Significantly, Defaqto's analysis found that the number of providers in the home insurance market has increased by 73% since 2004. This increase has been driven by comparison websites and major retail brands which, while creating unprecedented choice for consumers, has led to greater competition.
This has resulted in providers moving away from ‘one size fits all' products to a more targeted approach in order to meet the needs of different customer groups. At the same time, however, there are signs that the industry has started to move towards a focus on price, and away from the cover and benefits offered by policies.
Defaqto's report concludes that insurers will be competing in a difficult environment over the coming years, and getting the approach and balance right will be a significant challenge.
Mike Powell, Defaqto's Insight Analyst for General Insurance, said:
"It is clear that insurance providers will be competing in a challenging environment over the coming years. We believe there are long-term implications for insurers, who may need to consider how they restrict premiums while simultaneously lowering the cost of acquiring and retaining new customers.
"In addition, there are increasing signs that a race to the bottom with regards to premiums could emerge - and this could be detrimental to consumers and the industry as a whole.
"Our comprehensive analysis of the home insurance market is focused on helping insurers understand the key trends in the sector, and consumers' priorities when purchasing products. Ultimately, this understanding can help firms develop products that meet people's needs."
