With motor insurance premiums increasing far above the rate of inflation, 37% of UK consumers are looking to switch their provider in the next 12 months. This is considerably more than any other type of insurance, according to research commissioned for financial services review site, Smart Money People, and conducted by Consumer Intelligence.
The data is taken from their Insurance Uptake Score, a new bi-annual barometer of insurance purchasing decisions, based on consumer predictions about whether they will continue with, purchase, increase, reduce, or cancel their cover of ten types of annual insurance products most commonly purchased by individuals.
After car insurance, home insurance has the highest number of policyholders looking to switch provider (27%).
Saving money the driving factor for switching
An overwhelming 87% of those planning to switch are doing so to try and find a cheaper policy.
The Association of British Insurers (ABI) recently revealed that in Q3 of 2023, the average premium paid for private comprehensive motor insurance was £561- up 29% on Q3 2022 and is at its highest since it started collecting this data in 2012.
According to Smart Money People’s research, other reasons for switching include changing the level of coverage (8%), a change in circumstances (10%), and having had a bad experience with their current provider (3%).
Slow growth in the sector
The Insurance Uptake Score found that over the next 12 months, motor insurance will see the lowest potential growth (+3%) of ten types of the most common, annually-purchased personal lines insurance products. It compares the net increase (respondents who will take out new cover or expect to increase their cover) with the net decrease (respondents who will stop their cover or reduce their coverage level).
Of the one in ten (11%) car insurance customers who stated they would likely change their coverage in the next 12 months, 7% plan to increase their cover, and 5% intend to reduce their cover.
Of those decreasing their cover, 59% predict they’ll remove optional covers or add-ons, whilst 23% plan to decrease the limits they’re covered for.
Of the 7% who intend to increase their cover, 42% predict they’ll increase the limits they’re covered for and 40% say they’ll look to add additional cover/add-ons. The most popular add-ons drivers are looking to take out are protected no claims discount (62%), legal expenses cover (43%) and guaranteed courtesy car / hire (40%).
Over a third (33%) of those who intend to increase their cover, said it was to cover them for things they might not be able to afford on their own.
Changes in consumer habits
The survey also found August to be marginally the most common renewal month, however this is fairly evenly split across several months. November and December are noticeably the least common renewal months.
How drivers pay for their premiums is also expected to change. More than half of people who don’t currently have insurance, who are taking out a new policy in the next 12 months, intend to pay monthly (51%) compared to 34% of those who currently have insurance.
Smart Money People CEO, Jacqueline Dewey, explains what insurers can learn from this data: "In a competitive landscape, and an unpredictable economic climate, insurers can future-proof their businesses by understanding consumer behaviour and needs both now, but also on the horizon. From gearing up for more monthly payments, to considering their add-ons, this is how insurers can adapt to survive.
“With growth for motor insurance looking slower than other personal lines insurance markets, it’s more important than ever for insurers to keep their finger on the pulse."
Customer satisfaction down
According to data from Smart Money People, the average customer service score for all car insurance providers has dropped considerably in 2023 compared to previous years. More than 42,000 reviews left over a five year period, and across 105 providers, were analysed.
In the past year alone, satisfaction is down 20%. Car insurance providers received an average rating of 4.64 (out of 5) by their customers in 2022 on the Smart Money People site, compared to 3.70 in 2023 so far. This year is the only of the five where the average rating has dipped below 4.
Unsurprisingly, given the rise in premiums, Smart Money People’s overall value for money score for car insurers decreased from 4.58 in 2022, to 3.67 in 2023. Customer service scores have fared just as poorly: in 2023 the average score was 3.71 compared to 4.62 in 2022.
Specialist insurers and general insurers typically scored higher than banks and other financial services providers across the five years. In 2023, the latter achieved an average score of just 2.6.
Smart Money People CEO, Jacqueline Dewey, said: “While it’s a difficult situation for drivers who are struggling with rising premiums, insurers are facing a tough time too. Companies are doing all within their power to keep their policies competitively priced, but are dealing with factors beyond their control pushing costs up. On top of this, there’s added pressure from customers who naturally tend to expect more when they’re paying more.
“Collecting and analysing customer reviews is an essential way to ensure that customer service, and therefore customer loyalty, doesn’t suffer. With so many drivers looking to switch providers, firms can counteract this by analysing data and listening to what their customers really want from them.”
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