Overview:

Introduction

This report includes information and commentary on the total market share and advertising spend of the key industry players in UK household insurance. There is analysis into consumer trends and the success of various distribution methods by demographic group. It also details the changes in the number of claims in household insurance and their total value as well as the premium prices of policies.

Scope

*Consumer research on buyer motivations, methods of arrangement and switching behavior based on an exclusive survey of nearly 4,400 consumers.
*Insight into the effects of the credit crunch, including the major changes to the competitor rankings and housing market.
*Data on the market share of the top brands and groups as well as an analysis of the marketing spend of the top brands.
*Forecasts of the future size of the market, its underwriting profit and the drivers that will affect the market going forward.

Highlights

There is a wide variety of distribution channels represented in the top 10 insurer chart below. For example, Tesco Personal Finance (now Tesco Bank) has a strong presence, demonstrating that even retail affinities can use their commercial presence and nous to successfully market general insurance.

In 2009, the average claim value increased 4.2% to £1,227 per claim and in correlation the gross claims costs in the UK rose 3.0% to £376m. However the number of theft-related insurance claims fell 1.2% to 306,000: this was expected to rise with the worsening financial situation in the UK and related increasing unemployment rate.

Though the market has been contracting since 2008, the insurers have adjusted their strategies and started to show growth again in 2010, and when the housing market returns to strength the bancassurers who sell much of their home insurance book on the back of mortgage arrangements, and the rest of the market, will start to see more dramatic growth.

Reasons to Purchase

*Assess the most effective distribution and marketing methods by demographic group and the potential of the new business market.
*Understand the trends in claims by volume and total value and how this impacts on the loss, expense combined operating ratios of the industry.
*Gain insight into the future direction of the sector, including market size and underwriting profitability and the major issues affecting the market.

