UK Household Insurance: Market Dynamics and Opportunities
The household insurance market, the second-largest personal lines product after motor in terms of GWP, remains highly competitive as insurers are attracted to the respectable profit levels being achieved. However, market saturation and overcapacity are very real problems, and insurers will have to think creatively if they want to succeed in this space.
Reasons To Buy
- Ensure your strategy is robust against the key issues facing the household insurance market.
- Gauge the market's profitability, the factors that influenced its performance, and how insurers are adapting to this.
- Map your business plan against our forecasted GWP for the market.
- Analyze the key issues that will continue to affect the market going forward.
- How has the market performed in 2014 and what are its future prospects?
- What are the key developments and issues shaping the household space?
- What impact is competition having within the market?
While many insurers are currently focusing on mass market customers – the majority of whom are now buying combined policies − one area that offers significant growth opportunities is the tenants market, as penetration in this area is much lower.
Competition still plays a crucial role within the UK household insurance market, with insurers being attracted by respectable profit margins generated as a result of mild weather conditions.
The persistency in rates remaining soft has seen household insurance market GWP continue to fall further since 2011, with GWP in 2014 dropping to £6.7bn – a contraction of £300m (4.3%).
- Executive Summary
- The household market remains highly competitive
- Key findings
- Critical success factors
- Market Context
- The market saw a dip in GWP for 2014
- Rates continue to soften in the market
- Table Household GWP (£000s) and annual growth rate (%), 2009-14
- Profit margins continued to be squeezed in 2014
- Table Household insurance market reported year COR (%), 2009-14
- Claims costs have fallen over the last two years
- 2014 saw an improvement in claims incurred
- Escape of water is still the main cause of claims
- Premiums for all products fell in 2014
- Market average premiums for buildings-only policies have continued to fall
- Table Buildings-only policies quarterly premium change (%), Q1 2012-Q2 2015
- Contents-only premiums maintained a steady decline throughout 2014
- Table Contents-only policies quarterly premium change (%), Q1 2012-Q2 2015
- Combined policies have seen premiums fall in almost every quarter
- Table Combined policies quarterly premium change (%), Q1 2012-Q2 2015
- Combined policies remain the most popular
- Both insurers and consumers prefer combined policies
- Table Household GWP by policy type (000s), 2010e-14e
- Table Household GWP by policy type (%), 2010e-14e
- Market penetration could still improve
- 2014 saw an increase in the number of homeowners with no cover
- Insurers have yet to fully capitalize on the rental market
- Table Respondents without any home insurance by tenure (%), 2013-14
- Key Developments and Issues
- The housing market is growing stronger
- New home registrations continued to rise throughout 2014
- Table Number of new home registrations in the UK, Q1 2010-Q1 2015
- Mortgage approval rates have risen steadily over the last few years
- Flood Re has been pushed back to 2016
- Issues raised over the scheme are still be to addressed
- Flood Re's impact on the household insurance market will be minimal
- Household insurance is still under FCA scrutiny
- Greater transparency is wanted on renewal quotes and fees
- Comparison sites need to be clearer for consumers
- The FCA review highlighted room for improvement
- 2015 and Beyond
- GWP is forecast to reach £6.5bn by 2019
- Table Forecasted Consumer Price Index and GDP growth (%), 2014e-19f
- Table Total market GWP (£m), 2009-19f
- Regulation and technology will shape the future of the market
- Flood Re is not yet in place
- The FCA continues to ensure best practice
- Smart homes will lead innovation in household insurance
- Realtime data will enhance underwriting
- Mobile tech is not being insured
- Abbreviations and acronyms
- Premium income measures
- Gross claims incurred
- Gross premium
- Written premiums
- Primary and secondary research
- Verdict Financial's 2014 UK General Insurance Consumer Survey
- Further reading