18 Jun 2020
Posted in Insurance
COVID-19 to hit UK home insurers as disposable income will decline, says GlobalData
Home insurance, which has remained stagnant since 2017 in the UK, is expected to fall as COVID-19 hits the economy and consequently, the disposable income is likely to drop, says GlobalData, a leading data and analytics company.
According to GlobalData’s 2019 UK Insurance Consumer Survey, there has been an increase in the number of consumers shopping around before renewing their home insurance (now 41.8%) while more than a quarter of policyholders (27.9%) will switch the provider during the renewal time.
Jazmin Chong, Insurance Analyst at GlobalData, comments: “The increased proportion of consumers changing their purchasing behavior is due to an increased cost of premiums, a common trend over the last few years. This is driven by higher costs of claim payouts due to weather-related events, as well as an increased uptake in technologies that make policies overall more expensive in the short-term. These changes in the market, combined with a greater number of budget-conscious consumers being in a better position to mitigate household risk while working from home, will lead to a decrease in the uptake of household insurance.”
As a result of COVID-19, the UK’s home insurance market is forecast to contract. GlobalData is forecasting that gross written premiums will fall from £6,369 in 2019 to £5,935 by 2024, representing a compound annual growth rate (CAGR) of -1.4%. The fall in the market is expected to come from consumers taking out fewer policies and choosing less expensive cover options such as combined policies or reducing the extent of optional extras in their coverage.
Chong concludes: “In the long-term, the lockdown will have greater implications for the household industry, as customer behavior and willingness to adapt technologies to their home insurance policies will change. This will make insurers less willing to further invest and integrate home sensor technologies or other technologies as part of their policies. This will make it harder for the home insurance industry to avoid paying out expensive claims and also trickier for insurers to reduce premiums.”