UK Private and Commercial Landlord Insurance 2016

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The residential landlord market provides a mixed picture in terms of its current state and future outlook. While it has undergone significant growth over recent years, the market is ripe for change following government plans to raise taxes on secondary properties and increase stamp duty. Landlords may also be vulnerable to interest rate changes, which have caused some financial providers to revamp their lending criteria and introduce tougher restrictions. This is a concern for insurers that have previously enjoyed the buoyancy of the market. Insurance providers are primarily in the market for accidental landlords – those acquiring properties by ways other than outright purchase. And as lending rules strengthen and it becomes increasingly difficult to attain a buy-to-let mortgage, this may become a principal route to market for insurers. However, although the number of those offering rented accommodation through a secondary home has declined from last year, providers are adamant the market’s value will continue to grow, especially as investors rush to buy a second property and attempt to beat the tax hikes.

On the commercial landlord side, the firms involved in the real estate and rental space are moving towards the expansion of investment in commercial property outside of London. This is becoming a preferred option due to the prospect of gaining a better return on the investment, including more financial gain or an improvement on the space acquired for rental purposes, such as a larger office area at a reduced cost than if the space was to be rented in the capital.

Scope

  • The proportion of consumers offering rented accommodation in the UK through a secondary property has fallen year-on-year from 60.3% in 2014 to 56.5% in 2015.
  • Contacting the insurer directly is the main distribution platform for private landlords, with 43.0% of consumers opting to purchase insurance via this channel.

Telephone is the most popular method of arranging cover in the real estate and renting space, with 46.9% of SMEs opting for this medium.

Reasons to buy

  • Keep up-to-date with the latest developments occurring in the private and commercial landlord markets.
  • Be informed of the latest issues affecting customers and the subsequent impact on insurers.
  • Be prepared for how regulation will influence the landlord space over the next few years.

Companies mentioned

BNP Paribas

Belong Safe

Airbnb

Aviva

AXA

Allianz

Hiscox

Direct Line

RSA

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QBE

NFU Mutual

Zurich

Towergate

BNP Paribas

Belong Safe

Airbnb

Aviva

AXA

Allianz

Hiscox

Direct Line

RSA

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QBE

NFU Mutual

Zurich

Towergate

Table of Contents

EXECUTIVE SUMMARY

The profitability of the market is in question amid changes to policies

Key findings

Critical success factors

PRIVATE LANDLORDS AND RESIDENTIAL PROPERTIES

Introduction ...

EXECUTIVE SUMMARY

The profitability of the market is in question amid changes to policies

Key findings

Critical success factors

PRIVATE LANDLORDS AND RESIDENTIAL PROPERTIES

Introduction

The landlord insurance market is worth an estimated £2.22bn

GWP in the commercial property market has fluctuated in recent years

The residential buy-to-let space is thriving but is facing several challenges

Rising house prices are driving consumers into private rented accommodation

Buy-to-let lending is thriving but has been a concern for policy makers

Ownership of secondary properties is most prevalent in London and Southern England

Government intervention will reduce buy-to-let lending

Landlords are clamping down on illegal subletting

Airbnb-style "host insurance" could fill gaps in the landlord and home markets

The protection of tenants is now a priority amid the introduction of new safety measures

New regulation for letting agents provides landlords and tenants with increased powers

Ownership of secondary properties has increased but fewer are willing to let

13.4% of consumers own secondary residential properties in the UK

56.5% of consumers use second properties to provide rented accommodation for tenants

