As the insurance industry pivots to meet modern consumer expectations, online-only insurance products are gaining prominence. These digital-first policies are a strategic response to customer demand for convenience and insurers’ need to reduce costs and carbon footprints.
Online-only insurance products, which we define here as policies managed exclusively on a website or app without phone support (except for claims), are quickly becoming a staple. Many major insurance groups now offer at least one online-only option, and our data shows that most consumers see at least two online-only products among the five cheapest premiums on price comparison websites (PCWs).
Growth and appeal of digital car insurance
The past few years have seen a steady rise in the availability of online-only car insurance options. Major insurers have introduced online-only variants within their existing tiered offerings, and customer response has been promising. A recent Consumer Intelligence survey indicates that half of respondents currently have an online-only policy, with the 45-54 age group being the most prominent demographic.
Consumers have cited several advantages to these products. Our research found that consumers’ most preferred channel for policy amendments is through a website or portal. The majority expressed openness to their current provider adopting an online-only approach, citing convenience, 24/7 access, and cost savings as key incentives.
Benefits for both parties
Online-only policies present a win-win situation for both insurers and customers. For insurers, the digital approach reduces overhead costs associated with call centres, cuts administrative fees, and lowers the company’s carbon footprint. Additionally, online products allow insurers to “stack” their brands on PCWs, occupying more screen space and enhancing their visibility.
For consumers, our survey respondents cited benefits such as ‘cheaper premiums’, a ‘user-friendly experience’, and ‘24/7 customer support via email/chat as the three most important factors that would make ‘online-only’ products more enticing to them. Reduced or eliminated administration fees might also serve as an added benefit. However, some online-only policies may have limited options for policy adjustments compared to traditional ones. Despite these minor trade-offs, many consumers view the shift to digital services as advantageous.
Consumer preferences and generational differences
When asked about their preferred channel for making policy amendments, nearly half (46%) of respondents selected a website or portal. The remaining preferences were split across phone (28%), mobile app (24%), and in-branch services (2%).
Generational differences, however, highlight unique challenges. Respondents aged 65+ had a stronger preference (42%) for phone-based interactions, while only 13% of those under 35 opted for phone support over digital options. While older consumers showed some hesitancy towards a fully digital model, younger demographics welcomed the convenience of online services.
Pricing strategy and product stacking
The digital shift also enables insurers to employ new pricing strategies, enhancing their competitive position on PCWs. For example, when a major brand’s online product secured the top spot on Compare the Market in July, 58% of the top five ranks were dominated by that brand's offerings, even at times filling all top 10 slots. . While new online-only products may be free of the renewal pricing considerations that must be taken into account with General Insurance Pricing Practices reforms, the power of brand stacking has meant many insurers have taken the opportunity to move up the competitive rankings with an additional online-only tier. Few online-only products operate in a different quoting space to their main brand equivalents.
What consumers want in online-only products
As we mentioned earlier, when it comes to making online-only products more attractive, survey respondents highlighted lower premiums as the top priority (81%), followed by a user-friendly website and app (56%), and 24/7 customer support through chat and email (53%). Other benefits included transparent terms and conditions (45%), and positive reviews and testimonials (44%).
Unsurprisingly, price remains a crucial factor for consumers, with 49% of respondents willing to switch to an online-only policy if it offered an 11%-20% cost saving over traditional policies with phone support. Additionally, 25% said they would consider switching for a smaller 1%-10% saving. These findings suggest that many consumers are open to online-only options, provided they offer clear cost benefits.
Concerns surrounding online-only insurance
While the benefits of online-only insurance products are evident, consumer concerns must be addressed to boost adoption rates. The most significant concern given was the lack of personal interaction (48%), followed by doubts about customer service quality (45%), the insurer's reliability (41%), privacy and data security (32%), and clarity around policy details (31%). A further 2% selected ‘other’, while 13% declared they had no concerns at all.
Addressing these concerns with robust customer support, secure data management practices, and transparent communication can help insurers build trust with digital-only customers.
The future of online-only insurance
As digital adoption increases, online-only products are set to become an integral part of the insurance landscape. By offering a streamlined, cost-effective model, insurers can meet consumer demand for convenience while realising substantial operational benefits. Balancing digital efficiency with personalised support options, especially for those less comfortable with online-only interactions, will be crucial to ensuring the continued success and growth of this model.
For consumers, the future of insurance looks increasingly digital, delivering ease, cost savings, and service accessibility. The industry’s commitment to meeting these evolving expectations underscores a significant step forward in making insurance more adaptable and responsive to today’s fast-paced, tech-savvy world.
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