Home Insurance - UK - December 2015

OVERVIEW
What you need to know
EXECUTIVE SUMMARY
The market
Home Insurance gross premiums shrink by 6%
Figure 1: Gross home insurance premiums (UK business only), FAN CHART 2010-20
The majority of policies are purchased online
Figure 2: Home insurance purchase methods, April 2015
Summer Budget reveals 3.5% insurance premium tax increase
Companies and brands
Direct Line Group is the UK’s biggest home insurance underwriter
Figure 3: Domestic property insurance market share, by GWP, 2014
The consumer
Nearly two thirds have a home insurance policy
Figure 4: Home insurance ownership, by type of policy, September 2015
Nearly a third switched at last renewal
Figure 5: Actions taken at last home insurance renewal, September 2015
40% use price comparison websites to check competitiveness of renewal
Only a fifth will certainly renew with existing provider
Figure 6: Expected renewal plans for next home insurance policy, September 2015
Widespread support for greater renewal transparency
What it means
ISSUES AND INSIGHTS
Efforts to improve transparency are welcomed by consumers
The facts
The implications
Longer term products could tackle churn but will not end price sensitivity
The facts
The implications
The ‘Connected Home’ will transform insurance
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Market devalues by 6%
Consumers are most likely to purchase a policy online
Price competition drives down premiums
Fraud costs halve since 2010
MARKET SIZE AND FORECAST
Gross Written Premiums down by 6%
Figure 7: Gross and net written premiums – domestic home insurance, 2004-15
Underwriting ratios maintain profitability
Figure 8: Domestic property insurance underwriting ratio, 2005-14
Market forecast
Figure 9: Gross written premium – domestic home insurance, fan chart 2010-20
Figure 10: Gross written premium – domestic home insurance, 2010-20
Forecast methodology
CHANNELS TO MARKET
The majority of policies are purchased online
Figure 11: Home contents insurance purchase methods, April 2015
Direct sales improved in 2014
Intermediary sales drop by 10% over past five years
Policies sold via bancassurance declined
Figure 12: Domestic Property Insurance, by GWP, by distribution channel, 2010-14
MARKET DRIVERS
Premium prices have continued to fall
Summer Budget reveals 3.5% insurance premium tax increase
Figure 13: Average home insurance market premiums (quarterly basis) January 2010-October 2015
Claims costs drop by 5%
Figure 14: Gross domestic claims incurred, 2005 - 14
Claims fraud drops by 22%
Weather related claims grow by 69%
Accidental damage
Figure 15: Distribution of domestic home insurance claims, by gross value, by type of peril, 2010-15
FCA review presentation of add-ons to consumers
Flood RE details confirmed
KEY PLAYERS – WHAT YOU NEED TO KNOW
Direct Line Group is the UK’s biggest home insurance underwriter
Insurers continue to focus on digital…
…and look for ways of building trust
Advertising spend drops by 13%
MARKET SHARE
Direct Line Group claims the biggest underwriter share
Figure 16: Top 15 domestic property insurance parent groups, by GWP, 2014
Top 10 insurers have nearly four fifths of the market
RSA close the gap
Figure 17: Top 10 domestic property insurance parent groups, by GWP, 2012-14
COMPETITIVE STRATEGIES
Improving digital services
Lloyds Banking Group
Aviva
L&G
Product development in the name of fairness
RBS and NatWest
AXA
Insurance gets social
TSB offers modular insurance in new partnership with Aviva
PCWs compete for business
ADVERTISING AND MARKETING ACTIVITY
Overall advertising spend down 13%
Figure 18: Total above-the-line, online display and direct mail adspend in the home insurance market, 2010/11 – 2014/15
Significant reductions in spend on direct mail
Figure 19: Total above-the-line, online display and direct mail adspend in the home insurance market, by media type, 2010/11– 2014/15
Direct Line tops adspend list
Figure 20: Top 20 above-the-line, online display and direct mail advertisers of home insurance, 2012/13–2014/15
Specialist providers increase advertising spend
Insurers compete for online presence
Nielsen Media Research coverage
THE CONSUMER – WHAT YOU NEED TO KNOW
Two thirds have a home insurance policy
Majority stayed with existing provider but not without shopping around
40% use price comparison websites to check competitiveness of renewal
Lack of loyalty towards home insurers
Widespread support for greater renewal transparency
HOME INSURANCE OWNERSHIP
Nearly two thirds have a home insurance policy
Figure 21: Ownership of home insurance and other general insurance products, September 2015
Most people opt for combined cover
Figure 22: Home insurance ownership, by policy type, September 2015
Less than half of those renting have home contents insurance
Figure 23: Home insurance ownership, by housing situation, September 2015
Students are in danger of being underinsured
Equal ownership across the income scale
Figure 24: Home ownership by household income, September 2015
MOST RECENT POLICY RENEWAL OUTCOME
Nearly two thirds stayed with their existing provider
Figure 25: Actions taken at last home insurance renewal, September 2015
Higher premium costs incentivises switching
FACTORS INFLUENCING MOST RECENT POLICY RENEWAL
Pricing is the key reason to stay
A fifth of consumers were offered a price match
Good service is a stronger deterrent to switching
Active approach at renewal
Figure 26: Reasons for staying with existing provider, September 2015
MOST RECENT RENEWAL BEHAVIOUR
Price comparison websites as an information source
Bargaining for a better deal
Only 15% check the value of their personal belongings
A quarter pay their premiums annually
Figure 27: Actions at last purchase or renewal of home insurance policy, September 2015
EXPECTED PLAN AT NEXT RENEWAL
One in five is planning to renew with existing provider
Only one in twenty will switch
Figure 28: Expected renewal plans for next home insurance policy, September 2015
Those who stayed, are more likely to renew again
Figure 29: Expected renewal plans for next home insurance policy, by actions taken at last renewal, September 2015
FACTORS AFFECTING CHOICE OF HOME INSURANCE PROVIDER
Renewal premium transparency is valued by consumers
Ability to access an advisor over the phone is important for all ages
Comparisons are important
Discounts for home security measures
Figure 30: Factors influencing choice of provider, September 2015
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology
APPENDIX – MARKET SIZE AND FORECAST
Additional market forecast data
Figure 31: Best and worst case scenario forecast - Gross written premium – domestic home insurance, 2015-2020
Forecast Methodology