UK Household Insurance 2011
Introduction This report provides a comprehensive analysis of the household insurance market. It provides in-depth data and analysis of the size and profitability of the market. There is also analysis into consumer trends and the success of various distribution methods by demographic group. It details the number of claims in household insurance and their total value as well as the premium prices of policies. Features and benefits
Insight into the latest issues affecting the household insurance marketplace and the impact these issues are having on growth and profitability.
Latest findings from Datamonitor's 2011 General Insurance Consumer Survey including distribution, purchasing and retention patterns.
Analysis of market size and the profitability for the market as a whole as well as the top 10 insurers.
Forecasts up to 2015 of the market share by GWP and profitability of the UK household insurance market.
Highlights The household insurance market benefited from a solid increase in gross written premiums and a decrease in gross claims costs. Profitability in the market, however, decreased as insurers increased their provisions for unexpired risk reserves. The structure of the market has been affected by the continued economic downturn as a higher proportion of the population have moved into rental accommodation. This has resulted in a 9.4% increase in private renters in the UK in 2009/2010 and will require a change in strategy for providers. Aggregators are aggressively seeking to grow their share of the household insurance distribution channel to replicate their success in the private motor insurance market. Table Of Contents OVERVIEW Catalyst Summary EXECUTIVE SUMMARY Gross written premiums for the market rose in 2010 Gross written premiums increased by 1.4% in 2010 Claims costs decreased in 2010
Total claims costs reduced by 7.4% in 2010 Gross claims are forecast to increase further as unemployment rises 12 major groups hold the majority of the UK home insurance market The vast majority of customers have some form of household insurance Customers living in rental accommodation are becoming a valuable market segment Gross written premiums are forecast to grow slowly until 2015 MARKET CONTEXT Introduction Gross written premiums for the market rose in 2010 Gross written premiums increased by 1.4% in 2010 The reported year combined ratio increased in 2010 Premium rates have remained volatile in 2010 and 2011 The contents only shoparound premium has risen in 2010 and 2011 Buildings only insurance has seen the largest increase in premiums Premiums in the combined household insurance market have begun to stabilize in 2011 Claims costs decreased in 2010 Total claims costs reduced by 7.4% in 2010 Burst pipes were the main cause of weather-related claims Household fire damage claims costs fell to ÂŁ332m in 2010 The average claims cost for accidental damages increased in 2010 The number of theft claims decreased in 2010 Insurers paid out less in subsidence claims in 2010 but claim numbers have increased significantly MARKET ISSUES Risk of burglary decreased in 2010 but has increased in 2011 Insurers' risk exposure from burglaries decreased in 2010 The increased number of burglaries in 2010/11 will lead to higher theft claims costs Gross claims are expected to increase further as unemployment risesIndustry figures highlight a clear correlation between a change in the unemployment rate and a change in the number of gross burglary claims: as the number of unemployed increases, there is a subsequent increase in the number of theft claims in the UK. As the economic recovery continues to struggle and unemployment figures begin to rise once again, insurers can expect to see an increase in the number of theft claims, causing claims inflation. According to the Office for Budget Responsibility's Economic and Fiscal Outlook 2011, unemployment is forecast to increase further throughout 2011 and will begin dropping by 2012 as output growth returns. Accordingly, the increase in unemployment will lead to a rise in theft claims throughout 2011, before dropping off in 2012. The slow growth in the number of households limited premium growth in 2010 Growth in the number of households has slowed to 0.1% There will be an increase in the number of contents only policies purchased The number of new mortgages being issued is steadily increasing Government spending cuts are set to impact flood insurance cover DISTRIBUTION DYNAMICS Direct insurers have seen a dramatic rise in their share of the UK home insurance market (Untitled sub-section)
