"With money being a big motivating factor already – especially in motor - it’s likely people will be keener for a deal."
There has been a notable drop in the number of consumers shopping around and switching their motor and home insurance policies, according to a new report from Consumer Intelligence.
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.
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.
Karen Houseago, head of insurance at Consumer Intelligence, said: “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.”