Table of Contents
- CHAPTER 1 EXECUTIVE SUMMARY
- Introduction
- Market context
- There are several forms of home emergency cover
- Home emergency insurance is largely provided in combination with home
insurance and two main strategies for the product are evident
- Many insurers provide home emergency insurance as a standard part of
their home insurance, using it as a form of product differentiation
- Other providers sell the cover as an optional extra on home
insurance, using it as a revenue generator
- Home emergency premium rates vary considerably from £2 to £7 a month
- It is estimated that there are over 3 million policies in force,
though only between 1.2 and 1.3 million of these policies are paid for
- Competitive dynamics
- Most of the top 10 home insurers offer home emergency, but cover is
less common among mid-sized home insurers
- There is little to no direct competition in the home emergency market
- Competition to home emergency comes from substitute products, such as
home service and single utility emergency cover, supplied by utility
companies
- The future decoded
- Two separate strategies are likely to shape growth in the home
emergency market in the near future
- As competition heats up in the household insurance market, offering
home emergency as standard could be increasingly used as a
differentiation tool
- Selling the product as an optional extra will lead to an increase in
penetration rate
- However, factors such as a rise in Internet sales and the threat from
substitute products will limit growth in the sale of home emergency
insurance
- CHAPTER 2 INTRODUCTION
- What is this report about?
- Who is the target reader?
- How to use this report
- CHAPTER 3 MARKET CONTEXT
- Introduction
- There are several forms of home emergency cover
- Home emergency insurance is largely provided in combination with home
insurance and two main strategies for the product are evident
- Many insurers provide home emergency insurance as a standard part of
their home insurance, using it as a form of product differentiation
- Other providers sell the cover as an optional extra on home insurance,
using it as a revenue generator
- Stand-alone home emergency insurance is not as successful as cross
selling
- Face-to-face or personal contact plays an important role in the sale of
home emergency insurance
- Home emergency premium rates vary considerably from £2 to £7 a month
- It is estimated that there are over 3 million policies in force, though
only between 1.2 and 1.3 million of these policies are paid for
- Home emergency is a profitable line, due to low claims frequency
- Lack of price-based competition allows providers to price the product
profitably
- Profitability is also helped by a low claims frequency, though claims
frequency is linked to unpredictable weather conditions
- Only some weather claims are likely to lead to an increase in the
number of home emergency claims
- CHAPTER 4 COMPETITIVE DYNAMICS
- Introduction
- The top household insurers, as well as the top banks, are the main
providers of home emergency insurance
- Most of the top 10 home insurers offer home emergency, but cover is
less common among mid-sized home insurers
- Many banks also offer home emergency insurance, but the product is
less common among brandassurers
- There is little to no direct competition in the home emergency market
- The main battlefield and driving force of the home emergency market is
the highly competitive household insurance market
- A number of developments in the household insurance market are
influencing the home emergency market
- The household insurance market saw increased competition in 2005,
which drove down premium rates
- The increased commoditization of household insurance and changing
distribution channels raises the intensity of price-based competition
- Direct distribution channels, especially the phone and the Internet,
are growing in favor with consumers
- As Homeserve provides home emergency services for insurance providers,
there is no room for product differentiation
- Inter Partner Assistance partners with Homeserve and underwrites many
insurance providers' home emergency policies
- Competition to home emergency comes from substitute products, such as
home service and single utility emergency cover, supplied by utility
companies
- British Gas dominates the home service market, while other utility
companies offer single utility emergency products
- Advertising is dominated by Homeserve and British Gas, which will impact
consumer perception of the product
- British Gas and Homeserve account for 78 per cent of the £19 million
spent on advertising in 2005
- Direct mail is the most popular advertising medium due to its
cost-efficiency and the role of home emergency as a cross-sold product
- Because of the costs involved it is not feasible for insurance
providers to advertize home emergency insurance on television
- Press advertising is a cheaper way of building public awareness than
television advertising, and is used by several competitors for this reason
- CHAPTER 5 THE FUTURE DECODED
- Introduction
- The number of households in the UK is increasing, leading to a small
increase in the number of potential home emergency customers
- Two separate strategies are likely to shape growth in the home emergency
market in the near future
- As competition heats up in the household insurance market, offering
home emergency as standard could be increasingly used as a differentiation
tool
- Up-selling and cross-selling will lead to an increase in penetration
rate, especially for providers that currently have low penetration
- However, factors such as a rise in Internet sales and the threat from
substitute products will limit growth in the sale of home emergency insurance
- Changes in distribution trends for home insurance will limit the
growth potential of home emergency insurance, as online sales increase at
the expense of face-to-face sales
- Low consumer awareness and substitute products will continue to limit
growth
- CHAPTER 6 APPENDIX
- Supplementary data
- Definitions
- Definitions of general terms
- Definitions of terms specific to this report
- Research methodology
- Future readings
- Relevant links
- Do you need more information?