A handful of leading insurance brands distributed the majority of insurance policies 12 major groups hold the majority of the UK home insurance market Less than two-fifths of consumers aged 55–65 took out home insurance policies with the top 10 providers Aviva's combined home insurance was most popular among consumers aged 18–24 Respondents aged 55–65 were the least likely to hold contents only insurance with a top 10 provider Aviva has become the most popular provider of buildings only insurance Three of the major aggregators were top 10 insurance advertisers in 2010 The top 10 insurance advertisers have increased their expenditure RBS brands Direct Line and Churchill continued to spend heavily on advertising in 2010 Acromas increased its marketing budget by 10.3% Half of the top 10 insurance advertisers' budget was spent on television campaigns Television advertising remains the most popular marketing medium Direct mail has increased in prominence as a secondary advertising medium The radio, cinema, and outdoor marketing platforms were used to a greater extent in 2010 The press and the Internet were less popular with insurance advertisers than in 2009 Aggregators increased their advertising expenditure in 2010 Gocompare.com and Comparethemarket.com dramatically increased their advertising expenditure CONSUMER DATA Introduction Combined insurance cover accounts for almost half of policies written The vast majority of respondents have some form of household insurance Respondents over the age of 55 were the most likely to be insured Households with a higher income are the most likely to have some form of household insurance Consumers belonging to socio-economic groups A and B are the most likely to hold household insurance policies Consumers with combined policies are the most price conscience but insurer reputation is important The use of the Internet in arranging a household policy is increasing across all policy types Contents cover is most popular among the younger age groups Older consumers are most likely to use the telephone to purchase home contents insurance Consumers with an income of between £75,000 and £99,999 are most likely to use the phone to arrange their contents cover Insurers are most likely to be able to poach customers between the ages of 25 and 34 Consumers were more likely to change provider in 2011, compared to 2010 Customers living in rental accommodation are becoming a valuable market segment Buildings only cover is most popular among the highest income bracket Internet arrangement is a popular method for arranging buildings insurance High income consumers are mostly like to use the Internet to arrange their home buildings cover Older consumers are less likely to change their building insurance provider The propensity to stay with the current provider increases with household income Combined household policies remain best suited to the majority of the market Many younger consumers rely on face-to-face advice when organizing a combined policy The Internet is the most popular means of arranging a policy across all income groups Consumers between the ages of 25 and 34 were the most likely to change their policy
Respondents with a household income of over £100,000 were the most likely to change provider Customers are taking a multi-channel approach when choosing their provider COMPETITVE DYNAMICS Introduction Gross written premiums in the market grew by 1.4% in 2010 Market share among the top 10 insurers dropped by 0.1% in 2010 Allianz grew its market share aggressively in 2010 Lloyds Banking Group achieved the lowest accident year combined operating ratio in 2010 Competitors have increased their presence in the online sphere Swiftcover provides AXA with an opportunity to reduce costs Legal & General launches on Gocompare.com Aviva has re-entered the aggregator market RBS Insurance will offer high-net-worth household policies to Coutts clients FUTURE DECODED Gross written premiums are forecast to grow slowly until 2015 Claims costs inflation is forecast to rise steadily over the forecast period Insurers' exposure to sovereign debt means they will have to rely on underwriting profitability Weak consumer confidence will limit the growth potential of premiums Market concentration will increase, putting pressure on premiums Slow growth in the housing market will limit the growth in policy numbers The presence of aggregators may lead to policy commoditization Increased competition will lead to a higher combined operating ratio in the future APPENDIX Supplementary data General Insurance Consumer Survey 2011 demographics Contents only cover: socio-economic group data Buildings only cover: socio-economic group data Combined buildings and household cover: socio-economic group data Definitions Premium income measures Distribution definitions Other Methodology Primary and secondary research Gross written premium and combined operating ratio estimates and forecast methodology Advertising and marketing spend data Further reading Ask the analyst Disclaimer LIST OF TABLES Table: Gross written premiums in the household insurance market (£bn), 2006–10 Table: Combined operating ratio (%), 2006–10
