presents a barrier
- The threat of the packaged account
Strengths and Weaknesses in the Market
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- Figure 18: Strengths and weaknesses within UK home insurance market
- Strengths of the home insurance market
- Weaknesses of the home insurance market
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Who’s Innovating?
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- Key points summary:
- Innovation restricted by price-driven competition and regulation
- Insurers provide incentives for a good claims record…
- …and look to offer a kinder no-claims discount
- ‘Green’ is colour for 2007
- Online self-service insurance
- Brokers helped with rebuild figures
- Going beyond price
Trade Perspective
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- Participating companies
- Rise of online services revolutionises distribution channels
- The growing trend of market segmentation
- Moving towards a price-driven market
- New product development essential to prevent consumer cynicism
Market Size and Forecast
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- Key points summary:
- Strong underwriting results ensure profit for property sector
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- Figure 19: Domestic property, insurance underwriting result, NWPs, 2000-06
- Claims and underwriting ratios show steady improvements
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- Figure 20: Claims, expenses and underwriting results as a proportion of NWP, 2000-06
- Gap between buildings and contents segments continues to narrow
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- Figure 21: Estimated value of the domestic buildings and contents insurance sectors, by GWP, 2000-06
- Forecast
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- Figure 22: Forecast of the UK home insurance market, by gross written premiums, 2006-12
- Factors used in the forecast
- Market context
- Property and motor business account for 60% of general insurance market
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- Figure 23: General insurance business for UK risks, by annual net written premiums, 2000-05
- Domestic business accounts for almost 60% of total property sector
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- Figure 24: Domestic and commercial property insurance, by GWPs, 2000-05
Premium Pricing
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- Home insurance premiums remain relatively static
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- Figure 25: AA British premium index, July 1994-April 2007
- Different pressures for buildings and contents premiums
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- Figure 26: AA shoparound premiums for buildings, contents, comprehensive and non-comprehensive cover, April 2005-July 2007
Claims Experience
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- Key points summary:
- Claims experience is the most crucial factor in home insurance industry
- Cost of claims has been favourable in recent years
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- Figure 27: Gross incurred claims for the domestic property insurance market, by the major perils, at current prices, 1996-2006
- Index highlights erratic nature of weather and subsidence claims
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- Figure 28: Index of the cost of claims incurred, 1996-2006
- Average cost of theft claims continues to rise
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- Figure 29: Theft claims, by number, value and average value, 1996-2006
- Subsidence claims rise in wake of long hot summers
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- Figure 30: Subsidence claims, by number and value, 1992-2006
- Weather-related claims unpredictable by nature
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- Figure 31: Gross incurred claims for weather damage, 1998-2006
- Cost of flooding the new ‘hot topic’
- Effective claims management becomes priority…
- …with an emphasis on quality, not cost
- Fraudulent claims cost industry £1.6 billion per year
Market Share
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- Aviva and RBS account for 40% of total GWPs
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- Figure 32: Underwriting market share for domestic property insurance, 2005
- A number of major insurers increase their market share
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- Figure 33: Market share of top ten property underwriters, 2004 and 2005
Companies and Products
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- Company profiles of top five insurers
- Aviva
- RBS
- Royal & SunAlliance
- HBOS plc
- Lloyds TSB Group
- Key intermediaries
- AA Insurance
- Budget Insurance
- New entrants to the home insurance market
- HNW and MNW markets drive product developments
Brand Elements
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- Figure 34: Usage and attitudes on home insurance, May 2007
- Churchill
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- Figure 35: Words associated with the Churchill brand, May 2007
- Brand qualities
- A challenge to remain top dog
- Norwich Union
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- Figure 36: Words associated with the Norwich Union brand, May 2007
- Brand qualities
- Quote me happy, then keep me happy
- Prudential
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- Figure 37: Words associated with The Prudential brand, May 2007
- Brand qualities
- Poor old Pru needs a pep-up
- RIAS
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- Figure 38: Words associated with the RIAS brand, May 2007
- Brand qualities
- RIAS needs more pizzazz
- Brand qualities
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- Figure 39: Customer word associations with various home insurance brands, May 2007
- Usage of brands
- Watch out for Tesco!
