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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- Engage your policyholders
- There are still opportunities for new products
- Could brokers undermine direct sales?
- See the recession as an opportunity not a threat
- Tailor your offer
Market in Brief
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- Growth in premiums in current prices…
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- Figure 1: Trends in premiums (£bn), in current prices, 1995-2007
- …masks a stagnation in premiums in real terms
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- Figure 2: Trends in premiums (£bn), in constant 2003 prices, 1995-2007
- Weather claims put a big dent in profits
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- Figure 3: The claims and expense ratios for home insurance (%), 1997-2007
- How crushing will the crunch be?
- But could the crunch also be liberating?
- Aviva leads the market
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- Figure 4: Underwriting market share for domestic property insurance, 2007
- The brokers are back in town…
- …and the net continues to grow in importance
- Are consumers getting the best deal?
- Withdrawal of cover?
Fast Forward Trends
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- Trend 1: Universal Uncertainty
- A wake up call
- Economic volatility
- Tapping into what is important
- Trend 2: Home of the Senses
- Attitudes towards home protection
- Protecting the essence of a home
Internal Market Environment
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- Key points
- Regulatory issues
- Treating Customers Fairly (TCF)
- The Insurance Conduct of Business (ICOB) regulations
- Implications
- Underinsurance is an issue…
- …as is over-insurance
- Relative cost of home insurance is rising rapidly…
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- Figure 5: The price index* of home insurances vs the price index of all consumer goods and services, 1998-2008
- …driven by rising costs of home repair and maintenance
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- Figure 6: The price indices of home insurance, all consumer expenditure, durable goods and household repair and maintenance, 1998-2008
- Ownership of consumer durables increases across population
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- Figure 7: Percentage of households with consumer durable products, 1998/99 and 2006
- Property crime falling…
- …but some groups more exposed than others
- Affluent consumers lead the market
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- Figure 8: Total annual spend on household insurance, by decile grouping, 2006/07
- Important to know your Xs from your Ys
- Generational shift in insurance purchasing
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- Figure 9: The proportion of adults arranging their home insurance online, by age, August 2008
- Changing working patterns
- Home is source of pride for many
Broader Market Environment
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- Key points
- A target market which is expanding…
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- Figure 10: Number of households, by size of household, 1990-2013
- …but a market where demand is growing fastest at the lower end
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- Figure 11: Dwelling stock: type of accommodation in England, 2006-07
- An increase in smaller households
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- Figure 12: Household estimates and projections: by composition in England, 2000-15
- But high levels of owner-occupation will persist
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- Figure 13: Tenure trends in England and Wales, 1991-2007
- House moves tend to increase demand and increase competition
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- Figure 14: Household characteristics: recently moved, by current and previous tenure (000), 2006/07
- Surge in second homes
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- Figure 15: The number of households in England with second homes, by location, 1996/97-2006/07
- The economy influences demand and the claims rate
- The environment and climate change
- The insurance industry turns green
- Flooding
- The Pitt report
Competitive Context
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- Key points
- Little alternative to insurance
- Some have no choice…
- …and some simply forget
- The threat of the packaged account
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- Figure 16: Packaged bank accounts with home insurance-related benefits, October 2008
Strengths and Weaknesses in the Market
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- Figure 17: Strengths and weaknesses within UK home insurance market
- Strengths of the home insurance market
- Growing number of households
- Comparatively high retention rates
- Improved technology
- Good cost control
- Weaknesses of the home insurance market
- Revival in the rental sector
- Weather claims
- Increased competition and product development
- Regulations limiting innovation
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Who’s Innovating?
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- Key points
- A mature and stable market
- Bespoke insurance
- Ethical home insurance…
- …and Shari’a-compliant cover
- Credit crunch offers a new specialist risk opportunity…
- …as does climate change
- Can women be a new target?
