UK Household Insurance 2010

Overview
Catalyst
Summary
Executive Summary
The household market shrank slightly in 2009 and will be comparatively static in 2010
The household market contracted by 2% in 2009
The majority of home insurance policies are distributed through the top 10 groups and brands
The top ten insurance groups hold the largest share of the home insurance markets
The dominant platforms for home insurance sales are the telephone and internet
Internet and telephone sales are becoming increasingly prevalent in the home insurance market
The average theft claim value continued to rise in 2009
Household insurance market GWP hits ?7.9bn at the end of the forecast period
The household insurance market is expected to see muted growth
Table of Contents
Table of figures
Table of tables
Market Issues
Introduction
Rates have begun to increase in the market as investment income has come under pressure
Investment returns have declined significantly in 2009
Claims costs are also putting pressure on insurers to increase rates
Despite an increase in mortgage volumes, the total value of mortgages dipped in 2009
The mortgage situation will most affect bancassurers
Insurers have introduced strategies to manage weather perils
The Flood and Water Management Act was passed in Q2 2010
Many insurers are being proactive when dealing with floods
Burst pipes and related escape of water leads to increases in claims
Aggregators have grown their presence in the home insurance market
Around 45% of consumers use an aggregator when arranging their household insurance cover
Aggregators are starting to focus more advertising budget on promoting their home insurance products
Market Context
Introduction
The household market shrank slightly in 2009 and will be comparatively static in 2010
The household market contracted by 2% in 2009
Combined insurance policies constituted the largest share of the total market GWP
Insurers put through price rises following Cockermouth
The past year displayed a steady increase in the market average premium and shoparound premium of combined home insurance
The household contents premium prices fluctuated over the past two years
Insurers continue to increase the price of buildings insurance cover
There is a vast potential market for household insurance
There is a potential market of 21.5m households in England
The number of households in England grew by 0.6% in 2008/09, increasing the opportunity for new business
Privately-rented households remain the largest growing market for household insurance providers
2009 Saw claims costs continue to improve
Claims costs fell marginally in 2009
Escape of water claims increased by 21.2% in 2009
Flood and storm damage claims continued to fall in 2009
Domestic fire claims costs decreased in 2009
Accidental damage claims costs declined slightly to ?397m in 2009
The average theft claim value continued to rise in 2009
The number of burglaries increased slightly in 2008/09
Households with a high level of security were the best burglary risks for insurers in 2008/09
Insurers paid out more in subsidence claims in 2009
Returns are attractive in the household insurance market
The combined operating ratio of the market is currently at a healthy level
Distribution
Introduction
Banks and building societies hold the largest share of the UK home insurance market
The majority of home cover sales can be attributed to banks and building societies
Brokers closed the market share gap with the bancassurers in 2008 and 2009
The direct channel retains a level share of the household insurance market
Partnerships' share of the UK home insurance market has declined
The majority of home insurance policies are distributed through the top 10 groups and brands
The top ten insurance groups hold the largest share of the home insurance markets
The Lloyds TSB, Halifax and Norwich Union brands have the greatest market share
Older consumers are more likely to select a home insurance policy targeted at their age group
Direct Line's and Halifax's combined contents and buildings insurance policies are particular popular among younger consumers
Home contents insurance providers showed little age to market correlation, aside from RIAS and Saga
Consumers aged 18-24 were most likely to arrange buildings only home insurance policies through a top ten distributor
Direct Line spent the most money on household insurance marketing
Direct Line spent the most money on marketing home insurance in 2009
The top ten household insurance advertisers spent the majority of their marketing budget on direct mail campaigns
TV advertising was a key medium for the top ten advertisers, in particular the direct insurers
Advertisers ranked 11-20 preferred direct mail campaigns and were also more likely to spend significant sums on press campaigns
The household insurers ranked 11-20 for UK market advertising also showed a preference for direct mail
TV advertising was a key medium for the top ten advertisers, in particular the direct insurers
Press advertising can constitute a prudent secondary advertising platforms
Consumer Data
Introduction
Combined household insurance is the most popular type of product sold to consumers
There is a healthy market for home insurance products
Consumers over the age of 55 are the largest target market for combined policies
Higher income households have higher penetration rates for combined home insurance and buildings only cover
Consumers belonging to socio-economic groups A and B display consistently higher penetration rates for combined household products
