What UK home insurers can learn from the Nordics to return to profit

By Karsten Ries, CEO of Onics

For six consecutive years, the UK home insurance market has struggled to make money. Rising claims severity, ageing housing stock, inflationary repair costs, and intense price competition have combined to squeeze margins to the point where profitability has become the exception rather than the rule. According to EY, the sector’s losses are no longer cyclical – they are structural.

Yet while UK insurers wrestle with these challenges, their Nordic counterparts tell a different story. In markets such as Denmark, Sweden, and Norway, insurers have made a decisive shift away from a purely reactive model of paying claims towards a preventative, data-led approach to managing risk.

The result has been reduced losses, greater underwriting insight, and improved customer loyalty. For UK insurers looking for a route back to profit, the Nordic experience offers three clear lessons.

‍

1. Prevention beats price in a commoditized market

UK home insurance remains heavily price-driven. Products are largely indistinguishable, switching is easy, and customer engagement is minimal until something goes wrong. This dynamic fuels churn and erodes margins, creating a race to the bottom that benefits no one.

Nordic insurers have taken a different path by embedding prevention directly into the insurance proposition. Using Internet of Things (IoT) technology such as water-leak sensors, temperature and humidity monitors, and connected smoke detection, they intervene before damage escalates into a claim. Escape of water alone accounts for roughly 25-30% of home insurance claims, and many of these losses are avoidable if detected early.

Internal analyses from Nordic insurance deployments show that early water-leak detection can fully prevent around 10% of escape-of-water claims and reduce the severity of a further 30% by half. That translates into claims savings of more than 25% for one of the most expensive and frequent causes of loss. Crucially, prevention changes the economics of insurance: insurers spend less paying for damage, and customers experience fewer disruptive claims events.

For UK insurers, this represents a strategic shift. Instead of competing solely on premium, insurers can compete on protection, offering tangible value that customers can see and feel in their homes.

‍

2. Better data is the real power behind AI underwriting

Much has been written about the potential of AI in underwriting, pricing, and claims. But AI is only as good as the data that feeds it. In the UK, underwriting decisions are still largely based on static, proxy variables, such as postcode, property type, historic claims, and broad demographic assumptions. These inputs struggle to capture how a home is actually used or how risk evolves over time.

Nordic insurers have addressed this gap by using IoT to generate high-quality, structured data directly from the insured property. Sensors provide continuous insight into environmental conditions, behavioural patterns, and early warning signals for risk events. Over time, this creates a richer, more dynamic risk profile for each household.

This data has multiple future benefits. It enables more accurate pricing, supports proactive interventions that reduce claims severity, and improves claims handling by providing objective evidence of incidents when they occur. It also helps insurers identify false or exaggerated claims more easily, reducing leakage and operational cost.

For UK insurers willing to invest in AI, the Nordic lesson is clear: the biggest gains will not come from more sophisticated algorithms alone, but from improving the quality and relevance of the data those algorithms consume.

‍

3. Engagement drives loyalty – and new revenue

An often-overlooked challenge in UK home insurance is low customer engagement. Many policyholders interact with their insurer once a year at renewal, or when there is a claim. This arms-length relationship limits loyalty, makes insurers vulnerable to churn, and cuts opportunities for cross-sell or upsell.

By contrast, Nordic insurers using connected-home IoT solutions have created frequent, positive touchpoints with customers. Alerts, insights, and preventative guidance delivered via a branded app position the insurer as an active partner in protecting the home, rather than a distant payer of claims.

This engagement has measurable financial value. Modelling shows that even a modest improvement in retention can deliver significant benefits. For a book of 100,000 policies with average annual premiums of £400, improving retention by just 10% can generate hundreds of thousands of pounds in additional value per year.

Prevention services also support tiered pricing strategies, encouraging customers to move into higher-value products in exchange for added protection.

Beyond retention, connected-home platforms open the door to new services and revenue streams, from smart-home automation to enhanced fire and intrusion protection. As consumer expectations evolve, insurers that fail to offer preventative, digital services risk appearing outdated and interchangeable.

‍

Learning from the Nordic playbook

The Nordic experience shows that profitability is not restored by cutting costs alone. It requires a fundamental rethinking of the insurer’s role: from compensating loss to preventing it; from relying on proxy data to leveraging real-world insight; and from transactional relationships to ongoing engagement.

The strongest Nordic results did not come from devices alone. The real impact came from pairing prevention with an operating model: clear customer onboarding, reliable triage, and a partner ecosystem that can act on alerts quickly. This design builds both clear internal ownership and long-term customer trust.

For UK home insurers facing sustained margin pressure, these lessons are increasingly hard to ignore. IoT-enabled prevention is no longer an experimental add-on, it is a proven lever for reducing claims, strengthening underwriting, and differentiating in a crowded market.

Once customers adopt an embedded prevention services, switching becomes less attractive. Improved retention further strengthens ROI. The path, therefore, back to profit may not lie in pricing harder, but in protecting smarter as a longer-term partner in risk.

‍

Experience the Nordic risk prevention solution

Onics provides P&C insurers with a customizable risk prevention solution that enables insurers to prevent and reduce payouts related to water damage, fires, and burglaries and strengthen the relationship with their customers.

Beyond the initial claims reduction, the solution delivers data that enables faster claims handling, smarter underwriting decisions, and personalized pricing.

Book a demo below to experience the solution for yourself and discover how it can benefit your insurance company.