Table of Contents
Issues in the Market
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- Key issues
- Abbreviations
Future Opportunities
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- Premium and Cutthroat
- Playing to both ends of the market
- The impact on home insurance
- A move downmarket?
- Customisation
- Tailoring cover to suit the individual
- A question of positioning
- Encouraging claimants – what price a no claims bonus?
- The importance of quality
Market in Brief
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- Split between buildings and contents insurance has narrowed
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- Figure 1: Estimated value of the domestic buildings and contents insurance sectors, by GWP, 2002-09
- Sharp turnaround in the underwriting cycle in 2008
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- Figure 2: The home insurance underwriting cycle+, 1998-2008
- Weather still the main cause of claims in 2008
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- Figure 3: Gross incurred claims for the domestic property insurance market, by the major perils, at current prices, 1996-2008
- Majority of consumers report arranging contents insurance offline…
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- Figure 4: How consumers arranged last home contents insurance policy, July 2009
- The big four insurers generate 63% of GWP
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- Figure 5: Underwriting market share for domestic property insurance, 2008*
- Competition induced rise in adspend appears to have peaked
- Few signs of policy cancellations
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- Figure 6: Life or home insurance policies, July 2009
- Retention a problem, but not a disaster
- Strong faith in the product – “you’d be a fool not to have home insurance”
Internal Market Environment
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- Key points
- Premium pricing – buildings up, contents level
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- Figure 7: Home insurance premiums, 2004-09
- House rebuilding costs fall…
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- Figure 8: Annual % change in house rebuilding cost index and RPI, 1998-2009
- Climate change and flooding are major concerns for industry
- Flooding
- The impact of climate change
- Cost of contents has fallen over the last decade
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- Figure 9: RPI and consumer durables indices, 1999-2009
- But level of contents ownership has increased
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- Figure 10: Percentage of households with consumer durable products, 1998/99 and 2007
- Underinsurance remains a problem
- Burglary figures increase…
- … and fraud is expected to become more prevalent
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- Figure 11: Estimated value of undetected fraudulent general insurance claims, 2008
- But industry is making progress on fraudulent claims
Broader Market Environment
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- Key points
- The number of households continues to increase…
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- Figure 12: Number of households (Great Britain), by size of household, 1990-2031
- … but household structure continues to evolve
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- Figure 13: Household estimates and projections: by composition in England, 2000-15
- Growth in both the owner-occupied and private rental markets
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- Figure 14: Tenure trends in England and Wales, 2000-08
- Housing market slowdown has knock-on effect for home insurance
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- Figure 15: UK housing market – number of transactions, average house prices and number of years between moves, 2004-09
- The impact of the slowdown
- The industry perspective
- The consumer perspective
- Online channels increase in importance…
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- Figure 16: British internet penetration at home/work/place of study or elsewhere, 2003-09
- … but have an impact on pricing and switching activity
- A more intrusive style of regulation?
Competitive Context
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- Key points
- Self-insurance the only real alternative
Strengths and Weaknesses in the Market
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- Figure 17: Home insurance – SWOT analysis, 2009
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Who’s Innovating?