Overview 1
Catalyst 1
Summary 1
Executive Summary 2
The household market shrank slightly in 2009 and will be comparatively static in 2010 2
The household market contracted by 2% in 2009 2
The majority of home insurance policies are distributed through the top 10 groups and brands 3
The top ten insurance groups hold the largest share of the home insurance markets 3
The dominant platforms for home insurance sales are the telephone and internet 4
Internet and telephone sales are becoming increasingly prevalent in the home insurance market 4
The average theft claim value continued to rise in 2009 5
Household insurance market GWP hits £7.9bn at the end of the forecast period 6
The household insurance market is expected to see muted growth 6
Table of Contents 8
Table of figures 9
Table of tables 9
Market Issues 10
Introduction 10
Rates have begun to increase in the market as investment income has come under pressure 10
Investment returns have declined significantly in 2009 10
Claims costs are also putting pressure on insurers to increase rates 10
Despite an increase in mortgage volumes, the total value of mortgages dipped in 2009 10
The mortgage situation will most affect bancassurers 10
Insurers have introduced strategies to manage weather perils 12
The Flood and Water Management Act was passed in Q2 2010 12
Many insurers are being proactive when dealing with floods 12
Burst pipes and related escape of water leads to increases in claims 13
Aggregators have grown their presence in the home insurance market 14
Around 45% of consumers use an aggregator when arranging their household insurance cover 14
Aggregators are starting to focus more advertising budget on promoting their home insurance products 15
Market Context 19
Introduction 19
The household market shrank slightly in 2009 and will be comparatively static in 2010 19
The household market contracted by 2% in 2009 19
Combined insurance policies constituted the largest share of the total market GWP 20
Insurers put through price rises following Cockermouth 22
The past year displayed a steady increase in the market average premium and shoparound premium of combined home insurance 22
The household contents premium prices fluctuated over the past two years 23
Insurers continue to increase the price of buildings insurance cover 23
There is a vast potential market for household insurance 26
There is a potential market of 21.5m households in England 26
The number of households in England grew by 0.6% in 2008/09, increasing the opportunity for new business 27
Privately-rented households remain the largest growing market for household insurance providers 29
2009 saw claims costs continue to improve 30
Claims costs fell marginally in 2009 30
Escape of water claims increased by 21.2% in 2009 32
Flood and storm damage claims continued to fall in 2009 32
Domestic fire claims costs decreased in 2009 34
Accidental damage claims costs declined slightly to £397m in 2009 35
The average theft claim value continued to rise in 2009 35
The number of burglaries increased slightly in 2008/09 36
Households with a high level of security were the best burglary risks for insurers in 2008/09 38
Insurers paid out more in subsidence claims in 2009 40
Returns are attractive in the household insurance market 42
The combined operating ratio of the market is currently at a healthy level 42
Distribution 44
Introduction 44
Banks and building societies hold the largest share of the UK home insurance market 44
The majority of home cover sales can be attributed to banks and building societies 44
Brokers closed the market share gap with the bancassurers in 2008 and 2009 44
The direct channel retains a level share of the household insurance market 44
Partnerships' share of the UK home insurance market has declined 44
The majority of home insurance policies are distributed through the top 10 groups and brands 46
The top ten insurance groups hold the largest share of the home insurance markets 46
The Lloyds TSB, Halifax and Norwich Union brands have the greatest market share 47
Older consumers are more likely to select a home insurance policy targeted at their age group 48
Direct Line's and Halifax's combined contents and buildings insurance policies are particular popular among younger consumers 49
Home contents insurance providers showed little age to market correlation, aside from RIAS and Saga 51
Consumers aged 18-24 were most likely to arrange buildings only home insurance policies through a top ten distributor 52
Direct Line spent the most money on household insurance marketing 54
Direct Line spent the most money on marketing home insurance in 2009 54
The top ten household insurance advertisers spent the majority of their marketing budget on direct mail campaigns 54
TV advertising was a key medium for the top ten advertisers, in particular the direct insurers 54
Advertisers ranked 11-20 preferred direct mail campaigns and were also more likely to spend significant sums on press campaigns 56
The household insurers ranked 11-20 for UK market advertising also showed a preference for direct mail 56
TV advertising was a key medium for the top ten advertisers, in particular the direct insurers 56
Press advertising can constitute a prudent secondary advertising platforms 57
Consumer Data 59
Introduction 59
Combined household insurance is the most popular type of product sold to consumers 59
There is a healthy market for home insurance products 59
Consumers over the age of 55 are the largest target market for combined policies 60
Higher income households have higher penetration rates for combined home insurance and buildings only cover 61
Consumers belonging to socio-economic groups A and B display consistently higher penetration rates for combined household products 63
Price should be the primary focus in insurance marketing campaigns 65
Insurance companies should emphasize competitive prices when marketing their combined policies 65
While price remains the dominant attraction for insurance buyers, older consumers are more likely to consider other factors 66
Although it remains the key factor, older consumers of motor insurance are less concerned about price 66
The dominant platforms for home insurance sales are over the telephone or internet 68
Internet and telephone sales are becoming increasingly prevalent in the home insurance market 68
Providers of home insurance to the over 65s market should base their strategy primarily around telephone sales 69
Consumers aged over 65 prefer to use the phone to arrange their insurance policies, whereas other groups prefer to use the internet 69
Internet selling strategies for combined home insurance should remain the core method of targeting consumers with household incomes over £30,000 71
A and E consumers prefer to purchase their combined policy over the telephone 73
A telephone-based distribution strategy would be prudent for home contents insurance sales 74
The telephone surpasses the internet as the most popular platform for arranging home contents insurance 74
Consumers are generally more likely to purchase their home contents insurance over the telephone 76
The telephone is the preferred platform for arranging home contents insurance policies 78
There is a significant potential market for distributors of household insurance to target 79
Combined buildings and contents policy consumers are most likely to switch 79
Retention rates for combined home insurance peak with middle-aged consumers 81
The younger consumers were more likely to be on their first household insurance policies 81
Consumers earning less than £15,000 are least likely to change their combined insurance provider 82
Provider-switching of combined contents and buildings insurance policies is high across all socio-economic groups 84
Consumer aged under 35 are the softest targets for home contents insurance sales 86
Consumers aged 45-64 are more likely to stay with the same home contents insurance provider at renewal 86
Consumers with a household income of £75,000-99,999 are the most loyal to their home contents insurance policy providers 87
Contents only insurance showed the highest rate of consumer promiscuity 89
Competitive Dynamics 91
Introduction 91
2009 saw major changes to the market positions in home insurance 91
RBSI gained market leadership in household 91
Groupama stood out from the pack 93
Lloyds Banking Group profited from a low combined ratio 95
Future Decoded 98
Introduction 98
Household insurance market GWP hits £7.9bn at the end of the forecast period 98
The household insurance market is expected to see muted growth 98
Profitability in the market will remain fairly constant during the forecast period 101
APPENDIX 104
Distribution definitions 104
Banks/building societies 104
Broker 104
Company staff 104
Direct 104
'Other' company agents 104
Partnerships 104
Methodology 104
Datamonitor General Insurance Consumer Survey 104
Primary and secondary research 106
Distribution estimates and forecast methodology 106
Advertising and marketing spend data 106
Further reading 108
Ask the analyst 108
Datamonitor consulting 108
Disclaimer 108

