Get ahead of the competition with Timetric’s Household Insurance in the UK - Key Trends and Opportunities to 2018 – the research report covering the market dynamics, competitive landscape and consumer perspectives through insights and forecasts. This report also discusses key products and distribution channels and gives an overview of the leading companies in the category, along with details of strategic initiatives undertaken.
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Gross written premiums (GWP) in the household insurance category fell by 1.6% in 2012 and 3% in 2013, to reach over GBP6 billion. The decline was due to falling policy prices provoked by strong competition in the category, combined with benign weather conditions in 2013. For the whole review period, however, the category still posted a positive compound annual growth rate (CAGR) of 1%.
In contrast to other non-life categories, household insurance remained profitable throughout the review period. In 2013, insurers achieved a combined operating ratio of 91%, well below the 100% breakeven threshold but higher than in the category’s best year, 2011. Raising profit margins through pricing in 2011 and a low level of claims incurred in 2011 and 2013 helped the category to stay comfortably profitable.
Future profitability is not guaranteed as insurers fail to keep commission costs and operating expenses in check. Both of these indicators rose constantly during the review period, at CAGRs of less than 6% and over 6% respectively. Additionally, the household category’s strong underwriting faces challenges as distribution shifts in favor of price-comparison websites, enhancing competition and putting pressure on prices.
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With rising expenses and earned premiums possibly limited by reduced pricing margins, insurers’ future profitability is easily threatened by a period of bad weather, as the weather remains the category’s main driver in terms of the value of claims.
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