UK Household Insurance: Market Dynamics and Opportunities 2019

Table of Contents

Table of Contents

1. EXECUTIVE SUMMARY

1.1. The UK household insurance market is declining

1.2. Key findings

1.3. Critical success factors

2. MARKET DYNAMICS

2.1. Introduction

2.2. Market conditions softened in 2018

2.2.1. UK household insurance GWP declined by 4.9% in 2018

2.2.2. Premium rate declines returned in 2018 following a rare year of growth

2.2.3. Combined cover is still the dominant product

2.2.4. Underinsurance among Generation Rent remains a major concern

2.2.5. Regulators still see dual pricing as a major problem

2.3. Weather incidents caused claims to rise in 2018

2.3.1. Two severe countrywide storms saw weather claims rise by over 150% in 2018

2.3.2. Claims inflation is challenging profitability

2.3.3. Underwriting profitability dropped significantly in 2018

2.3.4. Flood Re continues to help at-risk houses across the UK

2.4. Home insurance demand was hit by a reduction in new house registrations

2.4.1. New home registrations and completions remained static in 2018

2.4.2. Mortgage approval rates dipped slightly in 2018

2.4.3. Penetration rates are high among owner-occupiers but lower for tenants

3. COMPETITOR DYNAMICS

3.1. The top 10 insurers account for two thirds of GWP

3.1.1. RSA overtook Lloyds and Direct Line to lead the household market

3.2. Analysis of the market leaders

3.2.1. Direct Line lost key partnerships as RSA picked up Nationwide

3.2.2. Lloyds Bank partnered with US startup Trov to sell products to home owners

3.2.3. Aviva is evolving its proposition using technology

3.2.4. Allianz's acquisition strategy will make it a key player in the household market

3.2.5. Saga responded to FCA warning with three-year fixed product

4. THE MARKET GOING FORWARD

4.1. Introduction

4.2. The market is expected to drop to GBP5.9bn in GWP by 2024

4.2.1. Insurers controlling claims should see the market steadily decline over the forecast period

4.3. Startups have turned their attention to Generation Rent

4.3.1. The Generation Rent trend could mark a shift in home insurance

4.3.2. Urban Jungle targets Generation Rent

4.3.3. Brolly launches its own contents policy to combat an antiquated market

4.3.4. Lemonade's move to Europe poses a threat to established players

4.3.5. Other US startups are also worth watching

4.4. Competition from retailers is growing

4.4.1. Amazon is on the verge of entering the market

4.5. Growth of smart home devices will impact the market

4.5.1. Water detection and education are essential to reducing escape of water claims

4.5.2. Cybersecurity is an emerging market for individual customers

5. APPENDIX

5.1. Abbreviations and acronyms

5.2. Methodology

5.2.1. GlobalData's UK Insurance Consumer Survey

5.2.2. UK Top 20 General Insurance Competitor Analytics methodology

5.2.3. Forecasting methodology

5.3. Secondary sources

5.4. Further reading

List of Figure

List of Figures

Figure 1: Household GWP declined in 2018 after growth in 2017

Figure 2: All premium rates decreased at the start of 2019

Figure 3: Rates have fluctuated, but changes have been limited over the past two years

Figure 4: Consumers shifted further towards combined home insurance in 2018

Figure 5: The proportion of UK consumers living in a rented property increased in 2018

Figure 6: Insurance penetration among renters remains below 50%

Figure 7: Over 15% of renters are still purchasing unnecessary cover

Figure 8: Weather claims soared in 2018 following two severe events in the UK

Figure 9: Claims fell over the review period despite the 2018 weather claims

Figure 10: Growth in household rebuild costs has stabilized since 2018 following sharp fluctuations

Figure 11: The Consumer Durables Price Index has fluctuated significantly

Figure 12: Underwriting profitability plummeted following severe weather incidents in 2018

Figure 13: New registrations and completions remained static in 2018

Figure 14: Mortgage approval has declined marginally since the start of 2017

Figure 15: Nearly half of private tenants do not hold home insurance

Figure 16: Direct Line recorded a second consecutive sharp decline in 2018, meaning RSA now leads the market

Figure 17: Steady declines in GWP are predicted up to 2024

Figure 18: Urban Jungle caters for young tenants

Figure 19: Brolly's cover is flexible and can be managed within its app

Figure 20: Lemonade's platforms are easy to use and understand

Figure 21: Consumers' willingness to purchase home insurance from Amazon doubled in 2018

Figure 22: Forecasting methodology

List of Table

List of Tables

Table 1: Household insurance GWP and annual growth rate, 2013-18

Table 2: Quarterly average household insurance premium rate movements, 2014-Q1 2019

Table 3: AA Shoparound average home insurance premiums quarterly change, Q1 2015-Q4 2018

Table 4: Household gross claims incurred by type and number of claims notified, 2014-18

Table 5: Underwriting profit results for UK household insurance, 2008-18

Table 6: New home registrations and completions, 2014-18

Table 7: Percentage of respondents holding any form of home insurance, 2017-18

Table 8: Top 10 UK household insurers by market share, 2016-18

Table 9: Total GWP and average premium forecasts, 2018-24f