Impact of Inflation on United Kingdom (UK) Personal Lines Insurance Market
Summary
This report provides an overview of some of the leading macroeconomic trends driving inflation in the UK economy, as well as those set to affect future inflation and GDP growth rates in 2023 and beyond. It analyzes how insurance consumer behavior has changed in the past 12 months and how it will continue to change in the future, with specific analysis of the motor, household, pet, and travel insurance sectors. The report also looks at the UK economy heading into 2023 and how insurers can be best prepared to deal with the trials and tribulations the coming years may bring.
In October 2022, the inflation rate in the UK was 11.1%. This rapid rate of price increases is causing huge strain on businesses’ and consumers’ finances, leading to a cost-of-living crisis in the UK. GlobalData’s Q3 2022 Consumer Survey suggests that over 85% of consumers are worried, to some extent, about their current financial situation. Many factors have coalesced in creating this economic situation, including global issues such as the COVID-19 pandemic and related supply-chain problems as well as domestic issues such as Brexit and economic mismanagement. Across all four of the primary personal lines of business (motor, home, pet, and travel), consumers have canceled policies, with more considering taking such action. Other consumers are looking to adjust their policies - either cover levels, excess, or both - while others have looked to switch provider in search of better value for money.
Scope
- 85.3% of UK consumers are, to some extent, concerned about their current financial situation, according to insights from GlobalData’s Q3 2022 Consumer Survey.
- Over 40% of former consumers in the home, pet, and travel lines indicated that they canceled their policy as a cost-cutting measure due to the cost-of-living crisis.
- A further two in five current policyholders in the pet and travel lines indicated they have considered switching or canceling their policy, with over one in five consumers in the home and motor lines indicating similar.
- Understand the extent and underlying drivers of inflation and the subsequent economic downturn facing the UK economy.
- Discover why consumers are canceling their insurance policies and how to reduce these actions.
- See how and why consumers are adjusting their policies and switching their providers in 2022.
- Determine the effects of inflation on premium prices and changes in demand for policies.
- Ascertain how long-term trends in consumer behavior may be affected by the economic situation in the UK.
- Executive Summary
- Market overview
- Key findings
- Critical success factors
- Inflation Has Been Growing Since Mid-2020
- Inflation indicators have been rising for two years
- Table Figure 1: Inflation in the UK economy has been accelerating since the start of 2021
- Table Figure 2: The difference between real and nominal wages has been growing since the start of 2021
- Macroeconomic trends
- Table Figure 3: Rising interest rates will increase costs for homeowners, businesses, and government borrowing
- Table Figure 4: The Russia/Ukraine conflict has led to spiraling and highly volatile oil prices
- Table Figure 5: The UK has become less attractive to foreign investment in H2 2022
- Consumers are highly concerned about inflation
- Table Figure 6: Over 85% of UK consumers are concerned about their current financial situation
- Table Figure 7: Home energy bills and household budgets are the most concerning aspects to UK consumers
- Table Figure 8: 38.7% of consumers put the cost-of-living crisis in their top three financial concerns
- Inflation indicators have been rising for two years
- Changing Consumer Behavior
- Cost-cutting and home working are driving cancellations
- Table Figure 9: Travel and pet insurance policies were the most frequently canceled in 2022
- Table Figure 10: Home working has contributed to over a third of motor cancellations in 2022
- Table Figure 11: More than one in 10 motor, home, and pet customers used premium finance in 2022
- Table Figure 12: More than 33% of pet and travel customers have considered switching or canceling their policy
- Table Figure 13: Single-trip travel policies have become more attractive to consumers in 2022
- Consumers are also looking to make policy adjustments
- Table Figure 14: Some motor customers are reducing their cover to cut costs
- Table Figure 15: Many consumers are combining a reduction in cover with a reduction in excess
- Shopping is more frequent, but switching is more difficult
- Table Figure 16: UK consumers are generally shopping around more often in 2022 than in 2021
- Table Figure 17: Cheaper premiums and better cover limits are driving most insurance provider switches
- Cost-cutting and home working are driving cancellations
- Changes in Premiums and Demand
- Motor premiums have risen rapidly in the year
- Table Figure 18: The ABI estimates that the average motor insurance premium has risen by 5.3% in 2022
- Home premiums and policies written have fallen in 2022
- Table Figure 19: Home insurance premiums have been quite stagnant since the start of 2020
- Table Figure 20: The number of contents-only policies written has been declining year-on-year since Q1 2021
- Motor premiums have risen rapidly in the year
- The UK Economy Going Into 2023 and Beyond
- The UK is forecast to enter recession by Q4 2022
- Table Figure 21: The UK is forecast to enter a recession in Q4 2022
- Longer-term changes to behavior and insurance
- Table Figure 22: Mortgage approvals have generally declined since the end of 2020
- Table Figure 23: The cost-of-living crisis is delaying some household purchases
- Table Figure 24: Within five years, over a third of consumers expect to move to EVs
- Table Figure 25: The cost-of-living crisis is having a mixed effect on the shift to EVs
- Technology can mitigate the future impact of inflation
- Table Figure 26: Almost 50% of consumers would be willing to pay more for instant payouts in their travel policy
- The UK is forecast to enter recession by Q4 2022
- Appendix
- Abbreviations and acronyms
- Methodology
- Secondary sources
- Further reading
- About GlobalData
- Contact Us
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