Table of Contents
Overview
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- What you need to know
- Products covered in this Report
Executive Summary
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- The market
- GWP up by 4% in 2016
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- Figure 1: Gross written domestic property insurance premiums – Fan chart, 2012-22
- Recent years have seen a fall in the volume of claims
- A varied distribution mix
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- Figure 2: Share of gross domestic property insurance premiums, by sales channel, 2016
- The past decade has seen a fall in homeownership
- Regulatory burden increases
- Companies and brands
- Top five underwriters control two thirds of the market
- Aviva, Direct Line and LBG are the largest home insurance underwriters
- Greater investment in product development and innovation
- Market attracts new technology-focused entrants
- The consumer
- 46% of internet users aged 18+ have both buildings and contents insurance
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- Figure 3: Reasons for not having contents insurance, by tenure, September 2017
- Accidental damage cover is the most popular add-on
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- Figure 4: Top reason for not having accidental damage and home emergency cover, September 2017
- 14% of home insurance policyholders have made a claim …
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- Figure 5: Customer experience of and satisfaction with claims handling, September 2017
- … while 76% have switched provider within the past five years
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- Figure 6: Length of time ago last switched policy, September 2017
- 53% are most persuaded by price when choosing a policy
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- Figure 7: Most influential factors determining product choice, September 2017
- 50% would consider installing a smart device to lower their premium
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- Figure 8: Interest in new smart solutions related to home insurance, September 2017
- What we think
Issues and Insights
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- Home insurance gets smart
- The facts
- The implications
- Shift customer attention away from price alone
- The facts
- The implications
The Market – What You Need to Know
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- GWP up by 4% in 2016
- Recent years have seen a fall in the volume of claims
- A varied distribution mix
- The past decade has seen a fall in homeownership
- Regulatory burden increases
Market Size and Forecast
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- Limited real premium growth
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- Figure 9: Gross and net written premiums – UK domestic property insurance, 2007-17
- Rise in reinsurance ceded
- Five-year forecast: total premium income will remain flat
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- Figure 10: Gross written domestic property insurance premiums – Fan chart, 2012-22
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- Figure 11: Forecast of gross written domestic property insurance premiums, 2012-22
- Forecast methodology
Claims Incurred and Underwriting Result
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- Low volume of claims offset rising costs to maintain profitability in 2016
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- Figure 12: Total outgo and underwriting result – UK domestic property insurance, 2012-16
- The price of acquisition
- Underwriting ratio increases to 5.7% in 2016
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- Figure 13: Domestic property insurance underwriting ratio, 2007-16
Channels to Market
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- Brokers maintain share
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- Figure 14: Share of gross domestic property insurance premiums, by sales channel, 2012-16
- Web aggregators play a huge role in the distribution of home insurance
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- Figure 24: Information sources used prior to policy purchase or renewal, by home and motor insurance policyholders, September 2016
Market Drivers
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- Changing tenure patterns
- Combined policies are the most popular type
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- Figure 15: Proportional distribution of home insurance sales, by product type, 2016
- Lower claims volumes are helping to keep average premiums down …
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- Figure 16: Average combined, buildings only and contents-only insurance premiums, 2012-17
- …however, this may not be sustainable given rising inflation
- Lower claims frequency eases pressures on margins
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- Figure 17: Total number of domestic property claims, 2007-16
- Most home insurance claims are for accidental damage
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- Figure 18: Proportional distribution of domestic property claims, by type of peril, 2016
- Fraud repudiation rates have increased slightly over the past two years
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- Figure 19: Detected domestic home insurance fraud repudiation rates, 2007-16
Regulatory and Legislative Changes
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- Introduction of a new levy means more affordable insurance for flood-risk properties
- IPT reaches all-time high
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- Figure 20: Changes to the standard rate of IPT, 2011-16
- New rules to improve transparency will result in greater customer churn
Companies and Brands – What You Need to Know
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- Top five underwriters control two thirds of the market
- Aviva, Direct Line and LBG are the largest home insurance underwriters
- Greater investment in product development and innovation
