Abstract
This report seeks to assess these major issues that are currently affecting the home insurance sector. It uses exclusive consumer research to examine ownership levels, the preferred channels and methods used to arrange home insurance, as well as looking at attitudes and behaviours towards home insurance including levels of switching and shoparound activity.
Table of Contents
- Issues in the Market
- Key issues covered in the report
- Abbreviations
- Market in Brief
- Home insurance sector set to increase profitability
- Figure 1: Domestic property, insurance underwriting result, NWPs, 2000-06
- Favourable claims costs help to maintain profitability
- Figure 2: Gross incurred claims for the domestic property insurance market, by the major perils, at current prices, 1996-2006
- Aviva and RBS account for 40% of total GWPs
- Figure 3: Underwriting market share for domestic property insurance, 2005
- Trends in UK households pose opportunities and risks for insurers
- Technology has significant impact on distribution channels
- Over a third of consumers arrange cover directly from insurer
- Figure 4: Arrangement of last home insurance policy, by distribution channel, April 2007
- Internet sales lead to increased customer churn
- Figure 5: Length of time with current home contents insurance provider, April 2007
- Internet sales increase sharply, as branch sales continue to fall
- Figure 6: Method used to arrange current home contents policy, 2003-07
- Broader Market Environment
- Key points summary:
- A growing number of potential targets
- Figure 7: Number of households, by size of household, 1991-2012
- Growing demand for smaller houses has impact for insurance industry
- Figure 8: Proportion of housebuilding completions, by number of bedrooms, 1991/92-2005/06
- Housing demand increasing risk profiles?
- Demand for smaller properties affects insurance premiums
- Figure 9: Households, by type of dwelling, 2005
- UK desire to own property is positive for home insurance market
- Figure 10: Number of GB dwellings, by tenure, 1981-2005
- Changing pattern of mortgage activity impacts home insurance market
- Figure 11: Number of new loans for home purchase, including number of loans for FTB, 1999-2006
- Opportunities and challenges from growth in buy-to-let properties...
- ...and from increased desire to own second home
- Positive trends for PDI and consumer expenditure but caution required
- Figure 12: Total PDI and consumer e xpenditure, at 2002 prices, 2002-12
- Internal Market Environment
- Key points summary:
- Far-reaching FSA regulation described as ' overkill'
- Various measures used to determine sum insured
- Figure 13: RPI, consumer durables and house rebuilding index, January 1997-January 2007
- Cost of rebuilding continues to rise above inflation...
- ...although consumer durables index continues to fall
- Other factors influencing cost of premium
- Discounts provided for security deterrents
- Contents cover undercutting other insurances?
- Figure 14: Average annual premium for household insurance, 2003/04-2005/06
- Implications
- People aged 50-64 spend most on household insurance premiums
- Figure 15: Average annual premium for household insurance, by age, 2005/06
- Ownership of consumer durables increases across population
- Figure 16: Percentage of households with consumer durable products, 1998/99 and 2005/06
- Changing lifestyles present challenges and opportunities for insurers
- iPod generation fully embraces technology
- 40% of people now work from home
- Home is source of pride for many
- Figure 17: Consumer spending on glassware/tableware/household utensils, household textiles, furniture/furnishings, 2001-06
- Competitive Context
- Self-insurance chosen over wasted premiums
- Cost is a deterrent to purchasing insurance for many
- Consumer apathy presents a barrier
- The threat of the packaged account
- Strengths and Weaknesses in the Market
- Figure 18: Strengths and weaknesses within UK home insurance market
- Strengths of the home insurance market
- Weaknesses of the home insurance market
- Market Size and Forecast
- Key points summary:
- Strong underwriting results ensure profit for property sector
- Figure 19: Domestic property, insurance underwriting result, NWPs, 2000-06
- Claims and underwriting ratios show steady improvements
- Figure 20: Claims, expenses and underwriting results as a proportion of NWP, 2000-06
- Gap between buildings and contents segments continues to narrow
- Figure 21: Estimated value of the domestic buildings and contents insurance sectors, by GWP, 2000-06
- Forecast
- Figure 22: Forecast of the UK home insurance market, by gross written premiums, 2006-12
- Factors used in the forecast
- Market context
- Property and motor business account for 60% of general insurance market
- Figure 23: General insurance business for UK risks, by annual net written premiums, 2000-05
- Domestic business accounts for almost 60% of total property sector
- Figure 24: Domestic and commercial property insurance, by GWPs, 2000-05
- Premium Pricing
- Home insurance premiums remain relatively static
- Figure 25: AA British premium index, July 1994-April 2007
- Different pressures for buildings and contents premiums
- Figure 26: AA shoparound premiums for buildings, contents, comprehensive and non-comprehensive cover, April 2005-July 2007
- Claims Experience
- Key points summary:
- Claims experience is the most crucial factor in home insurance industry
- Cost of claims has been favourable in recent years
- Figure 27: Gross incurred claims for the domestic property insurance market, by the major perils, at current prices, 1996-2006
- Index highlights erratic nature of weather and subsidence claims
- Figure 28: Index of the cost of claims incurred, 1996-2006
- Average cost of theft claims continues to rise
- Figure 29: Theft claims, by number, value and average value, 1996-2006
- Subsidence claims rise in wake of long hot summers
- Figure 30: Subsidence claims, by number and value, 1992-2006
- Weather-related claims unpredictable by nature
- Figure 31: Gross incurred claims for weather damage, 1998-2006
- Cost of flooding the new ' hot topic'
- Effective claims management becomes priority...
