With most research suggesting over 80% of UK motorists shop around for insurance every year, there’s a view that most people compare purely on price with little thought at the time of renewal.
But our recent research* shows there are many factors – and many different routes for quoting – that come into play when policyholders look at their annual policy renewal.
There are several different types of behaviours that separate those consumers who review the amount of cover they have every year, and those that heavily use the price comparison websites, shopping purely on price.
The price comparison sites dominate a lot of the rate shopping, but overall, when it comes to the final purchase, fewer motorists purchase insurance online from the price comparison sites than other online channels.
Our LexisNexis Risk Solutions survey* investigated the ways consumers behave around the time of insurance renewal, the sources they use to search price, and the sources they use to purchase. It was based on interviews with 1,500 UK motor insurance customers.
According to Consumer Intelligence price shopping in motor insurance increased to an even higher level in 2018, with 85.1% of motorists shopping for a better premium, compared to 84.1% in the previous year.
Their survey showed this resulted in average savings of £64 for motorists. And yet beneath this intense price comparison activity, there are still large numbers of consumers who search price comparison websites (PCWs) before going on to purchase direct from an insurer, or from another site other than the primary PCW they used. We commented in another blog article about how consumers typically use PCWs to shop around and to purchase, in many cases manipulating their information along their quoting journey.
Out of the three major price comparison websites, certain of these are slightly preferred by consumers for comparison, while others are slightly preferred for purchasing.
Many different routes for quoting and purchasing
Our survey highlighted that whilst the overwhelming majority of motorists shop for price, many end up either staying with their current insurer, or purchasing from another direct insurer, or from a PCW that’s not the first one they chose.
Purchasing of motor insurance via cashback websites is also rising. It all adds up to a highly nuanced picture of consumer behaviour around the time of renewals.
Nearly six in ten motorists (59%) said they purchased their policy again from the same insurer, whereas 39% switched insurers, and 2% said they were making a first-time purchase.
A change in coverage was not shown to be a factor in switching insurers. In fact those who remained with the same insurer are slightly more likely to have increased their coverage.
13% of motorists who switched to a different insurer increased their coverage
17% of motorists who stayed with the same insurer increased their coverage.
About four-in-five motorists overall used a price comparison website during their most recent motor insurance shopping experience.
Our research showed some pretty intense shopping behaviour, with 60% of motorists ‘comparing the comparisons’, using multiple PCWs to shop. There was also a large number of consumers visiting PCWs before going on to make the purchase online from a direct insurer. Some 82% of motorists who bought insurance online, but not from a PCW, had used a price comparison website to compare prices.
Use of price comparison websites extends beyond just those purchasing from them: to other online price checkers, as well as shoppers who go on to purchase offline, typically by phone from a broker or direct.
Fewer motorists purchased their policy from a price comparison site than other online channels.
29% of motorists purchase their policy online (not from a price comparison website), but used price comparison website during shopping
24% of motorists did not purchase online, but used price comparison website during shopping
19% of motorists purchase online (from a price comparison website), and used other price comparison websites during shopping
16% of motorists do not use a price comparison website at all
12% of motorists purchased their policy from a price comparison website, and did not use another price comparison website during shopping.
Seven in ten purchases online, compared to over eight in ten searches
Overall, 68% of motor insurance purchases in our sample were made online from a range of different websites, whilst 32% were made offline.
Cashback websites have grown to account for 15% of online insurance purchases, nearly a third of the volume of purchases seen by price comparison sites.
These results show a more nuanced picture than just loyal customers being penalised for staying put with their existing insurer. There are also other variations in the types of customers who tend to review the existing coverage without changing, and those who decide to go on and change it.
Factors other than price contribute to switching
So what can we learn from the fact that loyal customers are more likely to increase their coverage when it comes up for renewal?
This could be the result of the better experience they have with their insurer, which is by definition why they choose to show loyalty. Or possibly it could be that the market is diverging between motorists who shop and renew at speed, without checking their policy, and those who pay attention to the policy terms and conditions, and who are more likely to upgrade their cover.
Another factor could be that more policyholders are on the look out for policy details such as high insurance excess, which has become a tactic for reducing the headline quote.
When reviewing their motor insurance policy, 84% of motorists said they maintain the same level of coverage, 5% increase coverage and 1% reduce coverage.
Those who increased their coverage are more likely to think that insurers consistently charge too much. Consumers who routinely shop around are more likely to feel that the price for their most recent policy was ‘about right’, while those who rarely shop around are more inclined to think their policy was priced too high.
It all indicates a role for more data around intelligent quoting, tapping into the consumer mind set and their preferences at renewals time.
For more insights from these research results download the LexisNexis Risk Solutions white paper ‘Finding (and Building) Loyalty in the Motor Insurance Market’.
*LexisNexis Risk Solutions carried out an anonymous survey, the Policy Renewal and Insurance Shopping Study, 23 January to 5 February 2018. Data collection: web survey using managed online panel as a sample. The sample was 1,500 consumers who have insurance on the vehicle they drive most often, who are equally or solely responsible for insurance decisions, and who purchased motor insurance within the past 18 months.
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