- Aggregator sites move up the value chain…
- …but get more competition
Trade Perspective
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- Recession will lower premiums and increase claims
- The move online will accelerate
- Key priorities: crunch, prices and flooding
- The impact of flooding
Market Size and Forecast
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- Key points
- Market grows – but so do reinsurance costs
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- Figure 18: GWP, NWP and reinsurance ceded on home insurance, 1998-2007
- Consumer premium payments have fallen in real terms
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- Figure 19: GWP on home insurance, at current and constant 2003 prices, 1995-2007
- Underwriting losses mount
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- Figure 20: Domestic property, insurance underwriting result, NWPs (£m), 2001-07
- Claims are key
- The underwriting cycle turns down…
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- Figure 21: The home insurance underwriting cycle+, 1997-2007
- …but cost control is maintained
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- Figure 22: The claims, expense and combined ratio home insurance (%), 1997-2007
- Structural insurance continues to take market share
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- Figure 23: Estimated value of the domestic buildings and contents insurance sectors, by GWP, 2000-07
- Forecast
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- Figure 24: Forecast of segments, estimated value of the domestic buildings and contents insurance sectors, by GWP, 2003-2013
- Outlook for the home insurance market
- Factors used in the forecast
Premium Pricing
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- Key points
- Premiums beginning to weaken…
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- Figure 25: Home insurance premiums, October 2008
- …after a long period of growth
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- Figure 26: The index of average premium rates for home insurance (July 2004=100), July 2004-October 2008
- Different pressures for buildings and contents premiums
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- Figure 27: Trends in the shoparound Index, October 2004-October 2008
Claims Experience
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- Key points
- Claims costs turn against the industry
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- Figure 28: The growth in home insurance claims (£bn), 1999-2007
- Weather the main cause of claims in 2007
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- Figure 29: Gross incurred claims for the domestic property insurance market, by the major perils, at current prices, 1996-2007
- Erratic nature of weather-related claims
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- Figure 30: Gross incurred claims for weather damage, 1998-2006
- Theft claims could rise
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- Figure 31: Theft claims, by number, value and average value, 1996-2007
- Fire claims relatively steady
- Heavy rain cuts subsidence claims
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- Figure 32: Subsidence claims, by number and value, 1992-2007
- Effective claims management becomes priority
- Staff training is the essence of good claims handling…
- …and this must extend to outsourced claims handlers
- Fraudulent claims cost industry £1.6 billion per year
- Detected fraud increasing
Market Share
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- Key points
- Big five control 64% of GWP…
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- Figure 33: Underwriting market share for domestic property insurance, 2007
- …but the top two lose share
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- Figure 34: Underwriting market share for the domestic property insurance, 2005-07
Companies and Products
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- Key points
- Company profiles of top five insurers
- Aviva plc
- Key brand: Norwich Union
- RBS Insurance
- Key brands: Direct Line, Churchill, NIG, Privilege and Green Flag
- RSA
- Key brands: MORE TH>N
- HBOS
- Key brands: Esure, St Andrew’s, Halifax, Sheilas’ Wheels
- Lloyds TSB Insurance
- Brands: Lloyds TSB General Insurance, Pearl
- Zurich
- Brands: Zurich
- Key intermediaries
- Acromas Holdings Ltd
- Key brands: AA, SAGA, ConfidentCover, DirectChoice Insurance, Drakefield Insurance
- Budget Insurance
- Swinton Group
Brand Elements
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- Brand map
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- Figure 35: Attitudes and usage of home insurance brands, October 2008
- Churchill
- What the brand is trying to achieve
- What the consumer thinks
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- Figure 36: Attitudes towards the Churchill brand, October 2008
- Norwich Union
- What the brand is trying to achieve
- What the consumer thinks
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- Figure 37: Attitudes towards the norwich union brand, October 2008
- Direct Line
- What the brand is trying to achieve
- What the consumer thinks
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- Figure 38: Attitudes towards the direct line brand, October 2008
- Lloyds TSB
- What the brand is trying to achieve
- What the consumer thinks
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- Figure 39: Attitudes towards the Lloyd TSB brand, October 2008
- More Th>n
- What the brand is trying to achieve
- What the consumer thinks
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- Figure 40: Attitudes towards the more th>n brand, October 2008
- Brand Qualities of home insurance brands
- Norwich Union the most accessible and competent brand
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- Figure 41: Personalities of various home insurance brands, October 2008
- Experience of home important brands
- Norwich Union has greatest experience
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- Figure 42: Consumer usage of various home insurance brands, October 2008
- Brand intentions for home insurance brands
- Consumers most likely to consider using Churchill in the future
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- Figure 43: Consideration of various home insurance brands, October 2008
- Brand momentum for home insurance brands
- Churchill is gaining most ground
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- Figure 44: Momentum of various home insurance brands, October 2008
- Brand satisfaction for home insurance brands
- Churchill shows most excellent or good satisfaction.