- SPP writing team
- List of Tables
- Table 1: The results of Datamonitor's home emergency mystery shopping
exercise, March 2006
- Table 2: Home emergency insurance premium rates, March 2006
- Table 3: Datamonitor estimates of the size of the home emergency
market in policy numbers and GWP, 2005
- Table 4: Gross claims incurred in the household market, by peril,
1999-2004
- Table 5: Proportion of household claims by peril, 1999-2004
- Table 6: Weather damage claims incurred by cause in household
insurance, 1999-2004
- Table 7: The top 20 household insurers' home emergency insurance
offerings, market share as part of group and as part of entire household
insurance market
- Table 8: Change in UK household insurance premiums, January 2006 -
April 2006
- Table 9: Change in UK household insurance premiums, 1999-2005
- Table 10: Examples of partnership deals in the home emergency market,
which is dominated by Inter Partner Assistance, the underwriting partner
of Homeserve
- Table 11: Examples of cover offered by utility companies, March 2006
- Table 12: Competitors' advertising spend on home emergency insurance
by medium, 2005
- Table 13: Advertising spend on direct mail for home emergency
insurance by competitor, 2005
- Table 14: Competitors' advertising spend on TV for home emergency
insurance, 2005
- Table 15: Competitors' advertising spend on press for home emergency
insurance, 2005
- Table 16: Reasons for choosing household insurance policy, split
according to method used to arrange cover (2005)
- Table 17: Platform used to arrange household insurance, 1999-2005
- Table 18: The size of UK households by the number of people, 1971-2004
- Table 19: Tenure structure in UK households, 1994-2004p
- List of Figures
- Figure 1: Around 13 per cent of UK households currently have home
emergency insurance, though only 5 per cent pay for it
- Figure 2: While most of the top 10 household insurers offer home
emergency insurance in some form, almost half of those ranked 11-20 do not
offer it
- Figure 3: An example of the way in which home emergency insurance is
described by an insurance provider
- Figure 4: British Gas's Homecare range is an example of home service
cover
- Figure 5: EDF energy offers electrical emergency cover as a single
utility product
- Figure 6: Standalone policies are often more expensive than policies
sold as optional extras on household insurance policies
- Figure 7: Around 13 per cent of UK households currently have home
emergency insurance, though only 5 per cent pay for it
- Figure 8: The percentage of household insurance claims made up of
weather claims varies, depending on weather conditions
- Figure 9: The proportion of weather damage claims made up of burst
pipes varies from year to year, depending on how cold the winter has been
- Figure 10: While most of the top 10 household insurers offer home
emergency insurance in some form, almost half of those ranked 11-20 do not
offer it
- Figure 11: More Th>n uses the fact that home emergency cover is
included as standard in its home insurance offering as a product
differentiator
- Figure 12: There has been a noticeable drop in buildings premium rates
since 2004
- Figure 13: South East Water offers plumbing and gas central heating
cover
- Figure 14: Gas supply pipe cover is one of NPower's offerings
- Figure 15: British Gas and Homeserve are the biggest spenders on
advertising for home emergency insurance
- Figure 16: Homeserve spent by far the most on direct mail advertising
for home emergency insurance in 2005
- Figure 17: Only three companies advertise home emergency insurance on
television, and of these British Gas spends by far the most
- Figure 18: British Gas and Direct Line use the press the most for
advertising home emergency insurance
- Figure 19: Industry executives have varied expectations for growth
- Figure 20: Home emergency insurance is not a mainstream offering, and
many household insurance providers do not offer it
- Figure 21: A cheaper quote is far more important to those purchasing
household insurance via direct platforms than those purchasing face-to-face
- Figure 22: The influence of the phone and the Internet have increased
at the expense of face-to-face distribution in the household market
- Figure 23: The total number of households continued to grow, while the
average household size stayed level in 2004
- Figure 24: Datamonitor's core consulting capabilities
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