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United Kingdom (UK) Household Insurance – Market Dynamics and Opportunities 2021

The total gross written premium of the UK household insurance market was valued at GBP6.32 billion in 2020. The market is expected to decline at a CAGR of more than -1% during the period 2021-2025. Average premiums have fluctuated on a quarterly basis, with the average price of buildings-only and combined policies in 2020 at the same level as they were in 2016. Correspondingly, insurers’ underwriting profitability in the market declined considerably in 2020.

Combined cover remains the dominant product in the market, accounting for over 80% of GWP in 2020. As house prices keep younger generations off the property ladder, targeting Generation Rent must be a priority for insurers if they wish to maintain or grow their levels of market share or GWP. Incumbent insurers face challenges from insurtech within this space, as these players seem to have been more effective in identifying ways of addressing this area of the market than traditional insurers.

Overview of the UK household insurance market

Overview of the UK household insurance market

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What are the dynamics in the UK household insurance market?

Going forward, the market is expected to decline at a slow rate over the next five years. Premium prices remain somewhat stagnant and unresponsive to the changing claims landscape, although ABI data for 2021 suggests that the price of combined policies may be starting to rise. Generation Rent remains an untapped opportunity for insurers in the home line to grow their consumer base. The adoption and utilization of efficiency-increasing technology by incumbents is slow in the market, while the disruption of the market by technologically aware insurtechs lag behind some of the other lines. We expect to see a rebound in 2021, driven by an increase in inflation and house prices off the back of the stamp duty holiday, pushing up the price of premiums. Subsequent years will see gradual declines in GWP as poor uptake continues to plague the market.

As telematics devices have been slowly transforming the landscape of motor insurance, smart home devices could offer similar possibilities to home insurers. Smart smoke alarms, cameras, and leak detectors could all serve to help consumers reduce their premiums. The uptake of these devices is slowly growing, with government figures revealing that 49% of UK residents purchased at least one smart device between March and December 2020. As well as up-and-coming insurtechs looking to develop technology-based products, incumbent home insurers may soon have to begin contending with leading big tech firms and other major corporations. Adverse weather events such as tropical storms, floods, and droughts can have significant impacts on home insurance claims.

What are the product categories in the UK household insurance market?

The products in the UK household insurance market can be categorized into combined premiums, contents-only premiums, and buildings-only premiums.

By the end of the year, prices dropped slightly in two of the three products – buildings only and contents only – and grew in combined insurance. As measured by total policies written, demand for all three types of products fell over the course of the year (although this fall was negligible for combined policies).  From 2016 to 2020, combined premiums increased by around 2%, buildings only by around 4% while contents only decreased by around 4%. This comes despite, higher average claim costs, rising house prices, increasing house repair costs, and greater adverse weather risks.

In terms of average premium, combined premiums are the highest followed by buildings only premiums and contents only premiums. Combined policies remain the dominant product in the home insurance market. In 2020, the product accounted for more than 80% of GWP in the market and more than 60% of policies written. Over the past five years, combined insurance has contributed to an increasing share of market GWP despite not always growing in demand, according to ABI data. Demand for buildings-only and contents-only cover has been steadily decreasing over the past five years. When it comes to home insurance, renters do not need to purchase cover for the building, as doing so is the landlord’s responsibility. This means a tenant just requires contents-only insurance to protect their belongings. Generation Rent has been an emerging trend in UK home occupancy for many years, with the number of rental properties growing 48.5% between 2007 and 2019 according to the ONS. Our own UK Insurance Consumer Surveys suggest that over one in five home occupiers currently rent. Despite this, as previously mentioned, the prevalence of contents-only insurance has declined steadily over the past five years.

Who are the major UK household insurers?

In 2020, RSA was the leading insurer followed by Lloyds Banking Group, Aviva, Allianz, Direct Line Group, AXA, and Ageas. RSA remains the market leader in the household insurance space, having usurped Lloyds and Direct Line for the top spot in 2018. In January 2020, Allianz finalized the acquisition of LV= General Insurance and the general insurance division of Legal & General. As a result of these two deals, Allianz finds itself in fourth place among home insurance competitors.

