UK household insurance market expecting a soft recovery

Press Release   •   Jul 19, 2013 14:16 BST

Gross written premiums within the UK household insurance market rose by 0.6% annually in 2012, slowing from the expansion recorded in 2011.

According to a recent report, 'Household Insurance in the UK, Key Trends and Opportunities to 2017,' premium income totalled £5.26 billion in 2012 and grew at a compound annual growth rate (CAGR) of 3.24% between 2008 and 2012. The strength of the housing market is a primary driver of demand for household insurance. 2012 saw slower growth in mortgage lending and house prices, and a slump in private housing construction.

A number of factors, such as an increase in fraud and increasingly unpredictable weather, have seen home insurance premiums continue to rise in the UK. For this reason, there has been a shift in how home insurance is bought in the UK -- as customers become a lot more price sensitive, there has been a large increase in the amount of policies sold through price comparison sites.

In addition to standard home insurance, some 8 million households in the UK are categorised as being a "non standard" risk.These households would require a Specialist or Non Standard insurer that would cover home insurance needs for people that have criminal convictions and/or subsidence in the property or have previously been underpinned.

The soft recovery in the UK housing market, coupled with the fragility in the wider economy, will remain a challenge for the household insurance category.

A strong rebound in economic growth is not expected to materialise until 2014, but as this recovery gains traction, growth rates in premiums will also pick up. Claims paid by household insurers jumped by 11.3% in 2012, in line with an increase in payouts for flood damage after heavy rainfall.

The UK has experienced two of its wettest years on record since 2008, a factor behind the 19% rise in claims paid between 2008 and 2012. Despite high claims payouts and a fall in investment income, household insurers remained profitable over the past four years.

This strong underwriting base faces challenges ahead, however, as the model of distribution shifts in favor of price-comparison websites.

For more information on the UK household insurance market, see the latest research: Insurance Market Research

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