- Market attracts a new technology-focused entrant
- Adspend steady
Market Share
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- Aviva was the largest home insurance underwriter in 2016
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- Figure 21: Top 20 domestic property underwriters – UK, by share of total market GWP – ABI members only, 2016
- A crowded marketplace
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- Figure 22: Company bought home contents insurance from (selected brands), September 2017
- Aviva and Direct Line Group have the largest customer share
Competitive Strategies and Innovation
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- Distribution developments
- Aviva’s strong performance in 2016 linked to two new partnership agreements …
- … while new deal with HSBC will deliver further growth opportunities
- Allianz withdraws from direct insurance market
- LV= ceases to sell its ABC Home Insurance product via the broker channel
- Digital innovation
- Aviva’s Ask It Never initiative
- Legal & General launches SmartQuote tool
- Neos: a new digital disruptor with a focus on prevention instead of payout
- PolicyCastle’s new smart and personalised service
- Other product launches
- Admiral launches combined home and motor policy for added convenience
- Vanquis enters home insurance market
Advertising and Marketing Activity
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- Home insurance industry spends around £100 million a year on above-the-line advertising
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- Figure 23: Total above-the line, online display and direct mail advertising expenditure on home insurance and related products, by product category, 2012/13-16/17
- Direct mail and TV advertising attract the greatest investment
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- Figure 24: Above-the line, online display and direct mail advertising expenditure on home insurance and related products, by media type, 2014/15-16/17
- Figure 25: Adspend split by media type, 2016/17
- Direct Line remains the biggest investor in above-the-line advertising
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- Figure 26: Top 10 above-the-line advertisers of home insurance and related products, 2012/13-2016/17
- Nielsen Ad Intel coverage
The Consumer – What You Need to Know
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- 46% of internet users aged 18+ have buildings and contents insurance
- 46% of home insurance policyholders have accidental damage cover
- 14% have made a claim…
- …while 76% have switched provider within the past five years
- 53% are most persuaded by price when choosing a policy
- 50% would consider installing a smart device to lower their premium
Product Ownership
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- 68% of UK adult internet users have home insurance
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- Figure 27: Ownership of general insurance products, September 2017
- Around a quarter of adults whose home is being bought with a mortgage lack buildings cover
- A third don’t have contents insurance because they can’t afford it
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- Figure 28: Reasons for not having contents insurance, by tenure, September 2017
Policy Add-ons
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- Accidental damage cover is the most popular add-on
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- Figure 29: Cover add-ons taken out with home insurance, September 2017
- A home emergency add-on tends to be cheaper than standalone cover
- 12% of renters have home emergency cover as part of their contents insurance
- Lack of perceived need is top reason for not having accidental damage and home emergency cover
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- Figure 30: Top reason for not having accidental damage and home emergency cover, September 2017
Claims Experience
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- Home insurers benefit from a relatively low claims frequency
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- Figure 31: Proportion of household policyholders who have made a claim in the past five years, September 2017
- Under-45s are much more likely to claim
- Parents are also more likely to claim
- Lower claims frequency has helped to offset a higher average claim payout over the past few years
- 68% of policyholders saw their premium rise after making a claim
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- Figure 32: Customer experience of and satisfaction with claims handling, September 2017
Switching Activity
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- 30% of policyholders have switched home insurer in the past year
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- Figure 33: Length of time ago last switched policy, September 2017
Factors Influencing Product Selection
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- Pricing is fundamental
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- Figure 34: Most influential factors determining product choice, September 2017
Gauging Interest in Smart Solutions
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- 50% of policyholders would consider installing a smart home device to lower their premium …
- …while 42% like the idea of buying a discounted smart device as part of their insurance package
- 45% are interested in cyber security cover
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- Figure 35: Interest in new smart solutions related to home insurance, September 2017
Appendix – Data Sources and Abbreviations
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- Data sources
- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Total market forecast – Best- and worst-case scenarios
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- Figure 36: Forecast of domestic home insurance gross written premiums – best- and worst-case scenarios, 2017-22
- Forecast methodology
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