The quiet development story in UK General Insurance

Analysis of the newest knowledge from the FCA1 from main unbiased insurance coverage consultancy Broadstone reveals that gadget insurance coverage isn’t solely rising in coverage volumes but additionally sustaining truthful payout ratios.

It is an more and more uncommon mixture within the UK General Insurance market the place many add-on merchandise face regulatory scrutiny and profitability challenges – nonetheless, gadget insurance coverage stands out as a resilient performer.

The statistics present sturdy shopper demand for gadget insurance coverage over the previous three years with insurance policies rising from 7.87 million in 2023 to eight.46 million in 2024, an annual development price of seven.5%. There has been some ebb and circulation within the proportions offered as add-on versus stand-alone cowl with no specific pattern in recent times. 

The combine is prone to be delicate to how particular person insurers class add-ons, nonetheless, stand-alone represents the majority of gross sales with almost two thirds of insurance policies offered on this method. Across each channels, there was a surge in premium earnings, which rose from £496 million in 2023 to £604 million in 2024, a 22% improve.   

This development displays the rising significance of tech units in on a regular basis life. Smartphones, tablets and wearables are not luxuries – they’re important instruments for work and leisure and gadget costs have risen sharply which has pushed each greater demand and premiums.

The marked premium development in 2024 signifies insurers are restoring margins after years of tight profitability nonetheless, in contrast to some shopper insurance coverage merchandise beneath FCA scrutiny, gadget insurance coverage continues to ship truthful worth.

Add-on payout ratios stay steady at 41.8%, whereas stand-alone merchandise noticed a drop from 59.3% in 2023 to 42.9% in 2024, seemingly because of pricing recalibration. Claims frequency is falling – add-on insurance policies fell from 12.8% to 7.8% and stand-alone insurance policies from 10.4% to 7.8% between 2022 and 2024. This suggests a development from very excessive ranges of product utilisation to one thing extra sustainable. Claim payouts have been rising, seemingly because of altering claims combine and higher-value units being insured.

This mixture of decrease declare incidence and better payouts suggests shopper willingness to pay for complete cowl and an evolving threat profile because the product turns into extra mainstream.

Gadget insurance coverage is notable for its attraction to youthful demographics. With smartphones and cell units being central to the lives of youthful customers, this product class seemingly features a greater proportion of policyholders beneath 40. 

For an business typically challenged to have interaction youthful generations, the expansion and worth metrics of gadget insurance coverage could sign progress. It suggests insurers are starting to satisfy the expectations of digital-native customers with related, accessible merchandise.

Cormac Bradley, Senior Actuarial Director at Broadstone, commented: “While some niche insurance products struggle to justify their value, gadget insurance is thriving. It is delivering consistent consumer benefit and adapting to market realities.” 

“Driven by the rising importance – and cost – of devices in people’s everyday lives, consumer demand is strong and becoming an essential product. It’s one of the few product lines that appears to be engaging younger consumers while maintaining fair value metrics.” 

“This could be a sign that insurers are beginning to close the generational gap in product relevance and accessibility. Insurers that meet younger consumers where they are today are well placed to anticipate their needs and build trust that lasts well beyond the gadget lifecycle.”

“The growth in this market is a significant opportunity for insurers underpinned by a stable regulatory outlook however insurers must also be alive to shifting trends to support further expansion. For example, tech inflation and evolving risk profiles which may necessitate dynamic pricing.”