Press releases

Household insurers see profitable year in 2014, but dark clouds are on the horizon

18 June 2015

  • House insurance industry wrote £6.6bn in premiums in 2014, resulting in £0.5bn profit;
  • Customers could benefit from reduced household insurance premiums in 2015 and 2016, but insurers may post first underwriting loss since 2007;
  • Connected homes the trend to watch for household insurers. 

Increasing pressure on premiums led to another competitive year for the household insurance industry, with premiums written in 2014 standing at £6.6bn and profits at £0.5bn, according to Deloitte, the business advisory firm. Premiums have declined by 4% in comparison to 2013, when they were £6.8bn.

Deloitte’s research shows that consumers enjoyed cheaper home insurance this year, with the average price for a policy falling from £250 to £243. Deloitte predicts further good news for consumers with premiums forecast to fall to £231 this year and then £224 in 2016.

James Rakow, insurance partner at Deloitte, said: “Despite floods and storms in January and February, 2014 was a profitable year for insurers. We saw a minor deterioration at a market level with net combined ratios of 92.0%, up from 91.8% last year. 2013 was a similar story, whereby very large weather claims for storms and floods were compensated by benign weather for the rest of the year, leading insurers to report underwriting profits despite the headline bad weather. Insurers have reduced premiums in light of this claims experience over the last two years. Consumers have had their pick of the lot for competitive insurance prices since 2013.”

Deloitte estimates that gross written premiums will fall by around 5% this year to £6.3bn and again in 2016 by a further 3% to £6.1bn. Deloitte expects headline net ratios to improve this year, to 90.3%, but then deteriorate in 2016, coming close to topping 100% at 98.3% suggesting potentially tricky times ahead.

James Rakow added: “With ratios so close to 100% in 2016, the risk of the home insurance industry reporting an underwriting loss – without a large weather event – is at its highest for the last decade. This should be a wake-up call for the industry to react and stop eroding the underlying profitability by cutting premiums.

“The consumer needs to be central to insurers’ strategies. The uptick in economic forecasts will create some churn, and we should see increased appetite for non-mandatory products such as content insurance or those for the connected home. The latter will be one to watch, but will take some time to pick up as many devices through the house need to be able to interact. Once common, it will revolutionise household insurance, as it enables insurers to understand the customers’ behaviours and helps to mitigate risk. From the customer point of view, this would be an add on to existing connected products, and could be seen as a bolt on to appliances they use and value. This would enable a tailoring of the product, provide real time interaction and really change the customer experience. Insurers will need to look beyond simple tailoring and flexing of their products to untapped segments of the markets. Insurers that get this right will be the winners in the year ahead.”


About the figures
The Deloitte estimates in this press release are based on data submitted by insurers in Form 20 to the Prudential Regulatory Authority, and supplemented with data from other forms and the ABI. Average premium figures for 2013 and 2014 are sourced from the ABI.

Note to editors

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited.

Fern Hammond
Deloitte LLP
020 7303 2329

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