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UK Household Insurance: Market Dynamics and Opportunities 2017

UK Household Insurance: Market Dynamics and Opportunities 2017

Summary

UK Household Insurance: Market Dynamics and Opportunities 2017, report provides an in-depth analysis of the UK household insurance market. It looks at market size and performance ratios as well as changes in premiums, claims, contextual and economic factors, regulation, and opportunities. It provides a thorough overview of the market along with future forecasts and analysis of emerging technologies and products.

High levels of competition and capacity within the household insurance space continue to shape soft market conditions, with little change in rate being achieved apart from pushing through new insurance premium tax (IPT) increases. Despite this and the new Flood Re levy introduced in 2016, profitability has been maintained due to relatively benign weather conditions.Scope

  • UK household insurance gross written premium (GWP) contracted by 1.4% in 2016.
  • Overall claims performance over the last five years tells a positive story, with the number of claims falling year on year between 2012 and 2016, achieving a negative CAGR of 11.4%.
  • The rise of ‘Generation Rent’ presents a shifting landscape that is dampening overall market growth, and is presenting home insurers with a customer demographic that has different needs and preferences not necessarily catered to effectively by current services.
  • The next couple of years should see a shift in the development of smart home insurance, and it is therefore imperative insurers keep on top of this.
  • With the Flood Re levy set each year and new regulations around pricing transparency, insurers need to ensure their pricing strategies are in line with the risks they face.
Reasons to buy
  • Benchmark yourself against the rest of the market.
  • Ensure you remain competitive as new innovations and insurance models begin to enter the market.
  • Be prepared for how regulation will impact the household insurance market over the next few years.


  • Market Context
    • Introduction
    • Soft market conditions shaped 2016
      • UK household insurance GWP fell by 1.4% in 2016
        • Table Figure 1: Household insurance GWP continues to fall
        • Table Household insurance GWP (£m) and annual growth rate (%), 2012-16
      • High competition has kept rates low in the main product category
        • Table Figure 2: Average premiums have reduced in the last two quarters
        • Table Quarterly average household insurance premium rate movements, 2012-17
        • Table Figure 3: Insurers have struggled to increase rates in the past year
        • Table AA Shoparound average home insurance premiums, Q1 2015-Q1 2017
      • The requirement to notify customers of the previous year's premium is expected to encourage shopping around
      • Combined cover is still the dominant product
        • Table Figure 4: Combined insurance remains the dominant home insurance product
    • Profitability is being challenged by claims and inflation
      • Claims costs fell in 2016 but average claims costs are increasing in areas
        • Table Figure 5: Weather-related claims costs are at their lowest since 2013
        • Table Figure 6: The last five years have seen a significant drop in the number of claims
        • Table Household gross claims incurred (£m) by type, and number of claims notified, 2012-16
      • Claims inflation is challenging profitability
        • Table Figure 7: Rebuild costs have been rising since September 2016
        • Table Figure 8: The cost of replacing household items has accelerated since 2015
      • Underwriting profitability increased to a five-year high
        • Table Figure 9: Underwriting profitability grew to its highest level since 2011
      • Flood Re affected results in 2016
    • Home insurance demand remained constant, but underlying dynamics are shifting
      • New home registrations and completions contracted slightly in 2016, although numbers remain well below requirements
        • Table Figure 10: New home registration and completions remained constant in 2016
        • Table New home registrations and completions, 2012-16
      • Mortgage approval rates in 2016 remained level with 2015, but have fallen in 2017
        • Table Figure 11: Monthly mortgage approvals have declined in 2017
      • The rise of `Generation Rent' presents a shifting landscape
        • Table Figure 12: Private tenant is the fasting growing type of tenure
      • Penetration rates are high among owner-occupiers, but lower for tenants
        • Table Figure 13: Nearly 40% of private tenants do not have any home insurance
        • Table Percentage of respondents holding any form of home insurance, 2015-16
  • Competitor Dynamics
    • The top 10 insurers account for 72% of GWP
      • Direct Line Group leads the household insurance market
        • Table Top 10 UK household insurers by GWP (£000s), 2016
      • Lloyds Banking Group is losing ground due to soft market conditions
      • Aviva is evolving its proposition using technology
      • Ageas is looking beyond the traditional policy to target millennials
      • Allianz and LV
    • Technology is facilitating new entrants
      • Neos aims to bring home insurance into the digital world
      • UK insurers are watching US digital insurer Lemonade
      • Insure-A-Thing is challenging the traditional business model
  • 2017 and Beyond
    • Introduction
    • The market is expected to grow to £6.8bn in GWP by 2021
      • Premium rates are unlikely to increase in the short term
      • Demand for home insurance will stay static as Generation Rent grows
      • A significant weather event will be required to shift rates
      • The negative economic consequences of Brexit are having an adverse effect
        • Table Figure 14: The household market will show modest growth over the next five years
        • Table UK household insurance GWP and growth rate, 2012-21f
    • Generation Rent will drive a new set of products
      • Demand for propositions aimed at tenants is growing
      • Millennials have different priorities and lifestyles compared to previous generations
      • Gadget insurance is being heavily marketed towards students and millennials
      • `Back Me Up' offers cover for any three items
      • Trov offers a digital locker
    • The evolution towards smart home insurance has started
      • Water detection is the primary focus to reduce escape of water claims
      • Security is another risk which is getting attention from insurers and tech companies
      • Other devices are driving a more connected home
        • Table Percentage of respondents, by type of smart device in their home
    • Competition from new startups and retailers is growing
      • New startups like Neos will continue to disrupt the market
      • The battle to own the customer has started
        • Table Percentage of respondents who would buy home insurance by brand/type of company
    • There are barriers and risks to overcome before we get to smart home insurance
      • Customers are expecting cheaper policies
      • Insurers are looking at the implications of the General Data Protection Regulation
      • Cyber risk for individuals is growing
  • Appendix
    • Abbreviations and acronyms
    • Methodology
      • GlobalData Financial's 2016 and 2017 UK General Insurance Consumer Surveys
    • Bibliography
    • Further reading
  • About GlobalData
    • Table Figure 15: About GlobalData
  • GlobalData at a Glance
    • Table Figure 16: GlobalData at a Glance

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