Abstract
Introduction
This report scrutinizes some of the key metrics and issues in the household insurance market providing the reader with information on the size and profitability of the market. Other key factors examined include statistics on the demand for household insurance and analysis of claims.
Scope of this report
- Key data on claims costs in the household insurance market in 2007
- Forecasts of market size and profitability until 2012
Research and analysis highlights
In 2006, household GWP increased by 3.4%, slowing down by 1.4 percentage points from 4.8% in 2005. One factor that has contributed to the slowdown of growth in this sector is that competition was strong in the market in 2006.
Key reasons to read this report
- Understand the future of this market in terms of market growth and underwriting profitability
- Understand key issues affecting the household insurance market
Table of Contents
DATAMONITOR VIEW
- CATALYST
- SUMMARY
ANALYSIS
- The number of UK households reached 24.2 million and is forecast to
increase over the next 20 years
- The number of UK households has been growing steadily since 1971
- An increase in the UK population has led to an increase in the number of UK households
- The average household size has been decreasing steadily
- The number of UK households is expected to grow significantly by 2029
- The number of privately rented households grew in 2006
- Household GWP growth slowed in 2006
- GWP growth for contents insurance has slowed in 2006, while growth in buildings GWP improved
- The number of UK households has been growing steadily since 1971
- Prices for buildings cover and contents cover increased in 2007
- Adverse weather conditions in 2007 have largely contributed to the rise in household insurance premiums
- The prices for raw materials and labor costs have also increased
- Property underwriting profits continued to decline during 2006 but the market remains profitable
- Household underwriting profits decreased significantly in 2006 as total outgoings rose
- Commissions and expenses and reinsurance ceded increased in 2007
- GWP growth outstripped increases in commissions and expenses
- Reinsurance ceded increased significantly in 2006
- The household insurance market experienced a reduction in the cost of
weather claims in 2006, but an increase in the cost of claims from other perils
- The cost of domestic property claims fell slightly in 2006, as a result of a fall in weather related costs
- Storm damage accounted for the largest part of the weather claims bill for household in 2006
- The cost of domestic fire claims increased in 2006
- The cost of household theft claims rose by 9.9% in 2006 as both the
number of claims and the average cost of claims increased
- The number of burglaries fell by 3% in 2005/6
- The risk of burglary is heavily influenced by factors such as tenancy status and security measures
- Subsidence claims costs grew in 2006 as did the average cost of claims
- Premiums are estimated to have risen marginally in 2007
- Household insurance premiums are estimated to have seen marginal increases in 2007
- Insurers gave a range of estimates for premium rate changes in 2008
- Under the neutral scenario the household insurance market experiences
steady GWP growth between 2007 and 2010 before declines in 2011 and 2012
- In the medium term competitive pressures will remain in the market exerting a downward pressure on prices
- The household insurance market is forecast to grow by 2.1% per annum between 2007 and 2012
- A significant increase in claims incurred in 2007 will lead to a significant underwriting loss
- The pessimistic scenario sees competition remaining strong thereby holding
back growth in the market
- Competition remains strong in the household market under the pessimistic scenario
- The household market reaches a value of £9.3 billion in GWP by 2012
- Limited growth in NWP in 2008 means the household insurance market moves into a loss in 2010 under the pessimistic scenario
- Under the optimistic scenario the market sees a strong underwriting profit
in 2008
- In the short term the floods enable insurers to put through a strong rate rise in 2008, however competitive forces temper any further strong rate rises between 2009 and 2012
- Under the optimistic scenario, strong increases in the price of premiums in 2008 stimulate GWP growth in the household insurance market
- The market achieves better underwriting results between 2008 and 2012 under the optimistic scenario
APPENDIX
- Definitions
- Premium income measures
- Earned premiums
- Gross Premium