List of Tables
Table 1: UK home lending volume and value, 2005-2009 11
Table 2: When your insurance last came up for renewal, did you visit any price comparison sites to obtain quotations? 15
Table 3: Top 4 aggregator insurance advertising spends, 2007-2009 17
Table 4: Top 4 aggregator insurance advertising spends by product, 2007-2009 18
Table 5: UK household insurance GWP, 2006-2010e 20
Table 6: Estimated split of household insurance GWP by type of cover, 2010 (£m) 21
Table 7: Average household insurance premium rates, April 2008-2010 (£) 25
Table 8: The size and tenure of households in England, 2008 and 2008-2009 (000s) 27
Table 9: The number of households in England, 2005-2008/09 (000s) 28
Table 10: Trends in household tenure for England, 1998-2008/09 (000s) 30
Table 11: UK domestic property insurance claims by peril, 2005-09 (£m) 31
Table 12: Escape of water claims cost and number of claims for escape of water in the UK, 2005-09 32
Table 13: Gross claims incurred for domestic property weather claims, 2005-09 (£m) 33
Table 14: UK claims incurred by fire, domestic and total, 2005-09 (£m) 35
Table 15: UK Accidental damage claims costs and the number of claims for accidental damage, 2005-2009 35
Table 16: Number of household theft and average theft claims cost in the UK, 2005-09 36
Table 17: Number of burglaries in England and Wales, 2001/02 to 2008/09 37
Table 18: UK employment, Q1 2006 - Q1 2010 38
Table 19: Household types by risk of burglary in the UK, 2005/06 to 2008/09 40
Table 20: Average subsidence claims cost compared to claims costs and number of claims for subsidence in the UK, 2005-09 42
Table 21: Household insurance GWP distribution by channel, 2005-09e 46
Table 22: With which of these insurance companies are you insured for your home insurance policy/s? Top 10 responses, split by age 49
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 50
Table 24: With which of these insurance companies are you insured for your home contents insurance policy/s? Top 10 responses, split by age 52
Table 25: With which of these insurance companies are you insured for your home buildings insurance policy/s? Top 10 responses, split by age 53
Table 26: Top 10 building and contents advertisers' spend by media, 2009 (£) 56
Table 27: Top 11-20 building and contents advertisers' spend by media, 2009 (£) 58
Table 28: Which of the following types of insurance are you covered by? 60
Table 29: Which of the following types of insurance are you covered by? Responses split by age 61
Table 30: Which of the following types of insurance are you covered by? Responses split by household income 63
Table 31: Which of the following types of insurance are you covered by? Responses split by socio-economic group 64
Table 32: Why did you take out your home insurance with your current provider? Top five responses 66
Table 33: Why did you take out your motor insurance with your current provider? Top five responses, split by age 67
Table 34: How did you arrange the home insurance policy you currently have? 69
Table 35: How did you arrange the combined contents and buildings insurance policy you currently have? Responses split by age 70
Table 36: How did you arrange the combined contents and buildings insurance policy you currently have? Responses split by household income 72
Table 37: How did you arrange the combined contents and buildings insurance policy you currently have? Responses split by socio-economic group 74
Table 38: How did you arrange the home contents insurance policy you currently have? Responses split by age 76
Table 39: How did you arrange the home contents insurance policy you currently have? Responses split by household income 77
Table 40: How did you arrange the home contents insurance policy you currently have? Responses split by socio-economic group 79
Table 41: When you last renewed your home insurance did you change company or stay with the same one? 80
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 82
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 84
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 85
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 87
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 89
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 90
Table 48: GWP and market share of the top ten household insurance groups, 2008-09 93
Table 49: GWP and market share of the top 11-20 household insurance groups, 2008-09 95
Table 50: Reported year combined ratio for top 10 household insurance groups, 2009 (%) 97
Table 51: Key variables affecting household insurance GWP, neutral scenario, 2010-2015 99
Table 52: Forecasts for total market household GWP, 2009-14 101
Table 53: Forecast of UK household insurance combined operating ratio, 2010-14 103
Table 54: Breakdown of household insurance consumer survey respondents, by household income and age 105
Table 55: Breakdown of household insurance consumer survey respondents, by socio-economic group 106
Table 56: The size and tenure of households in England, 2008 (000s) 107

