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New personal lines insurance barometer predicts growth in annual travel insurance
By Jess Rushton from the financial services customer insight platform, Smart Money People
Smart Money People’s new Insurance Uptake Score predicts which types of personal lines insurance products will see the highest growth over the next 12 months.
The UK personal lines insurance market is vast, with a plethora of insurers offering a wide range of products to meet consumers’ diverse needs. It encompasses motor insurance, home insurance, pet insurance, travel insurance, and niches such as gadget insurance and motorbike insurance. It is a dynamic and ever-evolving sector that plays a crucial role in safeguarding individuals and their assets.
Insurers in this sector are facing many challenges: they need to embrace digital transformation, adapt to regulatory changes, and address emerging challenges like climate change. At the same time, they also need to focus on providing personalised, ethical, and sustainable insurance solutions.
To stay competitive and thrive in this ever-changing landscape, providers must make informed predictions about the future of the UK’s general insurance market. Being able to foresee the gig economy or the need for electric car insurance would have been particularly lucrative. And indeed, knowing that Brexit and Covid were on the horizon would have been a game changer.
Consumer purchasing decisions
Consumer purchasing decisions form part of this future-gazing predicament. They are complex and influenced by various psychological, emotional, and practical factors. By understanding these factors and adapting their strategies accordingly, insurers can better connect with their target audience, build trust, and ultimately, drive sales.
That’s why Smart Money People has devised a new bi-annual barometer of consumer insurance purchasing decisions in the UK, that looks ahead by 12 months. It is sufficiently forwarding thinking to influence business forecasting without being ungrounded speculation.
Similarities to Net Promotor Score (NPS)
Those who have one foot in the marketing camp may be familiar with the term, Net Promoter Score. By subtracting the percentage of ‘detractors’ from the percentage of ‘promoters’, the Net Promoter Score is a single metric that is commonly used to determine customer satisfaction.
In a similar vein, the Insurance Uptake Score asks those responsible for purchasing personal lines insurance products about the decisions they anticipate making in the next 12 months.
It compares the ‘increase’ (respondents who will take out new cover or expect to increase their cover) with the ‘decrease’ (respondents who will stop their cover or reduce their coverage level).
The calculation is solely based on respondents for whom the product is relevant i.e. they either already have a policy or intend to take one out in the next 12 months. It excludes those without the cover for whom the product is not relevant and those who have no intention of taking it out.
Growth in personal lines insurance
From highest to lowest growth, the Insurance Uptake Scores for ten personal lines insurance products are:
- Travel insurance (annual): +15%
- Health insurance: +14%
- Home insurance – buildings: +13%
- Life insurance: +10%
- Motorbike insurance: +10%
- Gadget insurance: +6%
- Pet insurance: +6%
- Home insurance – contents: +4%
- Homes insurance – buildings and contents: +4%
- Motor insurance: +3%
Annual travel insurance set to boom
Over the next 12 months, annual travel insurance will see the highest potential growth (+15%) of ten types of the most common, annually-purchased personal lines insurance products.
This growth in annual travel insurance will be primarily driven by a 17% increase in new purchases and a 6% growth in existing holders increasing cover – either by increasing the limits they are covered for or adding in optional cover/add-ons in equal measures.
Out of ten types of insurance, annual travel insurance is the product where more people are looking to add optional cover/add-ons. This is most likely reflective of more adventurous travel plans and activities and the need to tailor cover to personal requirements.
In some countries, international borders were only opened as late as 2022 and even then, consumer travel habits had been seriously disrupted with many people hesitant to book multiple trips. This growth in annual travel insurance is reflective of a growing confidence and for many, a return to their normal calendar of travel.
It is also likely that post-covid, consumers now have a greater awareness of policy details and are demanding higher coverage levels for peace of mind.
In the next 12 months, a quarter of existing annual travel insurance policyholders say they are likely to switch provider at renewal.
Health insurance growth
Consumer purchases of health insurance will also likely grow substantially (+14%) in the next 12 months. The factor most driving this growth is existing policyholders looking to enhance cover by increasing the limit on their policy. An ever-stretched NHS is likely causing those who can afford to pay for private health cover, to ensure their policy is sufficient to meet their needs.
Propensity to switch provider
On average, over three-quarters of personal lines insurance holders intend to stay with the same provider at renewal during the next 12 months, and a quarter (24%) will switch.
Home, Pet, and Motor coverage levels
One in seven (14%) of home insurance customers said that they would likely change their coverage in the next 12 months (9% by increasing their cover, 5% by reducing their cover). One in 10 (11%) of motor insurance customers say the same (7% by increasing cover, 5% by decreasing). Thirteen per cent of pet insurance customers predict they will change their level of cover (8% by increasing, 5% by decreasing).
Of the consumers who intend to increase their home insurance coverage (all types) in the next 12 months, 63% predict they will increase the limits they are covered for and 26% say they will look to add additional cover/add-ons. Of the 7% of motor insurance who say they will increase their cover, 42% will increase limits and 40% will add additional cover/add-ons. Of the 8% of insured pet owners looking to enhance their policy, more are likely to increase limits (55%) than add additional cover/add-ons (32%).
Stay informed to stay ahead
In the fast-evolving insurance market, insurers need to not only have a view of the here and now but also of what’s on the horizon. Whilst growth is looking likely for all personal lines insurance markets, as the cost-of-living crisis deepens, we may see consumer insurance buying behaviour adapt to survive – making it important for insurers to keep their finger on the pulse.
By staying ahead of these trends and proactively addressing them, insurance companies can position themselves for success in the dynamic and competitive UK general insurance market.
Uma Rajagopal has been managing the posting of content for multiple platforms since 2021, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune. Her role ensures that content is published accurately and efficiently across these diverse publications.