Lloyds Banking Group is set to refocus its attention on insurance due to declining banking profits, according to recent news.
The group has reported profit losses due to low interest rates caused by COVID-19 and is looking to increase its emphasis on insurance and wealth management. If Lloyds is seen to be successful, this could start a trend of the bancassurance channel and improve Lloyd’s already strong position in the UK household market, according to GlobalData, a leading data and analytics company.
Lloyds’ current insurance book is heavily concentrated around personal household insurance in the UK, according to GlobalData’s UK Top 20 General Insurance Competitor Analytics. GlobalData’s UK Insurance Consumer Survey found that Lloyds was the 7th biggest home contents insurer in the UK in 2019, with a share of 3.3%. It held 3% of combined home insurance policies, but had a smaller presence in buildings only, with a share of 0.9%.
Ben Carey-Evans, Insurance Analyst at GlobalData, comments: “It has not yet been indicated what lines of insurance Lloyds will be looking at, but given that 92.9% of Lloyds insurance GWP in 2018 was in household insurance, that seems like a likely place to start.
“This is made more likely by that household insurance is one of the few lines where GlobalData expects claims to remain stable, or even decline. The chance of burglary, and even fire, is reduced by more people being in the house amid COVID-19 lockdowns and home working. There is some risk renewals will decline, as some consumers may feel they don’t need contents insurance as much, or see it as a cost that can be sacrificed as disposable income declines.
“The bank channel has been steadily declining across personal lines in recent years, so this is in interesting move from Lloyds Bank. Although the banking industry is struggling with profitability, moving to insurance will not be an easy solution, given that the pandemic has also left insurers struggling with profitability.
The issues affecting Lloyds will also be impacting other banks that have an insurance presence, so diversification could be the start of the re-emergence of the bancassurance channel.”
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