Table: Contents only policy quarterly premium changes (%), April 2008–July 2011 Table: Buildings only policy quarterly premium changes (%), April 2008–July 2011 Table: Combined policy quarterly premium changes (%), April 2008–July 2011 Table: Gross incurred UK property claims spilt by peril (£m), 2006–10 Table: Escape of water claims by category (£m), 2006–10 Table: Fire damage values (£m), 2006–10 Table: Accidental damage claims by value (£) and volume (000s), 2006–10 Table: Theft claims by volume (000s) and value (£), 2006–10 Table: Subsidence claims by value (£) and volume (000s), 2006–10 Table: Characteristics associated with risk of burglaries in the UK, highest and lowest Table: Breakdown of burglaries in England and Wales according to loss (000s) 2001/02–2010/11 Table: Percentage changes in unemployment rate and gross burglary claims costs, 2006–10 Table: Number of households in the UK (000s), 2005–09/10 Table: Breakdown of households according to ownership type (000s), 1998–2009/10 Table: Number of mortgages in the UK, 2006–10 Table: Household insurance GWP distribution by channel, 2006–10e Table: With which of these insurance companies are you insured for your home insurance? (top 10 responses split by age) Table: With which of these companies are you insured for your combined contents and buildings insurance? (top 10 responses split by age) Table: With which of these insurance companies are you insured for your home contents only insurance? (top 10 responses split by age) Table: With which of these insurance companies are you insured for your home buildings only insurance? (top 10 responses split by age) Table: Top 10 personal general insurance advertisers (£), 2007–10 Table: Top 10 personal general insurance advertisers by medium (£), 2007–10 Table: Advertising expenditure among the top four aggregators (£000s), 2007–10 Table: Which of the following types of insurance are you covered by? (multiple responses allowed) Table: Which of the following types of insurance are you covered by? Responses split by age Table: Which of the following types of insurance are you covered by? Responses split by household income Table: Which of the following types of insurance are you covered by? Responses split by socioeconomic group Table: Why did you take out your home insurance with your current provider? Table: How did you arrange the home insurance policy you currently have? Split by policy type Table: How did you arrange the home contents insurance policy you currently have? Responses split by age Table: How did you arrange the home contents insurance policy you currently have? Responses split by household income Table: When you last renewed your home contents insurance, did you change company or stay with the same one? Responses split by age Table: When you last renewed your home contents insurance, did you change company or stay with the same one? Responses split by household income Table: How did you arrange the home buildings insurance policy you currently have? Responses split by age Table: How did you arrange the home buildings insurance policy you currently have? Responses split
by household income Table: When you last renewed your home buildings insurance, did you change company or stay with the same one? Responses split by age Table: When you last renewed your home buildings insurance, did you change company or stay with the same one? Responses split by household income Table: How did you arrange the combined contents and buildings insurance policy you currently have? Responses split by age Table: How did you arrange the combined contents and buildings insurance policy you currently have? Responses split by household income Table: When you last renewed your combined contents and buildings contents insurance, did you change company or stay with the same one? Responses split by age Table: When you last renewed your combined contents and buildings insurance, did you change company or stay with the same one? Responses split by income Table: Before you took out your most recent insurance policy, did you take any of the following actions? Table: Market share by GWP of the 10 largest insurers in the UK, 2009–10 Table: Market share by GWP of the 11–20 largest insurers in the UK, 2009–10 Table: Insurers' COR breakdown by loss and expense ratio, 2010 Table: Household gross written premiums (£m), 2010–15f Table: Combined operating ratio (%), 2005–15f Table: Breakdown of respondents by age Table: Breakdown of respondents by income Table: Breakdown of respondents by gender Table: How did you arrange the home contents insurance policy you currently have? Responses split by socio-economic group Table: When you last renewed your contents insurance, did you change company or stay with the same one? Responses split by socio-economic group Table: How did you arrange the home building insurance policy you currently have? Responses split by socio-economic group Table: When you last renewed your buildings insurance, did you change company or stay with the same one? Responses split by socio-economic group Table: How did you arrange the home combined contents and buildings insurance policy you currently have? Responses split by socio-economic group Table: When you last renewed your combined contents and buildings insurance, did you change company or stay with the same one? Responses split by socio-economic group LIST OF FIGURES Figure: GWPs increased by 1.4% to £7.6bn in 2010 Figure: The RBS Group also holds the largest market share in the home insurance sector Figure: Almost half of all respondents had a combined household policy Figure: GWPs increased by 1.4% to £7.6bn in 2010 Figure: The reported year COR rose in 2010 for the first time since 2007 Figure: Shoparound contents cover experienced a large premium increase in Q1 2011 Figure: Buildings only policies have been historically underpriced Figure: Combined policy premiums have begun to stabilize in 2011 Figure: Gross incurred UK property claims spilt by peril (£m), 2006–10
