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Analyst Interview: UK Home Emergency Insurance 2016

General Insurance analyst Thomas McCourtie has been working on our “UK Home Emergency Insurance 2016” report. Here, we ask him about the key findings of his research, new and developing trends, and how he expects the market to develop over the coming years, especially in an age where smart technology has a growing use case for inside the home.

How has the market fared over the past year?

Home emergency insurance is one of the less pertinent markets for personal insurance, and its GWP growth rates over the years have been subdued at best. 2015 recorded a growth rate of just 0.1%, whereas the previous year saw the market contract by 0.7%. Much of the market’s growth occurred in 2011, when GWP hit £1.3bn (an increase of 17.1% from the previous year); revenues have hovered around this mark ever since. Staggered growth levels are also expected over the coming years, especially once the full effects of the Financial Conduct Authority’s banning order on opt-out insurance add-on sales comes into force.

What’s been the most significant development(s) in the home emergency insurance market?

The regulatory landscape has changed over the past year, which has encouraged providers to rethink their sales strategies and routes to market. This refers to the banning of opt-out insurance add-on sales and the improvement of product information, in order for consumers to be kept informed of the full coverage extent of their policies, as well as to promote competition among providers, so customers feel more inclined to shop around. This directly affects the home emergency insurance market, as these products are commonly bought as an add-on to regular household insurance. Therefore, insurers may be forced to take a different approach when targeting their customer base.

The other most notable development in the home emergency insurance market is the growth in the number of energy suppliers launching smart-tech devices designed to improve the mitigation or management of risk in the home. Such devices work to notify the user of damaged domestic appliances, such as a misfiring boiler or damage to the main water supply, and even the presence of intruders in the home. Insurers are waking up to the benefits of these devices and are beginning to offer incentives for those putting them to use in the form of reduced premiums, or a discount on the tech product itself when bought in conjunction with a policy. We believe that these types of partnerships and collaborations will become more prevalent in the next few years.

What can we expect from home emergency insurance going forward?

The market is expected to remain flat for the foreseeable future with regards to GWP. Providers are beginning to incentivize customers with discounts on premiums for the use of smart-tech devices, designed to ward-off risk and any consequential damages, meaning as a knock-on effect overall rates are likely to remain as they are or marginally decline. We can expect to see energy suppliers continue in their endeavor to develop products for consumers wishing to better manage their energy consumption and domestic risks, and more home emergency insurers will jump on the bandwagon.

However, the biggest challenge here is convincing consumers of the use case of such tech in the home. Currently, consumers are generally unwilling to buy smart devices for their property and have a lack of interest in the concept. Many still don’t understand how smart home products work and the potential benefits, which suggests more needs to be done to help change this lack of knowledge and confidence into real knowhow.

By Thomas McCourtie, Analyst

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