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- Figure 40: Customer usage of various home insurance brands, May 2007
- Attitudes towards home insurance brands
- Churchill most differentiated, Norwich Union most trusted
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- Figure 41: Attitudes towards home insurance brands, May 2007
- Brand satisfaction and performance
- Brand commitment
- Direct Line is first choice for home insurance
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- Figure 43: Degree of customer commitment to home insurance brands, May 2007
- Brand attitudes: Motor v home insurance category
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- Figure 44: Comparison of home and motor insurance key attitudes, May 2007
- Round-up
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Brand Promotion and Communication
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- Key points summary:
- General insurance accounts for highest adspend in financial services
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- Figure 45: Advertising expenditure on financial services, by sector, 2002/03-2006/07
- In 2006/07 adspend on home insurance increases by almost £20 million
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- Figure 46: Top 20 advertisers of home insurance, 2002/03-2006-07
- NU, Direct Line and SAGA account for 30% of adspend in 2006/07
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- Figure 47: Top 20 advertisers of home insurance, 2006-07
- Direct mail continues to dominate adspend
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- Figure 48: Advertising expenditure on home insurance, by media type, 2006/07
- Misleading advertising causes concern for FSA and ASA
Channels to Market
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- Key points summary:
- Distribution changes have profound impact on market
- Intermediaries and company agents lose out
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- Figure 49: Distribution channels for property insurance, by gross written premium, 1992-2005
- Four in ten consumers opt to use a direct insurer for contents cover
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- Figure 50: Distribution channel used to arrange current home contents insurance policy, 2003-07
- Mortgage providers suffer but banks/building societies increase share
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- Figure 51: Distribution channel used to arrange current buildings insurance policy, 2003-07
- Internet sales increase significantly in last five years
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- Figure 52: Method of arranging most current home contents policy, 2003-07
- Aggregator sites increase in popularity but receive mixed response
- Large-scale intermediaries fight back
- Brokers encouraged to embrace technology
Consumer Financial Activity
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- About the Financial Activity Bulletin
- Expected activity picks up
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- Figure 53: Expected financial activity – savings, investment, borrowing and debt repayment, December 2005-March 2007
- Much greater emphasis on saving than spending
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- Figure 54: UK savings and spending indices, January 2001-March 2007
- Activity remains subdued across most demographic segments
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- Figure 55: Expected financial activity over the next six months, by gender, age, soi=cio-economic group, household income and working status, March 2007
- Saving activity and reducing debt top consumer intentions
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- Figure 56: Top five financial activities planned in the next six months, March 2006-March 2007
- Mortgage demand falls but intentions to buy property remain unchanged
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- Figure 57: Expected mortgage and property purchase activity, Q3/Q4 2002-Q1/Q2 2007
- Identifying the main financial services providers
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- Figure 58: Saving, investment and lending: market sizes, by expected customer demand and brand leaders, March 2007
- Nationwide tops the activity chart
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- Figure 59: Activity levels of main financial services providers’ customer bases, March 2007
The Consumer – Product Ownership
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- Key points summary:
- 60% of adults have home contents insurance
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- Figure 60: Ownership of selected insurance products, 2003-07
- Housing market trends demand increased innovation from insurers
- Only a quarter of people renting have home contents insurance
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- Figure 61: Home insurance ownership, by gender, age, socio-economic group and household tenure, April 2007
- Implications and opportunities
- Level of affluence has impact on product penetration
- Implications and opportunities
- Londoners have lowest product penetration
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- Figure 62: Home insurance ownership, by lifestage, Mintel’s Special Groups, working status, gross annual income and TV region, April 2007
- Implications and opportunities
- Three quarters of mid-market tabloid readers have home insurance
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- Figure 63: Home insurance ownership, by technology users, Internet usage, newspaper readership, commercial TV viewing and supermarket usage, April 2007
- Implications and opportunities
The Consumer – Arranging Insurance Cover
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- Key points summary:
- Over a third of consumers arrange cover directly from insurer
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- Figure 64: Arrangement of last home insurance policy, by distribution channel, April 2007
- New entrants and online technology impact distribution channels
- Banks/building societies and retailers experience upward trend
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- Figure 65: Distribution channel of current home contents insurance, 2003-07
- Direct access to consumers proves to be advantage for banks/building societies
- Choice of channel linked to age and experience
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- Figure 66: Distribution channel of current home contents policy, by gender, age, socio-economic group and housing tenure, April 2007
- Providers need to provide flexibility in level of advice
- People less likely to use brokers in Anglia/Midlands and Scotland