Figure: There has been a significant increase in claims costs due to burst pipes in 2010 Figure: Damage caused by fire decreased in 2010 Figure: The average value of accidental claims increased in 2010 Figure: The cost of theft claims increased by 2.3% in 2010 Figure: The number of subsidence claims increased in 2010 Figure: Young homeowners are the most likely to be burgled Figure: There was a significant increase in the number of thefts in 2010/11 Figure: There is a positive correlation between the changes in unemployment and gross burglary claims Figure: Growth in the housing market slowed in 2010 Figure: There has been a steady increase in the number of private renters in recent years Figure: The mortgage market has begun to recover since 2008 Figure: The direct channel has continued to see growth in the household insurance market Figure: The RBS Group also holds the largest market share in the home insurance sector Figure: Younger consumers are more likely to opt for a prominent provider when purchasing home insurance Figure: Four of the top 10 combined home insurance providers are banking institutions Figure: Bancassurers comprise six of the top 10 home contents only insurers Figure: Aviva and Halifax have the largest share of consumers aged under 25 in terms of home buildings only insurance Figure: Direct Line was the largest insurance advertiser in 2010 Figure: The proportion of TV advertising expenditure increased slightly in 2010 Figure: Gocompare.com has the largest advertising expenditure Figure: Almost half of all respondents had a combined household policy Figure: Respondents between the ages of 55 and 65 were the most likely to hold household insurance Figure: Those with a household income of over £100,000 were most likely to have household insurance Figure: Household insurance penetration was highest in social groups A and B Figure: Consumers still view reputation and convenience as important factors when selecting a household insurance policy Figure: The use of the Internet in arranging policies is most suited to combined policies Figure: The Internet remains the most popular method of arranging a policy among younger purchasers Figure: It is vital that insurers offer contents packages to cover high net worth households Figure: Customers between the ages of 25 and 34 are the most likely to change provider Figure: Consumers with an income of between £75,000 and £99,999 were most likely to have changed provider Figure: The Internet is a popular channel for arranging buildings insurance Figure: High income earners tend to prefer the Internet when arranging a home building policy Figure: The propensity to change provider tends to increase with age Figure: The propensity to stay with the current provider increases with household income Figure: Young consumers rely heavily on face-to-face meetings to arrange combined household cover Figure: The Internet is the most popular means of arranging a policy across all income groups Figure: Respondents between the ages of 25 and 34 were the most likely to have changed their policy at the renewal date Figure: Respondents with a household income of over £100,000 were the most likely to change their policy provider Figure: Consumers use a multi-channel approach to research their insurance policies
Figure: Royal Bank of Scotland (RBS) is the largest household insurer in terms of GWP, 2010 Figure: Allianz, esure, and Munich RE achieved double digit growth in GWPs in 2010 Figure: Lloyds Banking Group has the lowest COR Figure: GWPs are forecast to reach ÂŁ8.9bn by 2015 Figure: The COR is forecast to drop to 95.5% in 2011 as the market rebounds from 2010's severe winter Figure: How did you arrange the home contents insurance policy you currently have? Responses split by socio-economic group Figure: When you last renewed your contents insurance, did you change company or stay with the same one? Responses split by socio-economic group Figure: How did you arrange the home building insurance policy you currently have? Responses split by socio-economic group Figure: When you last renewed your buildings insurance, did you change company or stay with the same one? Responses split by socio-economic group Figure: How did you arrange the home combined contents and buildings insurance policy you currently have? Responses split by socio-economic group Figure: When you last renewed your combined contents and buildings insurance, did you change company or stay with the same one? Responses split by socio-economic group About Us: ReportsnReports is an online library of over 100,000+ market research reports and in-depth market research studies & analysis of over 5000 micro markets. We provide 24/7 online and offline support to our customers. Get in touch with us for your needs of market research reports. Follow us on Twitter: http://twitter.com/marketsreports Contact: Mr.Priyank 7557 Rambler road, Suite727,Dallas,TX75231 Tel: + 1 888 391 5441 E-mail: sales@reportsandreports.com Visit our Market Research Blog