UK household insurance market, by key players

UK household insurance market, by key players

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Market report scope

Market size (Year – 2020) GBP6.32 billion
Growth rate (CAGR) >-1%
Base year for estimation 2020
UK household insurance product categories Combined premiums, contents only premiums, and buildings only premiums
Forecast period 2021-2025
Key players RSA, Lloyds Banking Group, Aviva, Allianz, Direct Line Group, AXA, and Ageas

This report analyzes the UK household insurance market, looking at drivers of uptake across different demographics and dwelling types. The report discusses the claims landscape as well as the broader housing market and upcoming regulatory changes within insurance. Incumbent competitors are analyzed and compared, along with newcomers and insurtechs within the space. Future impacts – including climate change, smart home devices, and changing living arrangements – are also examined.

Reasons to Buy

  • Identify underlying drivers of demand and premium prices for home insurance products.
  • Examine the nature of the home insurance claims landscape.
  • Compare the performances of market leaders.
  • Determine how insurtechs are attempting to gain traction in the market.
  • Understand the progression of home insurance lines into the future.

Key Players

RSA

Lloyds Banking Group

Aviva

Allianz

Direct Line Group

AXA

Ageas

Chubb

NFU Mutual

Zurich

LV=

Neos

Brolly

Urban Jungle

Getsafe

Locket

Lemonade

Hiscox

John Lewis

Google

Samsung

Amazon

Apple

British Gas

Table of Contents

Table of Contents

1. Executive Summary

1.1 Market overview

1.2 Key findings

1.3 Critical success factors

2. Market Dynamics

2.1 Growth in the UK household insurance market has been relatively stagnant over time

2.2 Government and regulatory policies in home insurance

2.3 The claims landscape in 2020

2.4 The housing market has been affected by the pandemic

3. Competitor Dynamics

3.1 Analysis of the market leaders

3.2 Insurtechs and newcomers

4. The Market Going Forward

4.1 The market is expected to remain relatively static

4.2 Smart home devices and the future of home insurance

4.3 Other providers may soon join the market

4.4 Climate change and adverse weather will affect claims

4.5 Insurers can play a role in alleviating the cladding crisis

5. Appendix

5.1 Abbreviations and acronyms

5.2 Methodology

5.3 Secondary sources

5.4 Further reading

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List of Tables

List of Tables

Table 1: Household insurance GWP, annual growth rate, 2016-20

Table 2: Yearly and quarterly average household insurance premium rate movements, Q1 2016-Q2 2021

Table 3: Percentage of respondents holding any form of home insurance, 2019-20

Table 4: Household gross claims incurred and number of claims notified, by type, 2016-20

Table 5: New home registrations and completions, 2016-20

Table 6: Top 10 UK household insurers by GWP and market share, 2018-20

Table 7: UK household insurance market forecasts, 2020-25f

List of Figures

List of Figures

Figure 1: UK household insurance market GWP declined in 2020

Figure 2: Home insurance premiums fluctuate quarter to quarter

Figure 3: Combined insurance accounts for the largest share of GWP

Figure 4: Penetration rates are below 50% for tenants

Figure 5: Over 20% of UK home occupiers rent

Figure 6: There are several different reasons why renters choose not to purchase a home insurance policy

Figure 7: One in five private renters have the wrong cover

Figure 8: Weather-related gross claims more than doubled in 2020

Figure 9: Lockdowns reduced the number of theft claims

Figure 10: The pandemic has accelerated the increase in house rebuilding costs

Figure 11: Inflation is driven by both supply side and demand-side factors

Figure 12: New home registrations and completions fell dramatically in 2020

Figure 13: Mortgage approvals were affected on a monthly basis, but increased in 2020 compared to 2019

Figure 14: RSA remains the market leader in the home insurance market

Figure 15: Almost half of consumers use a comparison website before purchasing contents-only insurance

Figure 16: The home insurance market will remain stable over the next five years

Figure 17: Consumers are open to the idea of purchasing home insurance from non-traditional providers

Figure 18: Forecasting methodology

Frequently Asked Questions

The total gross written premium of the UK household insurance market was valued at GBP6.32 billion in 2020.

 

 

The UK household insurance market is expected to decline at a CAGR of more than -1% during the period 2021-2025.

In 2020, RSA was the leading insurer followed by Lloyds Banking Group, Aviva, Allianz, Direct Line Group, AXA, and Ageas.

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