- Net Premium
- Written premiums
- Premium income measures
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Tables
- Table 1: The size of UK households by the number of people, 1971-2006, (millions)
- Table 2: Household projections in England by household type, 2004-29
- Table 3: Trends in household tenure for England, 1996-2006
- Table 4: Annual growth in the UK household insurance market in GWP, 2002-06
- Table 5: GWP split in household insurance between buildings and contents cover, 2002-06
- Table 6: Change in UK household insurance premiums
- Table 7: Total UK property underwriting account, 1996-2006, (£m)
- Table 8: Total UK household underwriting account, 1996-2006 (£m)
- Table 9: UK household insurance commissions and expenses compared with GWP and total outgoings, 2002-06, (£m)
- Table 10: UK domestic reinsurance ceded compared with NWP and GWP, 2002-06, (£m)
- Table 11: UK Reinsurers' share of claims, 2002-06 (£m)
- Table 12: UK domestic property insurance claims by peril, 2002-06
- Table 13: Gross claims incurred for domestic property weather claims, 2002-06 (£m)
- Table 14: UK claims incurred by fire, domestic and total, 2002-06, (£m)
- Table 15: Number of household theft and average theft claims cost in the UK
- Table 16: Number of burglaries in England and Wales, 1999-2006
- Table 17: Unemployment among 18-24 year old males in the UK, 1998-2006 (000s)
- Table 18: Household types most at risk from burglary in the UK, 2005-06-2006-07
- Table 19: Average subsidence claims cost compared to claims costs and number of claims for subsidence in the UK, 2002-06
- Table 20: Key variables affecting household insurance GWP, 2007e-12f (Neutral scenario)
- Table 21: UK household insurance GWP, 1998-2012f (Neutral scenario)
- Table 22: UK household insurance underwriting result, 1998-2012f (Neutral scenario)
- Table 23: Key variables affecting household insurance GWP, 2007e-12f (Pessimistic scenario)
- Table 24: UK household insurance GWP, 1998-2012f (Pessimistic scenario)
- Table 25: UK household insurance underwriting result, 1998-2012f (Pessimistic scenario)
- Table 26: Key variables affecting household insurance GWP, 2007e-12f (Optimistic scenario)
- Table 27: Household insurance GWP, 1998-2012f (Optimistic scenario)
- Table 28: Household insurance underwriting result, 1998-2012f (Optimistic scenario)
- List of Figures
- Figure 1: The average household size has decreased since 1971 in the UK
- Figure 2: The number of UK households is expected to grow over the next 22 years
- Figure 3: The number of UK privately rented properties increased in 2006
- Figure 4: Annual growth in GWP in the UK slowed in 2006 to 3.4%
- Figure 5: Growth in the contents sector GWP slowed considerably in 2006
- Figure 6: Premiums for building cover and contents cover increased in the UK in 2007
- Figure 7: UK property insurance underwriting profits fell in 2006 to £517m
- Figure 8: UK household underwriting profits fell dramatically during 2006
- Figure 9: GWP grew by 4.5% in 2006, outstripping increases seen in commissions and expenses in the UK
- Figure 10: Reinsurance ceded grew significantly in the UK during 2006
- Figure 11: The total cost of UK domestic property claims fell slightly in 2006, as a result of a reduction in weather related claims
- Figure 12: The cost of UK weather insurance claims fell in 2006 for domestic property
- Figure 13: The cost of claims caused by fire grew in 2006 for domestic property in the UK
- Figure 14: Both the number of theft claims and the average theft claims cost grew in the UK in 2006
- Figure 15: Number of burglaries in England and Wales, 1999-2006
- Figure 16: Homes with no security measures are at a very high risk of burglary; more than one in five was burgled in 2006-07
- Figure 17: The cost of UK subsidence claims rose in 2006, while the average cost of subsidence claims increased only slightly
- Figure 18: UK household insurance GWP increases between 2008 and 2010 before declining in 2011 and 2012
- Figure 19: The UK household insurance market made a significant loss in 2007 due to the summer floods
- Figure 20: Under the pessimistic scenario household insurance GWP increases more slowly between 2007 and 2012 before declining in 2011 and 2012
- Figure 21: Under the pessimistic scenario the household insurance market moves into an underwriting loss in 2011
- Figure 22: Under the optimistic scenario GWP spikes in 2008 as insurers raise rates by 10%
- Figure 23: Under the optimistic scenario the household insurance market achieves a strong profit in 2008 due to a significant rate rise