- ...with an emphasis on quality, not cost
- Fraudulent claims cost industry £1.6 billion per year
- Market Share
- Aviva and RBS account for 40% of total GWPs
- Figure 32: Underwriting market share for domestic property insurance, 2005
- A number of major insurers increase their market share
- Figure 33: Market share of top ten property underwriters, 2004 and 2005
- Companies and Products
- Company profiles of top five insurers
- Aviva
- RBS
- Royal & SunAlliance
- HBOS plc
- Lloyds TSB Group
- Key intermediaries
- AA Insurance
- Budget Insurance
- New entrants to the home insurance market
- HNW and MNW markets drive product developments
- Brand Promotion and Communication
- Key points summary:
- General insurance accounts for highest adspend in financial services
- Figure 45: Advertising expenditure on financial services, by sector, 2002/03-2006/07
- In 2006/07 adspend on home insurance increases by almost £20 million
- Figure 46: Top 20 advertisers of home insurance, 2002/03-2006-07
- NU, Direct Line and SAGA account for 30% of adspend in 2006/07
- Figure 47: Top 20 advertisers of home insurance, 2006-07
- Direct mail continues to dominate adspend
- Figure 48: Advertising expenditure on home insurance, by media type, 2006/07
- Misleading advertising causes concern for FSA and ASA
- Channels to Market
- Key points summary:
- Distribution changes have profound impact on market
- Intermediaries and company agents lose out
- Figure 49: Distribution channels for property insurance, by gross written premium, 1992-2005
- Four in ten consumers opt to use a direct insurer for contents cover
- Figure 50: Distribution channel used to arrange current home contents insurance policy, 2003-07
- Mortgage providers suffer but banks/building societies increase share
- Figure 51: Distribution channel used to arrange current buildings insurance policy, 2003-07
- Internet sales increase significantly in last five years
- Figure 52: Method of arranging most current home contents policy, 2003-07
- Aggregator sites increase in popularity but receive mixed response
- Large-scale intermediaries fight back
- Brokers encouraged to embrace technology
- The Consumer -- Product Ownership
- Key points summary:
- 60% of adults have home contents insurance
- Figure 60: Ownership of selected insurance products, 2003-07
- Housing market trends demand increased innovation from insurers
- Only a quarter of people renting have home contents insurance
- Figure 61: Home insurance ownership, by gender, age, socio-economic group and household tenure, April 2007
- Implications and opportunities
- Level of affluence has impact on product penetration
- Implications and opportunities
- Londoners have lowest product penetration
- Figure 62: Home insurance ownership, by lifestage, Mintel' s Special Groups, working status, gross annual income and TV region, April 2007
- Implications and opportunities
- Three quarters of mid-market tabloid readers have home insurance
- Figure 63: Home insurance ownership, by technology users, Internet usage, newspaper readership, commercial TV viewing and supermarket usage, April 2007
- Implications and opportunities
- The Consumer -- Arranging Insurance Cover
- Key points summary:
- Over a third of consumers arrange cover directly from insurer
- Figure 64: Arrangement of last home insurance policy, by distribution channel, April 2007
- New entrants and online technology impact distribution channels
- Banks/building societies and retailers experience upward trend
- Figure 65: Distribution channel of current home contents insurance, 2003-07
- Direct access to consumers proves to be advantage for banks/building societies
- Choice of channel linked to age and experience
- Figure 66: Distribution channel of current home contents policy, by gender, age, socio-economic group and housing tenure, April 2007
- Providers need to provide flexibility in level of advice
- People less likely to use brokers in Anglia/Midlands and Scotland
- Figure 67: Distribution channel of current home contents policy, by lifestage, Mintel' s Special Groups, working status, gross annual income and TV region, April 2007
- Implications and opportunities
- A fifth of tabloid readers arrange contents insurance with their mortgage
provider
- Figure 68: Distribution channel of current home contents policy, by technology users, Internet usage, newspaper readership, commercial TV viewing and supermarket usage, April 2007
- Implications and opportunities
- Mortgage providers lose ground in buildings insurance sales
- Figure 69: Distribution channel of current buildings insurance, 2003-07
- Direct providers set to retain dominance in buildings insurance market
- A quarter of mortgagors have buildings insurance with mortgage provider
- Figure 70: Distribution channel of current buildings policy, by gender, age, socio-economic group and tenure, April 2007
- Intermediaries appeal to people of all ages
- A quarter of people from London/North West use their mortgage provider
- Figure 71: Distribution channel of current buildings policy, by lifestage, Mintel' s Special Groups, working status, gross annual income and TV region, April 2007
- Implications and opportunities
- Half of heavy commercial TV viewers go directly to insurer
- Implications and opportunities
- Four in ten arrange home contents policy over the phone
- Figure 73: Method used to arrange current home contents insurance policy, April 2007
- Room for both direct and face-to-face sales
- Internet sales experience sharp growth
- Figure 74: Method used to arrange current home contents policy, 2003-07
- Proportion of sales made via the Internet will continue to grow
- Nearly half of all ABs arranged their home contents policy over the phone
- Figure 75: Method of arranging current home contents insurance policy, by gender, age, socio-economic group and housing tenure, April 2007
- Age and affluence dictate preferred methods to arrange insurance
- Likelihood to use the Internet increases with affluence
- Figure 76: Method of arranging current home contents insurance policy, by lifestage, Mintel' s Special Groups, working status, gross annual income and TV region, April 2007
- Implications and opportunities
- Tabloid readers prefer to arrange policy face to face than remotely
- Figure 77: Method of arranging current home contents insurance policy, by technology users, Internet usage, newspaper readership, commercial TV viewing and supermarket usage, April 2007
- Implications and opportunities
- CHAID analysis
- igure 78: Methods people are likely to use to arrange their home contents insurance a certain way, April 2007