Price should be the primary focus in insurance marketing campaigns
Insurance companies should emphasize competitive prices when marketing their combined policies
While price remains the dominant attraction for insurance buyers, older consumers are more likely to consider other factors
Although it remains the key factor, older consumers of motor insurance are less concerned about price
The dominant platforms for home insurance sales are over the telephone or internet
Internet and telephone sales are becoming increasingly prevalent in the home insurance market
Providers of home insurance to the over 65s market should base their strategy primarily around telephone sales
Consumers aged over 65 prefer to use the phone to arrange their insurance policies, whereas other groups prefer to use the internet
Internet selling strategies for combined home insurance should remain the core method of targeting consumers with household incomes over ?30,000
A and E consumers prefer to purchase their combined policy over the telephone
A telephone-based distribution strategy would be prudent for home contents insurance sales
The telephone surpasses the internet as the most popular platform for arranging home contents insurance
Consumers are generally more likely to purchase their home contents insurance over the telephone
The telephone is the preferred platform for arranging home contents insurance policies
There is a significant potential market for distributors of household insurance to target
Combined buildings and contents policy consumers are most likely to switch
Retention rates for combined home insurance peak with middle-aged consumers
The younger consumers were more likely to be on their first household insurance policies
Consumers earning less than ?15,000 are least likely to change their combined insurance provider
Provider-switching of combined contents and buildings insurance policies is high across all socio-economic groups
Consumer aged under 35 are the softest targets for home contents insurance sales
Consumers aged 45-64 are more likely to stay with the same home contents insurance provider at renewal
Consumers with a household income of ?75,000-99,999 are the most loyal to their home contents insurance policy providers
Contents only insurance showed the highest rate of consumer promiscuity
Competitive Dynamics
Introduction
2009 Saw major changes to the market positions in home insurance
RBSI gained market leadership in household
Groupama stood out from the pack
Lloyds Banking Group profited from a low combined ratio
Future Decoded
Introduction
Household insurance market GWP hits ?7.9bn at the end of the forecast period
The household insurance market is expected to see muted growth
Profitability in the market will remain fairly constant during the forecast period
APPENDIX
Distribution definitions
Banks/building societies
Broker
Company staff
Direct
'Other' company agents
Partnerships
Methodology
Datamonitor General Insurance Consumer Survey
Primary and secondary research
Distribution estimates and forecast methodology
Advertising and marketing spend data
Further reading
Ask the analyst
Datamonitor consulting
Disclaimer

LIST OF TABLES

Table 1: UK home lending volume and value, 2005-2009
Table 2: When your insurance last came up for renewal, did you visit any price comparison sites to obtain quotations?
Table 3: Top 4 aggregator insurance advertising spends, 2007-2009
Table 4: Top 4 aggregator insurance advertising spends by product, 2007-2009
Table 5: UK household insurance GWP, 2006-2010e
Table 6: Estimated split of household insurance GWP by type of cover, 2010 (?m)
Table 7: Average household insurance premium rates, April 2008-2010 (?)
Table 8: The size and tenure of households in England, 2008 and 2008-2009 (000s)
Table 9: The number of households in England, 2005-2008/09 (000s)
Table 10: Trends in household tenure for England, 1998-2008/09 (000s)
Table 11: UK domestic property insurance claims by peril, 2005-09 (?m)
Table 12: Escape of water claims cost and number of claims for escape of water in the UK, 2005-09
Table 13: Gross claims incurred for domestic property weather claims, 2005-09 (?m)
Table 14: UK claims incurred by fire, domestic and total, 2005-09 (?m)
Table 15: UK Accidental damage claims costs and the number of claims for accidental damage, 2005-2009
Table 16: Number of household theft and average theft claims cost in the UK, 2005-09
Table 17: Number of burglaries in England and Wales, 2001/02 to 2008/09
Table 18: UK employment, Q1 2006 - Q1 2010
Table 19: Household types by risk of burglary in the UK, 2005/06 to 2008/09
Table 20: Average subsidence claims cost compared to claims costs and number of claims for subsidence in the UK, 2005-09
Table 21: Household insurance GWP distribution by channel, 2005-09e
Table 22: With which of these insurance companies are you insured for your home insurance policy/s? Top 10 responses, split by age
Table 23: With which of these insurance companies are you insured for your combined contents and buildings insurance policy/s? Top 10 responses, split by age
Table 24: With which of these insurance companies are you insured for your home contents insurance policy/s? Top 10 responses, split by age
Table 25: With which of these insurance companies are you insured for your home buildings insurance policy/s? Top 10 responses, split by age
Table 26: Top 10 building and contents advertisers' spend by media, 2009 (?)