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- Figure 67: Distribution channel of current home contents policy, by lifestage, Mintel’s Special Groups, working status, gross annual income and TV region, April 2007
- Implications and opportunities
- A fifth of tabloid readers arrange contents insurance with their mortgage provider
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- Figure 68: Distribution channel of current home contents policy, by technology users, Internet usage, newspaper readership, commercial TV viewing and supermarket usage, April 2007
- Implications and opportunities
- Mortgage providers lose ground in buildings insurance sales
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- Figure 69: Distribution channel of current buildings insurance, 2003-07
- Direct providers set to retain dominance in buildings insurance market
- A quarter of mortgagors have buildings insurance with mortgage provider
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- Figure 70: Distribution channel of current buildings policy, by gender, age, socio-economic group and tenure, April 2007
- Intermediaries appeal to people of all ages
- A quarter of people from London/North West use their mortgage provider
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- Figure 71: Distribution channel of current buildings policy, by lifestage, Mintel’s Special Groups, working status, gross annual income and TV region, April 2007
- Implications and opportunities
- Half of heavy commercial TV viewers go directly to insurer
- Implications and opportunities
- Four in ten arrange home contents policy over the phone
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- Figure 73: Method used to arrange current home contents insurance policy, April 2007
- Room for both direct and face-to-face sales
- Internet sales experience sharp growth
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- Figure 74: Method used to arrange current home contents policy, 2003-07
- Proportion of sales made via the Internet will continue to grow
- Nearly half of all ABs arranged their home contents policy over the phone
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- Figure 75: Method of arranging current home contents insurance policy, by gender, age, socio-economic group and housing tenure, April 2007
- Age and affluence dictate preferred methods to arrange insurance
- Likelihood to use the Internet increases with affluence
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- Figure 76: Method of arranging current home contents insurance policy, by lifestage, Mintel’s Special Groups, working status, gross annual income and TV region, April 2007
- Implications and opportunities
- Tabloid readers prefer to arrange policy face to face than remotely
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- Figure 77: Method of arranging current home contents insurance policy, by technology users, Internet usage, newspaper readership, commercial TV viewing and supermarket usage, April 2007
- Implications and opportunities
- CHAID analysis
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- Figure 78: Methods people are likely to use to arrange their home contents insurance a certain way, April 2007
The Consumer – Attitudes and Targeting Opportunities
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- Key points summary:
- Almost 60% have held their current contents policy for three years
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- Figure 79: Length of time with current home contents insurance provider, April 2007
- High customer churn within motor insurance sector provides warning
- Loyalty increases with age but decreases with affluence
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- Figure 80: Length of time with current home contents insurance provider, by gender, age, socio-economic group and housing tenure, April 2007
- Younger consumers are more price-sensitive
- Policyholders from Scotland/Wales/South West are the most loyal
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- Figure 81: Length of time with current home contents insurance provider, by lifestage, Mintel’s Special Groups, working status, gross annual income and TV region, April 2007
- Implications and opportunities
- A fifth of heavy Internet users have held current policy for less than a year
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- Figure 82: Length of time with current home contents insurance provider, by technology users, Internet usage, newspaper readership, commercial TV viewing and supermarket usage, April 2007
- Implications and opportunities
- Face-to-face selling leads to lower customer churn
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- Figure 83: Method of arranging household insurance policy, by length of time with current home contents insurance provider, April 2007
- Time, ease and access influence switching behaviour
- Six in ten policyholders believe home insurance is essential
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- Figure 84: Home insurance attitudes and behaviours, April 2007
- Policyholders are prepared to pay for essential cover
- People most likely to shop around in first two years
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- Figure 85: Length of time policy held, by home insurance attitudes and behaviours, April 2007
- Providers need to satisfy consumers to limit churn
- Policyholders more likely to shop around for contents insurance
- Shoparound activity impacted by age and affluence
- Consumers who purchase policy directly are more likely to shop around
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- Figure 87: Shoparound activity for current contents and buildings policy, by distribution channel, April 2007
- Rise of aggregators will increase consumer price-sensitivity
- CHAID analysis
- Full-time workers most likely to switch
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- Figure 88: Which consumers are most likely to have been with their current home insurance provider for a specificied period of time (based on Q9), April 2007
- Home insurance clusters
- 1. Loyal
- 2. Unexcited
- 3. Value for money
- 4. Best money can buy
- A third of people aged 25-34 want the ‘best money can buy’
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- Figure 89: Cluster groups according to attitudinal statements about home insurance schemes, by gender, age, socio-economic group, lifestage, gross annual household income, tenure and working status, April 2007
- Half of consumers looking for best money can buy arrange their policy over the phone
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- Figure 90: Cluster groups, by how people with a home contents insurance policy arranged their policy, April 2007
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