We have reached the halfway point in a year in which insurance has seen more buffering than 2020!
Lots of clients have been asking us “what is going on in the market?” so I thought I would take a quick time out to review the story so far (Acts 1 & 2) and give some foundation for where we are now and what happens next (Act 3 and then 4).
Act 1: GIPP arrives on an unsuspecting and disinterested consumer
In Q1 consumers saw renewal notices come in at roughly the same price as last year’s price. This particularly affected Year 1 and 2 customers. Some of the longer-term customers saw prices go down which, surprisingly for insurers, made them shop around. Up or down, a change in price is suspicious. However the net result was shopping around dropped, and switching collapsed.
Act 2: Cost of living laid bare for an unsuspecting consumer (Q2)
Suddenly, consumers see a HUGE jump in energy price which makes them think about the price of everything. They start to shop around for insurance but often can’t find cheaper cover that is like for like, so some start switching to lower cover or cancel altogether, opting for self-insurance. Shopping around goes up, switching goes up but what is being bought is different.
Act 3: Insurance prices rise, and consumers freak out about the Cost of Living (now)
With insurance prices rising – meaning renewal prices going up and consumers are increasingly feeling the pinch – shopping around is going up across all categories. But with the proliferation of hollowed-out products, are consumers truly making a like-for-like comparison, or just buying something that is lower value for a lower price? As well as shopping around, we can expect switching goes up also.
Act 4: The regulator roars
It might be a whimper, but it won’t take much more than a swat of the tail for the market to panic. This phase is yet to come, so far, the regulator has been all talk and no action. But the action can and will come, probably after the submissions on the 30 September go in. But let’s face it, the sorts of things they are going to act on don’t need a submission.
They will be things like the cost of paying in instalments or the cost of add-ons. When the regulatory wind blows it won’t just affect those who have transgressed, it will cause a sea change in thinking within the market. A lot of people that we speak to just don’t think the regulator is going to want to or be able to follow through on the next part of the Fair Value/Consumer Duty journey. They take comfort from the fact that the regulator is delaying the implementation and phasing the rollout.
So, what happens in 2023? As the industry packs its swimmies, loads up on sun cream and then sweats it out in a queue at the airport before it jets off for a well-deserved summer break, to return in September and sharpen its pencil. Here are the key factors:
- How far claims inflation rises, before it is brought under control
- How far inflation goes within the market and how anxious this makes people feel at renewal
- Whether consumers decide to switch to avoid the rises, or they chose to cancel
Ultimately, with such change underway and on the horizon, providers need to ensure they have their fingers on the pulse, particularly when it comes to consumer behaviour. They need to understand what’s happening and why it’s happening. Shopping and switching are just two of the metrics we have been tracking for over a decade. Beyond understanding the direction of travel at a market level, you need to know how you compare at a brand level too, enabling you to making informed and confident decisions and respond rather than react to the evolving market.
Post-GIPP implementation, we've seen shopping and switching rates at renewal at their lowest point within the history of our Insurance Behaviour Tracker, the most comprehensive insurance-focused survey in the market dating back to 2009.
Download our latest infographic highlighting key insights about consumer behaviour at renewal across motor and home 📥
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