Table 27: Top 11-20 building and contents advertisers' spend by media, 2009 (?)
Table 28: Which of the following types of insurance are you covered by?
Table 29: Which of the following types of insurance are you covered by? Responses split by age
Table 30: Which of the following types of insurance are you covered by? Responses split by household income
Table 31: Which of the following types of insurance are you covered by? Responses split by socio-economic group
Table 32: Why did you take out your home insurance with your current provider? Top five responses
Table 33: Why did you take out your motor insurance with your current provider? Top five responses, split by age
Table 34: How did you arrange the home insurance policy you currently have?
Table 35: How did you arrange the combined contents and buildings insurance policy you currently have? Responses split by age
Table 36: How did you arrange the combined contents and buildings insurance policy you currently have? Responses split by household income
Table 37: How did you arrange the combined contents and buildings insurance policy you currently have? Responses split by socio-economic group
Table 38: How did you arrange the home contents insurance policy you currently have? Responses split by age
Table 39: How did you arrange the home contents insurance policy you currently have? Responses split by household income
Table 40: How did you arrange the home contents insurance policy you currently have? Responses split by socio-economic group
Table 41: When you last renewed your home insurance did you change company or stay with the same one?
Table 42: When you last renewed your combined contents and buildings contents insurance, did you change company or stay with the same one? When your combined contents and buildings contents insurance next comes up for renewal, how likely or unlikely is it that you will shop for alternative quotations? Responses split by age
Table 43: When you last renewed your combined contents and buildings contents insurance, did you change company or stay with the same one? When your combined contents and buildings contents insurance next comes up for renewal, how likely or unlikely is it that you will shop for alternative quotations? Responses split by Top ten GWP
Table 44: 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
Table 45: When you last renewed your home contents insurance, did you change company or stay with the same one? When your home contents insurance next comes up for renewal, how likely or unlikely is it that you will shop for alternative quotations? Responses split by age
Table 46: When you last renewed your home contents insurance, did you change company or stay with the same one? When your home contents insurance next comes up for renewal, how likely or unlikely is it that you will shop for alternative quotations? Responses split by household income
Table 47: When you last renewed your home contents insurance did you change company or stay with the same one? Responses split by socio-economic group
Table 48: GWP and market share of the top ten household insurance groups, 2008-09
Table 49: GWP and market share of the top 11-20 household insurance groups, 2008-09
Table 50: Reported year combined ratio for top 10 household insurance groups, 2009 (%)
Table 51: Key variables affecting household insurance GWP, neutral scenario, 2010-2015
Table 52: Forecasts for total market household GWP, 2009-14
Table 53: Forecast of UK household insurance combined operating ratio, 2010-14
Table 54: Breakdown of household insurance consumer survey respondents, by household income and age
Table 55: Breakdown of household insurance consumer survey respondents, by socio-economic group
Table 56: The size and tenure of households in England, 2008 (000s)

LIST OF FIGURES

Figure 1: The household market is expected to see marginal growth in 2010
Figure 2: The Lloyds Banking Group and the RBS Group both have a strong presence in the home insurance sector
Figure 3: The majority of home insurance is distributed over the phone or the internet
Figure 4: The average claim value increased in 2009
Figure 5: The household insurance market is expected to see slow growth over the next five years
Figure 6: While the number of mortgages increased in 2009, their total value decreased further
Figure 7: The Groupama website offers customers specific advice about floods and storms
Figure 8: Fewer people used an aggregator to purchase and research household insurance than motor
Figure 9: Top 4 aggregator insurance advertising spends, 2007-2009
