Home market is seeing ‘natural bifurcation’ as need for specialist underwriting increases – Pen Underwriting

Non-standard home insurance has proved something of a paradox in recent years, with an apparent surge in demand reportedly being met by supply challenges or an unwillingness from insurance providers to offer the required cover.

But is this a true and fair picture of the market?

While insurers increasingly focus their attention on digitally traded platforms, some within the market contend that non-standard risks are increasingly becoming the norm within broker led distribution.

And, as a specialist provider, we have certainly seen broker enquiry levels for appropriate cover stay strong and increase over the years – whether that’s for peril exposed properties, unconventional construction types, heightened vacancy risks or other factors.

Trends in key non-standard insurance risks support this trend.

By 2050, the Environment Agency predicts that eight million properties in England could be at risk of flooding. Unoccupied properties are also on the rise, with long-term empty homes hitting their highest level for 13 years in 2024, reaching 265,061 according to Action on Empty Homes’ analysis of government council tax data.

Then there’s thatched roofs, which have seen a resurgence due to their sustainable credentials and aesthetics. Some property developers are even incorporating thatch into new build homes.

And yet, over the same time period, headlines on the non-standard home market have focused on suggestions of capacity contractions, providers withdrawing, or appetites shrinking – with some commentators intimating that the industry is failing to respond to the opportunity this sector presents.

But rather than being a true representation of supply-demand dynamics, is what we have seen not instead a natural bifurcation of the market, between the specialists and the non-specialists?

So long as customers can access the right proposition for their risk, a tapering of suitable markets does not necessarily equate to no choice.

Risks finding the right home

It is true we’ve seen mainstream insurers and other non-niche providers concede that this area of the home market is not for them and is better suited to specialists with the data, underwriting expertise and experience to write these risks sustainably and profitably.

This has successfully enabled the MGA sector to come to the fore and do what it does best. In fact, rather than exiting non-standard outright, many mainstream insurers are choosing instead to tap into the value of specialist MGAs.

It’s also true that we have seen large proportions of books of business require new homes as those acquiring personal lines portfolios deem the non-standard home element to be outside their appetite.

But that’s where the specialists come in – to ensure these customers do find a home and the right one.

Successful strategic partnerships with brokers have also been established to ensure the automatic referral of risks that fall outside mainstream insurer appetite to specialists in non-standard home. This means that customers can seamlessly access the right policy for their risk.

So, the picture is far more positive than the one often painted.

The non-standard home market has restructured itself, tapering to providers with real expertise that are best placed to deliver the customer outcomes needed in more complex risk scenarios.

As results improve in the home market generally, we may well see new entrants or returners to the realm of non-standard home, increasing the choice some brokers felt was lacking.

But the sheer breadth of what can deem a risk non-standard, the technical underwriting needed and the complexity of claim scenarios that can ensue, should mean specialists are always the first port of call.