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- Key points
- True product innovation is rare
- Halifax launches community website for home insurance
- AXA goes beyond post-codes with ‘geo-coding’ underwriting tool
- RIAS introduces ‘Key Protection’ home insurance add-on
- Sainsbury’s links home insurance cover with its reward program
- MORE TH>N boosts customer service by streamlining claims process…
- … and also makes choosing a policy more straightforward
- Aviva teams up with Norfolk Police in the Safer Street project
Trade Perspective
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- The slowdown in the economy and housing market
- Consumers have become more price-conscious
- Credit crunch has brought the issue of trust to the forefront
- More need for cover if property theft levels rise during the recession…
- … but the number of fraudulent claims also likely to increase
- Aggregators
- Aggregators playing a bigger role in the market
- High volumes necessary in order to justify being on aggregators
- Aggregator brand just as important as insurer brand
- Growth and retention
- Marketing tactics focus on gaining market share
- Devaluing products through discounting
- Past claim experience makes a huge difference
- Many may find they are under-insured when making a claim
- Top-end market needs to be targeted differently than the value end
- Other issues
- Level of coverage outside the home still a confusing area for customers
Market Size and Forecast
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- Key points
- Drop in the value of reinsurance ceded leads to 3% rise in NWP in 2008
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- Figure 18: GWP, NWP and reinsurance ceded on home insurance, 1998-2008
- Sharp turnaround in the underwriting cycle in 2008
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- Figure 19: The home insurance underwriting cycle+, 1998-2008
- Quick return to profitability aided by consistent cost control
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- Figure 20: Home insurance claims, expense and combined ratios (%), 1998-2008
- Net claims incurred decline by 27% on previous year
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- Figure 21: Domestic property insurance underwriting result, 2001-08
- Split between buildings and contents insurance has narrowed
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- Figure 22: Estimated value of the domestic buildings and contents insurance sectors, by GWP, 2002-08
- Forecast
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- Figure 23: Forecast of the value of the domestic buildings and contents insurance sectors, by GWP, 2004-14
- Factors used in the forecast
Claims Experience
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- Key points
- Weather remains the main cause of claims in 2008
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- Figure 24: Gross incurred claims for the domestic property insurance market, by the major perils, at current prices, 1996-2008
- Storm damage typically behind most weather-related claims
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- Figure 25: Gross incurred claims for weather damage, 1998-2008
- Industry fears of more frequent high-damage weather events
- Wetter weather helps lower subsidence claims
- Fire claim values pushed up by more expensive household items
- UK economic difficulties could cause theft claims to rise
- Fraudulent claims also likely to increase
Market Share
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- Key points
- 63% of GWP controlled by the big four insurers
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- Figure 26: Underwriting market share for domestic property insurance, 2008*
- Aviva continues to lose ground while Lloyds jumps up the table
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- Figure 27: Underwriting market share for the domestic property insurance, 2005-08
Companies and Products
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- Major players
- Aviva UK Insurance
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- Figure 28: Personal gross written premiums (GWP) and operating profit, by channel, 2008
- Royal Bank of Scotland Insurance
- Royal & SunAlliance (RSA)
- Lloyds Banking Group
- Zurich Insurance
- AXA Insurance
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- Figure 29: AXA, gross revenues for property and casualty insurance in the UK, by channel, 2007 and 2008
- Key Intermediaries
- Acromas Holding Ltd
- Swinton Group
Brand Communication and Promotion
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- Key points
- Adspend appears to have reached a plateau in 2008
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- Figure 30: Advertising expenditure on home insurance (including buildings and contents), 2005-Q2 2009
- Direct Line tops the table accounting for 16% of total adspend
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- Figure 31: Top 20 advertisers of home insurance (including buildings and contents), 2006-08
- Aviva adspend back up in Q2 2009 after price comparison site exit
- Most advertisers use direct mail and TV to promote products
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- Figure 32: Advertising expenditure on home insurance (including buildings and contents), by media type, 2008
Brand Elements
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- Key points
- Brand map
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- Figure 33: Attitudes towards and usage of home insurance brands, August 2009
- Brand qualities of home insurance brands
- Lloyds TSB has authority, but Churchill most genuine
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- Figure 34: Personalities of various home insurance brands, August 2009
- Experience of home insurance brands
- Direct Line has most experience, but Lloyds shows recent growth
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- Figure 35: Consumer usage of various home insurance brands, August 2009
- Brand intentions for home insurance brands
- Direct Line most considered, Lloyds and Tesco put some off
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- Figure 36: Consideration of various home insurance brands, August 2009
- Brand satisfaction for home insurance brands
- Tesco and Direct Line most pleasing
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- Figure 37: Satisfaction with various home insurance brands, August 2009
- Brand commitment to home insurance brands
- Lloyds TSB polarises opinion
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- Figure 38: Commitment to various home insurance brands, August 2009
- Lloyds TSB
- What the consumer thinks
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- Figure 39: Attitudes towards the Lloyds TSB brand, August 2009
- MORE TH>N
- What the consumer thinks
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- Figure 40: Attitudes towards the MORE TH>N brand, August 2009
- Direct Line
- What the consumer thinks
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- Figure 41: Attitudes towards the Direct Line brand, August 2009
- Tesco
- What the consumer thinks
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- Figure 42: Attitudes towards the Tesco brand, August 2009
- Aviva
- What the consumer thinks
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- Figure 43: Attitudes towards the Aviva brand, August 2009
- Churchill
- What the consumer thinks
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- Figure 44: Attitudes towards the Churchill brand, August 2009
Channels to Market
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- Key points
- Independent intermediaries holding their ground
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- Figure 45: The distribution of home insurance by proportion of GWP per channel, 1992-2008
- Bank and building society channel starting to get less competitive
- Majority of consumers report arranging contents insurance offline…
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- Figure 46: How consumers arranged last home contents insurance policy, July 2009
- … but eventually, arranging policies online will be the norm
- Aggregators to play a big role in the market
- Brokers have been able to use aggregator websites to their advantage
- But aggregators do have their drawbacks
The Consumer – Product Ownership
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- Key points
- A slight fall in ownership – the impact of the slowdown?
