Is the loyalty discount working? It would seem so, according to the latest research from Consumer Intelligence. It appears fewer people are spending time shopping around for car cover, or switching. That could mean renewal pricing is simply more realistic now that “price walking” is an FCA no-no. But it could also be down to consumers driving less as fuel increases in costs and home delivery services become more streamlined since the pandemic.
There are other factors here which the research does not mention; switching anything now is a total pain. People in both the public and private sector are not working as efficiently as pre-pandemic. Waiting times on hold are much longer and any online form-filling problems can take a while to resolve via Help buttons or virtual assistants which struggle with regional accents, dialects from overseas or non-english speakers.
Secondly, most of the data “assumptions” which underpin comparison site insurance are outdated, especially things like occupation classification by risk, or the hybrid working patterns which have replaced commuting. How can an online journalist be any more risky than a civil servant, since both are mostly working from home on a laptop? Things like the weight of the car, especially electric vehicles, is arguably a bigger risk than the performance of the car in an era when 30 million vehicles clog Britain’s roads.
Asking users to confirm the weight class of an EV, then grading EVs by weight vs risk is a sensible move. Why? That weight is multiplied during an impact and is therefore a big factor in potential PI claims and life changing injuries. Plus the weight adds to the severity of damage to lighter, older vehicles in a two car crash.
Then there’s the gender wars problem of pronouns and identity – it’s only a matter of time before an insurer faces legal action for “misgendering” a customer and failing to offer cheaper cover because they are now female. One look at the Title dropdown menu on any comparison site shows how 1990s the whole thing is – times change and so a major overhaul of every comparison site is long overdue.
All this is bad news for Martin Lewis and other comparison site specialists, as the process of moving any online service becomes a more frustrating and time-consuming experience.
Here’s the word;
The latest cost of living report from Consumer Intelligence has highlighted a notable drop in the number of consumers shopping around and switching their motor and home insurance policies. This follows an industry-wide regulator-enforced guarantee that renewing customers wouldn’t be charged more than if they had been a new customer.
In the home market, 76.1% of customers shopped around in April-June 2019, dropping to 71.5% in April-June 2022. Similarly, switching fell from 37.1% to 34.7%. In the motor market, shopping around dropped from 83.1% to 79.4%, and switching from 39.7% to 36.9% in the same three-year period.
However, with the cost-of-living crisis biting harder, Consumer Intelligence is anticipating that consumers may begin to explore and realise that there are savings to be had, even if their renewal quote hasn’t increased.
Home insurance shopping and switching
Analysis shows only 25% of home insurance shoppers are currently driven by price, compared to 56% that shop out of habit – having been trained over many years that comparing the market is the most successful way to get the best deal.
Some 10% of those shoppers chose to stay with their current provider after seeing what else was out there. Of those that do switch, only 34% were motivated by the cheapest price, and just 10% by incentives like cashbacks. Whereas a quarter are switching mainly out of habit.
Motor insurance swapping and switching
Slightly more motor insurance shoppers were price driven – 14% because their quote had gone up a lot at renewal and 13% who wanted to use a quote to renegotiate with their current insurer. A further 56% said they shop around each year on principle.
Motor customers are far more motivated to actually make the switch by the cheapest price – with 50% citing it as their main reason for changing providers.
SHOW ME THE BENEFITS
Karen Houseago, Head of Insurance, Consumer Intelligence says: “As the rising cost of living takes hold and customers begin to feel the pinch, we’re expecting to see shopping rates increase. The big question is whether switching rates will go up, and that will only happen if customers feel as though they are saving money by switching.
“With money being a big motivating factor already – especially in motor – it’s likely people will be keener for a deal. This means new new-business opportunities – but there are also opportunities to increase the number of shoppers who choose to stay after looking around. Yes, price is going to be important, but it is clearly not the only front on which to fight for them.
“Communication will be absolutely key – especially for customers thrown into financial vulnerability, and at the point of a grudge expenditure. How can they be made to feel safe and valued? Will perks suddenly start to mean more – or less as people cut down on trips to the cinema and restaurants?
“What we need to be sure of is that the proliferation of lower value insurance products we’ve seen entering the market doesn’t mean that saving money results in compromising cover. Providers have a responsibility to provide, and articulate, fair value. Those able to do so may be the ones who prove most popular with cost-of-living shoppers and switchers.”
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