Rental property ownership among the different age bands presents a mixed picture

Consumers with larger incomes are most likely to afford second properties

Purchasing is the most popular means of acquiring a second property

Direct communication is favored by residential landlords purchasing insurance

Insurers remain the top channel for individuals insuring their rental property

Telephone is the outright winner in terms of arranging landlord cover

Over one third of properties let by landlords in the UK are inadequately insured

The residential landlord market going forward

Buy-to-let market to grow as investors strive to beat tax rises

The influx of foreign investors is driving the impact of buy-to-leave

Increased competition would bring about a drop in rates

The simplicity of landlord insurance could encourage use of the online channel

COMMERCIAL LANDLORDS, REAL ESTATE, AND RENTING

The market is mainly comprised of micro businesses and is best served by Aviva

The real estate and renting sector is most affiliated with micro businesses

Aviva remains the top insurer serving SMEs in the real estate and renting sector

E-commerce is driving uptake of large storage units

London is increasingly becoming a competitive market for commercial landlords

Increased demand for London office space puts downward pressure on vacancy rates

Investors are turning to areas outside London for commercial property purchases

Regional office markets are predicted to perform strongly in 2016

Brokers remain the first port of call for commercial landlords

The broker channel continues to dominate the distribution landscape

Price is the main reason for opting to use a broker

Telephone is the most popular medium in the real estate and renting space

Most real estate and renting sector SMEs spend between £1,000 and £1,999 on insurance

Property cover is the main product purchased in the real estate and renting space

APPENDIX

Abbreviations and acronyms

Definitions

Banks

Brokers

Direct

Price comparison websites

SME

Methodology

Verdict Financials 2015 UK General Insurance Survey

Verdict Financials 2015 UK SME Insurance Survey

Bibliography

Further reading

About Verdict Financial

Disclaimer

List of tables

Table 1: Top property insurers for SMEs in the real estate and renting sector, 2014-15

Table 2: Annual insurance spend of SMEs in the real ...

Table 1: Top property insurers for SMEs in the real estate and renting sector, 2014-15

Table 2: Annual insurance spend of SMEs in the real estate and renting sector, 2015

List of figures

Figure 1: The total commercial property market was worth £5bn in 2014

Figure 2: House prices have risen 53.2% from £173,000 in 2004 ...

Figure 1: The total commercial property market was worth £5bn in 2014

Figure 2: House prices have risen 53.2% from £173,000 in 2004 to £265,000 in 2014

Figure 3: 2015 saw a rapid increase in the number of buy-to-let mortgage deals

Figure 4: London has the largest share of consumers owning a secondary property at 27.5%

Figure 5: London represents the largest proportion of landlords in the UK with a 28.3% share

Figure 6: House prices were highest in Greater London during 2015 at £395,000

Figure 7: 2016 will see lending in the buy-to-let space slow amid changes to government policies

Figure 8: Belong Safe looks to provide insurance for home owners with paying guests

Figure 9: Communication failure is the most common lettings issue reported

Figure 10: 2014 marked the first drop in the number of complaints to The Property Ombudsman for five years

Figure 11: 13.4% of consumers own secondary residential properties in the UK

Figure 12: The proportion of consumers offering rented accommodation has fallen year-on-year

Figure 13: The majority of landlords acquire their second property by way of purchase

Figure 14: Insurers remain the top distribution channel for private landlords

Figure 15: Phone remains the most popular product distribution method for private landlords

Figure 16: 35.6% of individuals letting second properties do not have adequate insurance

Figure 17: The North West of England has the highest number of long-term empty properties

Figure 18: The real estate and renting sector has a bias towards the micro end of the market

Figure 19: 2015 saw growth in the number of micro enterprises in the real estate and renting sector

Figure 20: Aviva and AXA are the standout SME insurers in the real estate and renting sector

Figure 21: Over two thirds of property take-up in London during Q4 2015 occurred in the City

Figure 22: Office availability in the City of London during Q4 2015 was 55% of 14.2 million sq ft

Figure 23: Recent years have seen office investment volumes increase despite a fall in 2015

Figure 24: The speculative pipeline for regional office development has picked up pace in 2016

Figure 25: Brokers dominate product distribution in the real estate and renting space

Figure 26: Broker usage has slipped 2.3 percentage points but they continue to lead the market

Figure 27: Price is the determining factor for using an insurance broker

Figure 28: Almost half of real estate and renting SMEs purchased insurance over the phone

Figure 29: 20.6% of retail and renting SMEs annually spend between £1,000 and £1,999 on insurance

Figure 30: Property insurance is the main product purchased in the real estate and renting sector

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