List of Figures
Figure 1: The household market is expected to see marginal growth in 2010 2
Figure 2: The Lloyds Banking Group and the RBS Group both have a strong presence in the home insurance sector 4
Figure 3: The majority of home insurance is distributed over the phone or the internet 5
Figure 4: The average claim value increased in 2009 6
Figure 5: The household insurance market is expected to see slow growth over the next five years 7
Figure 6: While the number of mortgages increased in 2009, their total value decreased further 11
Figure 7: The Groupama website offers customers specific advice about floods and storms 13
Figure 8: Fewer people used an aggregator to purchase and research household insurance than motor 15
Figure 9: Top 4 aggregator insurance advertising spends, 2007-2009 16
Figure 10: Top 4 aggregator insurance advertising spends by product, 2007-2009 17
Figure 11: The household market is expected to see marginal growth in 2010 19
Figure 12: Combined home insurance policies account for the majority of the market GWP 21
Figure 13: April 2009 - 2010 saw a consistent price increase except for a slight plateau in Q3 2009 22
Figure 14: Q2 2009 displayed a particularly competitive time for household contents insurance 23
Figure 15: The market average price for buildings insurance consistently increased for the past 8 quarters 24
Figure 16: There is a potential home insurance market of 6.9m rented households and 14.6m owner occupied households in England 26
Figure 17: The number of households in England has grown consistently since 2005 28
Figure 18: The privately rented sector shows the largest growth for household insurance providers 29
Figure 19: Weather-related claims decreased significantly in 2008 while escape of water claims increased 31
Figure 20: Domestic property weather claims fell in 2009 33
Figure 21: Domestic fire claims comprised a slightly lower proportion of the fire claims in 2009 34
Figure 22: The average claim value increased in 2009 36
Figure 23: The number of burglaries increased very slightly in 2008/09 37
Figure 24: Young homeowners are the most likely to be burgled 39
Figure 25: The frequency and average value of subsidence claims rose in 2009 41
Figure 26: After the spike in COR due to the 2007 floods, the household market returned to profitability 43
Figure 27: Bancassurers' share of the home insurance market has declined 45
Figure 28: The Lloyds Banking Group and the RBS Group both have a strong presence in the home insurance sector 47
Figure 29: Halifax held the largest share in the 18-24 age group 48
Figure 30: For combined insurance, age-focused Saga and RIAS are dominant for older consumers 50
Figure 31: Targeting older consumers has proved effective for RIAS and Saga 51
Figure 32: Banks and building societies have a strong presence in the buildings only insurance sector 53
Figure 33: Top 10 household insurance marketers spend a lot of money on direct mail advertising 55
Figure 34: Household insurance advertisers ranked 11-20 show a preference for the direct mail medium 57
Figure 35: Combined buildings and contents policies have the highest penetration rates 60
Figure 36: Over 55s are the largest target market for combined home insurance policies 61
Figure 37: Providers should target their combined contents and buildings insurance offer at consumers in the mid and higher income bands 62
Figure 38: Bands A and B show the best penetration rates overall, while group E displays an off-trend high rate for combined policies 64
Figure 39: Price is a particularly important factor for consumers purchasing a combined home insurance policy 65
Figure 40: Older consumers were less likely to state price as a reason for selecting an insurance provider 67
Figure 41: The majority of home insurance is distributed over the phone or the internet 68
Figure 42: Older consumers are more likely to buy their combined policies over the phone 70
Figure 43: Consumers with income over £100,000 prefer to arrange their combined policy over the telephone 72
Figure 44: Groups A and E are more likely to use the telephone to arrange their combined household policy 73
Figure 45: Older consumers are more likely to use the phone to arrange their home contents insurance 75
Figure 46: The phone is the most used platform for arranging home contents insurance 77
Figure 47: Higher socio-economic groups are more likely to use the internet to arrange home contents insurance 78
Figure 48: Retention of household insurance by type 80
Figure 49: Middle-aged consumers are most likely to stay with their combined home insurance provider 81
Figure 50: Consumers with a household income of £100,000-139,999 are the most likely to switch their combined insurance policy providers 83
Figure 51: Consumers from group A were to most likely to switch combined home insurance providers 85
Figure 52: Consumer loyalty in the contents only insurance sector peaks with middle-aged consumers 86
Figure 53: The home contents insurance market showed a large degree of loyalty overall 88
Figure 54: Consumer promiscuity was consistently high for all groups 90
Figure 55: RBS Group took market leadership in home insurance underwriting in 2009 92
Figure 56: Onex Corp, Hiscox, Liverpool Victoria and Allianz all have a similar share of household underwriting 94
Figure 57: Lloyds Banking Group and Co-operative recorded low CORs in 2009 96
Figure 58: The household insurance market is expected to see slow growth over the next five years 100
Figure 59: There is little to no change expected in the COR during the forecast period 102