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- Figure 45: Satisfaction with various home insurance brands, October 2008
- Brand commitment to home insurance brands
- Tesco has high recommendation
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- Figure 46: Commitment to various home insurance brands, October 2008
- Round up
Brand Communication and Promotion
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- Key points
- Home insurance the second-largest category of general insurance advertising spend
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- Figure 47: Advertising expenditure on general insurance by sector (September- August), 2006/07 and 2007/08
- Direct Line the highest investor in advertising
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- Figure 48: The top advertisers of home insurance, 2006/07 and 2007/08
- Direct mail continues to dominate advertising spend
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- Figure 49: Advertising expenditure on home insurance, by media type, 2007/08
- Concerns over advertising standards
Channels to Market
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- Key points
- The broker is dead, long live the broker
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- Figure 50: The distribution of home insurance GWP, 1992-2007
- If you can’t beat ‘em, join ‘em
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- Figure 51: The trend in GWP, by distribution channel, 1992-2007
- The little guys specialise
- Is upselling treating customer fairly?
- Banks and building societies losing out
- Consumer perceptions do not match GWP
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- Figure 52: Distribution channel used to arrange current home contents insurance policy, 2003-08
- Offline still dominates but the net is rising fast
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- Figure 53: Method of arranging most current home contents policy, 2003-07
- Aggregator sites come under pressure
- Which? price is right
- FSA has some doubts about clarity, fairness and accuracy
The Consumer – Product Ownership
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- Key points
- Over 70% have home insurance
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- Figure 54: The penetration of home insurance, August 2008
- Have the floods and the credit crunch caused a rise in ownership?
- Home ownership drives the market
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- Figure 55: The penetration of home insurance, by tenure, August 2008
- Implications and opportunities
- The upselling opportunity
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- Figure 56: Adults who think it worth paying extra for important items, by gender, age/socio-economic group, lifestage, household tenure and ACORN group, August 2008
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- Figure 57: ‘I would like to have insurance that was tailored to suit my individual circumstances’, by gender, age, lifestage, socio-economic group, ACORN cateory and tenure, August 2008
- Policy ownership is an age and lifestyle thing
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- Figure 58: The penetration of home insurance, by age, lifestage, detailed lifestage groups and marital status, August 2008
- You need something to protect
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- Figure 59: The penetration of home insurance, by socio-economic group, working status, household income and ACORN category, August 2008
- Time to protect what you’ve got
- Insurers need to use traditional media to boost penetration
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- Figure 60: The penetration of home insurance, by TV region, newspaper readership, TV received and supermarket used, August 2008
The Consumer: Arranging Home Insurance
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- Key points
- Is searching uncommon because direct purchasing is high, or vice versa?