Figure 10: Top 4 aggregator insurance advertising spends by product, 2007-2009
Figure 11: The household market is expected to see marginal growth in 2010
Figure 12: Combined home insurance policies account for the majority of the market GWP
Figure 13: April 2009 - 2010 saw a consistent price increase except for a slight plateau in Q3 2009
Figure 14: Q2 2009 displayed a particularly competitive time for household contents insurance
Figure 15: The market average price for buildings insurance consistently increased for the past 8 quarters
Figure 16: There is a potential home insurance market of 6.9m rented households and 14.6m owner occupied households in England
Figure 17: The number of households in England has grown consistently since 2005
Figure 18: The privately rented sector shows the largest growth for household insurance providers
Figure 19: Weather-related claims decreased significantly in 2008 while escape of water claims increased
Figure 20: Domestic property weather claims fell in 2009
Figure 21: Domestic fire claims comprised a slightly lower proportion of the fire claims in 2009
Figure 22: The average claim value increased in 2009
Figure 23: The number of burglaries increased very slightly in 2008/09
Figure 24: Young homeowners are the most likely to be burgled
Figure 25: The frequency and average value of subsidence claims rose in 2009
Figure 26: After the spike in COR due to the 2007 floods, the household market returned to profitability
Figure 27: Bancassurers' share of the home insurance market has declined
Figure 28: The Lloyds Banking Group and the RBS Group both have a strong presence in the home insurance sector
Figure 29: Halifax held the largest share in the 18-24 age group
Figure 30: For combined insurance, age-focused Saga and RIAS are dominant for older consumers
Figure 31: Targeting older consumers has proved effective for RIAS and Saga
Figure 32: Banks and building societies have a strong presence in the buildings only insurance sector
Figure 33: Top 10 household insurance marketers spend a lot of money on direct mail advertising
Figure 34: Household insurance advertisers ranked 11-20 show a preference for the direct mail medium
Figure 35: Combined buildings and contents policies have the highest penetration rates
Figure 36: Over 55s are the largest target market for combined home insurance policies
Figure 37: Providers should target their combined contents and buildings insurance offer at consumers in the mid and higher income bands
Figure 38: Bands A and B show the best penetration rates overall, while group E displays an off-trend high rate for combined policies
Figure 39: Price is a particularly important factor for consumers purchasing a combined home insurance policy
Figure 40: Older consumers were less likely to state price as a reason for selecting an insurance provider
Figure 41: The majority of home insurance is distributed over the phone or the internet
Figure 42: Older consumers are more likely to buy their combined policies over the phone
Figure 43: Consumers with income over ?100,000 prefer to arrange their combined policy over the telephone
Figure 44: Groups A and E are more likely to use the telephone to arrange their combined household policy
Figure 45: Older consumers are more likely to use the phone to arrange their home contents insurance
Figure 46: The phone is the most used platform for arranging home contents insurance
Figure 47: Higher socio-economic groups are more likely to use the internet to arrange home contents insurance
Figure 48: Retention of household insurance by type
Figure 49: Middle-aged consumers are most likely to stay with their combined home insurance provider
Figure 50: Consumers with a household income of ?100,000-139,999 are the most likely to switch their combined insurance policy providers
Figure 51: Consumers from group A were to most likely to switch combined home insurance providers
Figure 52: Consumer loyalty in the contents only insurance sector peaks with middle-aged consumers
Figure 53: The home contents insurance market showed a large degree of loyalty overall
Figure 54: Consumer promiscuity was consistently high for all groups
Figure 55: RBS Group took market leadership in home insurance underwriting in 2009
Figure 56: Onex Corp, Hiscox, Liverpool Victoria and Allianz all have a similar share of household underwriting
Figure 57: Lloyds Banking Group and Co-operative recorded low CORs in 2009
Figure 58: The household insurance market is expected to see slow growth over the next five years
Figure 59: There is little to no change expected in the COR during the forecast period