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- Figure 47: Ownership of buildings and contents insurance policies, 2006-09
- Little sign of an increase in cancellations
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- Figure 48: Life or home insurance policies, July 2009
- Three in ten remain without cover
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- Figure 49: Home insurance policies by affluence, income, working status and housing tenure, July 2009
- Capital cover?
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- Figure 50: Home insurance policies by gender, age, lifestage, special group and region, July 2009
The Consumer – Purchasing Behaviour
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- Key points
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- Figure 51: Number of quotes consumers obtained when buying or renewing their last home contents policy, July 2009
- Lower cost – less incentive to switch
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- Figure 52: Products purchased or quoted for through a price comparison sites, September 2009
- Higher value – but loyalty suffers
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- Figure 53: Number of quotes obtained for last bought or renewed home contents policy, by socio-economic status and household income, July 2009
- A generation gap?
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- Figure 54: Number of quotes obtained for last bought or renewed home contents policy, by gender, age, special group and internet access, July 2009
- The internet boom continues
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- Figure 55: How arranged last home contents insurance policy, 2003-09
- The paradox of price – premium customers opting for the low-cost option
- Demonstrating service through an impersonal medium
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- Figure 56: How arranged last home contents insurance policy, by socio-economic group, working status, household income, household tenure and internet access, July 2009
- The generational shift towards the internet
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- Figure 57: How arranged last home contents insurance policy, by gender, age, lifestage, special group and region, July 2009
The Consumer – Attitudes and Targeting Opportunities
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- Key points
- Prepared to pay more for cover
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- Figure 58: Attitudes towards home insurance, July 2009
- Topping up cover
- Is it all about control?
- Insurance for people with little to insure
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- Figure 59: Attitudes towards home insurance, by ownership, July 2009
- Keeping claims costs down – but at what cost?
- Reviewing cover – as much about peace of mind as premiums
- Age, affluence, the importance of adequate cover…
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- Figure 60: Selected attitudes towards home insurance, by age and socio-economic group, July 2009
- … and the argument for quality standards online
- Price, not perks
- Finding the balance between price and quality
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- Figure 61: Home insurance target groups, July 2009
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- Figure 62: Life or home insurance policies, by target groups, July 2009
- Claims experience – driving a switch to quality?
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- Figure 63: Attitudes towards home insurance, by target groups, July 2009
- Mid-thirties – time to think about quality?
- Price-driven – but it’s not reflected in buying behaviour
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- Figure 64: Number of quotes obtained for last bought or renewed home contents policy, by target groups, July 2009
- Reaching the disengaged
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- Figure 65: How arranged last home contents insurance policy, by target groups, July 2009
Appendix – Market Share
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- Figure 66: Underwriting market share for domestic property insurance, 2008
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Appendix – The Consumer: Product Ownership
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- Figure 67: Home insurance policies, by demographics, July 2009
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Appendix – The Consumer – Purchasing Behaviour
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- Figure 68: Number of quotes obtained for last bought or renewed home contents policy, by demographics, July 2009
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- Figure 69: How arranged last home contents insurance policy, by demographics, July 2009
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Appendix – The Consumer – Attitudes and Targeting Opportunities
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- Figure 70: Most popular attitudes towards home insurance, by demographics, July 2009
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- Figure 71: Next most popular attitudes towards home insurance, by demographics, July 2009 (continued)
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- Figure 72: Target groups, by demographics, July 2009
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