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- Figure 61: How home insurance in arranged (% of adults) and the source of purchase, August 2008
- A generational divide
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- Figure 62: How home insurance is arranged, by gender, age, socio-economic group, lifestage, tenure and ACORN category, August 2008
- Also a regional divide: a Gaelic preference for face to face
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- Figure 63: How home insurance is arranged, by TV region, August 2008
- Choose your media carefully
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- Figure 64: How home insurance is arranged, by technology usage, internet usage, newspaper readership, TV viewing, TV reception and supermarket used, August 2008
- Age and tenure determine the source of purchase
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- Figure 65: Distribution channel of current home contents policy, by gender, age, lifestage and household tenure, August 2008
- Wealth is a key influence on source of purchase
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- Figure 66: Distribution channel of current home contents policy, by socio-economic group, ACORN category and TV region, August 2008
- Price-comparison sites gain ground
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- Figure 67: Distribution channel of current home contents policy, by internet usage, newspaper readership, TV reception and supermarket usage, August 2008
The Consumer: Search Strategies
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- Key points
- Don’t search, won’t search
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- Figure 68: The searching behaviour (%) of consumers when buying general insurance, August 2007
- Home insurance purchasers more choosy?
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- Figure 69: Consumer attitudes towards switching providers and searching among home insurance policies, August 2008
- Family mortgage holders the most likely to search at renewal
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- Figure 70: Consumer attitudes towards searching among home insurance policies at policy renwal, by gender, age, lifestage, marital status, tenure and TV region, August 2008
- The plumber and the CEO tend to search at renewal
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- Figure 71: Consumer attitudes towards searching among home insurance policies at renewal, by socio-economic group and ACORN category, August 2008
- The net leads to more searching at renewal
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- Figure 72: Consumer attitudes towards searching among home insurance policies at renewal, by technology usage, internet usage, newspaper readership, commercial TV viewing, TV received and supermarket used, August 2008
- First-time searchers generally become renewal searchers
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- Figure 73: Consumer attitudes towards searching among home insurance policies at first purchase, by gender, age, lifestage, socio-economic group, tenure, and TV region, August 2008
- Renewal searchers and first-time searchers use the same media
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- Figure 74: Consumer attitudes towards searching among home insurance policies at first purchase, by technology usage, internet usage, newspaper readership, commercial TV viewing, TV received and supermarket used, August 2008
- High levels of consumer ignorance about the policies they have
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- Figure 75: Consumer knowledge of the insurance policies they have, August 2007
- Implications and opportunities
- Affluent mortgagors are the most ‘clued up’ about insurance
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- Figure 76: Consumer knowledge of their home insurance policies, by gender, age, sociao-economic group, lifestage, tenure and ACORN category, August 2007
- Is lack of knowledge causing disaffection?
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- Figure 77: Consumer attitudes towards switching providers, August 2008
- Loyalty will shrink in the future
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- Figure 78: Consumer attitudes towards switching providers, by gender, age, socio-economic group, lifestage, household tenure and TV region, August 2008
The Consumer: Attitudes and Targeting Opportunities
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- Key points
- Lack of knowledge leads consumers to downgrade the value of home insurance
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- Figure 79: Consumer attitudes towards home insurance, August 2008
- Insurers are failing to engage the young
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- Figure 80: Consumer attitudes towards home insurance, by gender, age, socio-economic group, lifestage, tenure and TV region, August 2008
- Youngest, oldest and poorest are the most likely to claim
- Attitudinal groups on statements towards home insurance
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- Figure 81: Key target groups for home insurers, August 2008
- ‘Shopping around’ (23% of adults 18+, equivalent to around 11 million UK adults)
- Demographic profile
- ‘Can’t afford it!’ (16% of adults 18+, equivalent to around 7.8 million UK adults)
- Demographic profile
- ‘Old & loyal’ (12% of adults 18+, equivalent to around 5.6 million UK adults)
- Demographic profile
- ‘Worth paying extra’ (9% of adults 18+, equivalent to around 4.4 million UK adults)
- Demographic profile: Affluent third agers
- ‘Not interested’ (41% of adults 18+, equivalent to around 19.6 million UK adults)
- Demographic profile
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