Challenging market context

Things are tough for UK home and motor insurers. For years, they have struggled to turn a decent profit, largely due to commoditisation driven by price-comparison websites. Now they are being assailed by a proliferation of potentially-disruptive digital technologies, such as Artificial intelligence, regulatory scrutiny of “price-walking” and shifts in consumer behaviours triggered by the pandemic, such as driving less, which is prompting more and more to buy pay-as-you-drive policies. 

Opportunity ahead

The good news is that there are huge, largely untapped premium pools out there for new types of product that better meet customers’ under-served needs than the standard, basic products that are widespread today. Our recent survey of consumer preferences, “What do UK customers want?”, indicates that  around three-fifths of customers crave new types of product, an opportunity worth more than £10 billion (Figure 1).

Figure 1. Estimated premiums by product, £bn

For insurers, the advantages of shifting to a more personalised offering cannot be ignored. Other industries provide a useful comparator. Delivering hyper-personalisation not only allows firms to meet their customers’ expectations; it allows them to generate higher revenues, by building customer trust and loyalty. Data shows that there are revenues to generated from hyper-personalisation: as a firm’s personalisation matures, its revenue increases (see Figure 2). For example, Amazon and Netflix have respectively derived 35% and 60% of their sales from hyper-personalised recommendations, while Starbucks’ incremental revenue increased three-fold, via hyper-personalised offer redemptions.

Figure 2. The revenue pay-off of hyper-personalisation

Note: the shaded blue box denotes low hyper-personalisation maturity activities, which are correlated with low revenue generation from hyper-personalisation.

Are we comparing apples with pears here? True, people show more interest in watching Netflix than choosing insurance. But there’s mounting evidence that a revenue pay-off holds true even for insurers. According to a report supported by the Chartered Insurance Institute, 60 per cent of insurers with advanced levels of personalisation see a significant increase in their revenue per customer.

Then there are arguments for personalisation specific to insurance. For instance, connected and cost-focused motor insurance – where the premium is linked to driving data as recorded by in-car sensors or a mobile app – provides an incentive to drive more safely and to drive less, which reduces harmful carbon dioxide emissions. A connected and preventative home insurance product can help avoid costly water leak damage. In-home sensors can also keep the elderly safe.

The snag is that many customers are disengaged: they show little interest in spending time thinking about insurance, and this is likely to apply to researching, understanding and buying new types of home and motor policy. To overcome this challenge, insurers must radically beef up their marketing muscle. This means providing customers with personalised products, services and communications (see Table 1).

Table 1. What do customers want?


What do customers want?


Products that are easy to understand, purchase and use.


Services that make their lives easier. For instance, our survey identified that 35% of UK respondents aged 30 and above want access to a repairperson to help manage home losses or damage, and this rises to 45% among the under 30s or Generation Z.


Information that is easy to understand (i.e. descriptions of products and services written in plain English). Explanations of how a new, more personalised product better meets their needs than what they have.

The UK home and motor insurance markets continue to face challenging conditions. But looking ahead there is a clear opportunity to grow, boost loyalty and become greener by offering more personalised products. To get there, insurers will need to overcome customer disengagement. Marketing, the subject of our next blog, holds the key.