UK Household Insurance: Market Dynamics and Opportunities

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Soft market conditions endure in a UK household insurance market with high levels of competition and capacity, and a continuing shift in customer buying habits. Despite this, the market continues along a profitable path for as long as it can rely on relatively benign weather conditions.


Verdict Financial’s “UK Household Insurance: Market Dynamics and Opportunities” report provides an in-depth analysis of the UK household insurance market. It looks at market size and performance ratios as well as changes in premiums, claims, contextual and economic factors, regulations, and opportunities. It provides a thorough overview of the market along with future forecasts and analysis of emerging technologies and products.

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Table of Contents

Executive Summary

The UK household insurance market remains highly competitive

Key findings

Critical success factors

Market Context

A soft market and changing customer behavior led to a fall in GWP in 2015

Home insurance GWP fell by

3.8% in 2015

Premium rates return to flat or slightly negative following the Insurance Premium tax hike

Changing customer behaviors are compounding the competitive nature of the market

Competition remains fierce in the home insurance sector, preventing rate increases

Combined policies continue to dominate, but home ownership trends are impacting GWP

Home insurance remains profitable due to relatively benign weather

The loss ratio rose in 2015 as a result of the soft market, but the COR remained below 100%

The expense ratio fell in 2015 as a result of a lower commission ratio and a focus on efficiency

Claims costs fell in 2015, although the average claims cost increased

Gross incurred claims fell across all categories, except fire and escape of water

Average claims cost increased, with the average winter storm claim significantly higher in 2015

Escape of water claims were the costliest peril in 2015, although technology may ultimately assist

Flood Re affected H1 2016 results, but overall the impact is expected to be small

Flood Re launched in April 2016 and is expected to benefit around 350,000 homes “over time”

Flood Re costs have increased expense ratios for insurers in H1 2016

Overall, Flood Re impacts are expected to be relatively small

Home insurance demand remained strong, but underlying dynamics are shifting

New home registrations and completions increased, although numbers remain well below historic levels and requirements

Mortgage approval rates rose by 4% in 2015, but have fallen in 2016

The rise of ‘Generation Rent’ presents a shifting landscape

Penetration rates are high among owner-occupiers, but lower for tenants

2016 and Beyond

Household insurance GWP is forecast to stabilize up to 2018

Premium rates are unlikely to increase in the short term

A significant weather event will be required to shift rates

Demand and profitability will be impacted by the slowdown in the economy

Household GWP is expected to stabilize from 2016 to 2018

The negative economic consequences of Brexit could have an adverse effect

Brexit will not result in substantial changes to the market’s structure

The economic consequences of Brexit will have the greatest impact

FCA regulation on renewal transparency will impact the market in H2 2017

FCA regulation will increase renewal transparency and promote shopping around

Between 11% and 18% more home insurance customers could shop around

The impact will largely be evident from H2 2017

A major weather event will reveal Flood Re’s market impact

A significant weather event will reveal the extent to which Flood Re can plug the pricing gap

Stakeholders need to remain aware of the ultimate aim for premiums to fully reflect flood risks

The growth of ‘Generation Rent’ will impact product development

Renting will remain the fastest growing type of tenure

Home insurers need to build propositions targeted to the needs and behaviors of this customer segment

Technology-enabled product and service offerings have the potential to transform home insurance in the longer term

Consumer appetite for smart home technology is increasing in the wake of a growing number of products

There have been two significant developments in UK-connected home insurance in 2016

In spite of benefits, connected home insurance will not take off in the short term

Insurers will continue to seek opportunities to develop and test connected home use

There is growing interest in pay-as-you-go, highly tailored micro-insurance policies


Abbreviations and acronyms

Supplementary data


Combined operating ratio

Compound annual growth rate

Gross written premium


Primary and secondary research

Verdict Financial’s 2015 UK General Insurance Consumer Survey


Further reading

About Verdict Financial


Frequently asked questions

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