United Kingdom (UK) Household Insurance – Market Dynamics and Opportunities 2020

This report provides an in-depth analysis of the UK household insurance market. It looks at market size and performance ratios as well as changes in premiums, claims, contextual and economic factors, regulations, and opportunities. It provides a thorough overview of the market along with future forecasts and analysis of emerging technologies and products.

Following a sharp decline in 2018, gross written premiums (GWP) increased in the household insurance market by 3.2% in 2019. Weather claims dropped significantly in 2019 relative to the previous year, lifting some of the burden on insurance providers. Premium rates rose modestly in 2019 before rising steeply in the second quarter of 2020, possibly linked to unexpected challenges caused by the COVID-19 pandemic. Due to the sharp decrease in mortgage approval rates for 2020, a surge in house rebuilding costs, and macroeconomic contraction, the household insurance market looks set for a very turbulent second half of 2020 and beyond.

Scope

– Premium rates rose slightly in 2019 and Q1 2020, before shooting up massively in Q2.

– Total claims were down significantly in 2019, primarily due to a reduction in weather-related claims.

– Penetration rates remain low for renters, with less than half of all tenants holding some form of home insurance.

– Market GWP is expected to decline steeply in 2020 and is projected to be around 7% smaller by 2024 when compared to 2019.

Reasons to buy

– Benchmark yourself against the rest of the market.

– Ensure you remain competitive as new innovations and insurance models begin to enter the market.

– Be prepared for how regulation will impact the household insurance market over the next few years.

Companies mentioned

Lloyds Banking Group

Direct Line Group

Aviva

RSA

AXA

Ageas

Legal & General

NFU Mutual

Allianz

LV=

Neos

Amazon

Table of Contents

Table of Contents

1. EXECUTIVE SUMMARY

1.1. In 2019, the UK household market recorded its largest rise of the review period

1.2. Key findings

1.3. Critical success factors

2. MARKET DYNAMICS

2.1. Introduction

2.2. The market experienced growth in 2019

2.2.1. UK household GWP rose by

3.2% in 2019 – the largest rise in the last five years

2.2.2. Average premiums increased in 2019

2.2.3. Combined cover increased its share of the total market in 2019

2.2.4. The proportion of households renting decreased in 2019

2.3. Total claims dropped by 9% in 2019

2.3.1. Weather-related claims fell by more than half in 2019

2.3.2. Claims inflation is set to challenge profitability in the market in 2020

2.3.3. Flood Re remains a requirement

2.3.4. Reinsurance rate rises will increase pressure on premiums

2.4. The home insurance market has benefitted from an increase in underlying supply

2.4.1. New home registrations and completions were up in 2019

2.4.2. Mortgage approval rates were hit by COVID-19 in Q2 2020

2.4.3. There is considerable potential for growth from the rental market

3. COMPETITOR DYNAMICS

3.1. The top 10 providers increased their hold on the market

3.2. Aviva has continued to innovate

3.3. Direct Line expanded its digital initiatives

3.4. Insurtechs Hippo and Lemonade highlight new opportunities

4. THE MARKET GOING FORWARD

4.1. The market is expected to contract dramatically due to COVID-19

4.1.1. The economic impact of COVID-19 is forecast to negatively impact GWP

4.1.2. Government response measures could create a mini-boom for the market

4.1.3. The cost of claims will be volatile in the coming years

5. APPENDIX

5.1. Abbreviations and acronyms

5.2. Methodology

5.2.1. GlobalData’s UK Insurance Consumer Surveys

5.2.2. UK Top 20 General Insurance Competitor Analytics

5.2.3. Forecasting methodology

5.3. Secondary sources

5.4. Further reading

List of Tables

List of Tables

Table 1: Household insurance GWP and annual growth rate, 2014-19

Table 2: Quarterly average premium rate movements, Q1 2014-Q1 2020

Table 3: Household gross claims incurred by type and number of claims notified, 2014-19

Table 4: New home registrations and completions, 2014-19

Table 5: Top 10 UK household insurers by market share, 2017-19

List of Figures

List of Figures

Figure 1: Household GWP experienced strong growth in 2019

Figure 2: Premium rates dropped in Q1 2020

Figure 3: Consumers continued to shift towards combined cover in 2019

Figure 4: Living arrangements remained fairly consistent in 2019 compared to 2017

Figure 5: Over half of private tenants are not covered by insurance

Figure 6: An increasing number of renters are purchasing unnecessary cover

Figure 7: A drop in weather claims contributed to a fall in the total cost of claims

Figure 8: The total number of claims fell in 2019

Figure 9: Growth in rebuild costs has spiked in 2020 due to the COVID-19 pandemic

Figure 10: The price indices became more stable in 2019

Figure 11: Registrations and completions have leveled off in recent years

Figure 12: Mortgage approval rates have continued to fluctuate

Figure 13: LV= was a new entrant to the top 10 in 2019

Figure 14: COVID-19 is expected to lead to a market contraction

Figure 15: Forecasting methodology

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