As revealed in Consumer Intelligence’s quarterly Home Insurance Price Index, buildings and contents cover has risen below the rate of inflation over the last 12 months. This is even despite additional rises in Insurance Premium Tax.
Direct insurers have led the way on keeping a lid on prices over this period, our price tracking data shows.
Looking at all quotes rather than consumer best buys, the average premium quoted by direct brands has risen by just 4% compared in the last year compared with 9% for intermediaries.
Market price indexes by brand type
On average, intermediaries quoted £211 for a building and contents policy in April, and direct brands £201.
And when it comes to best buys – those top five quotes in direct or price comparison channels – direct insurers account for 31% of the home insurance brands of the market, but 54% of the best buys. By contrast, intermediaries account for 69% of the brands consumers can choose between but 46% of the top five prices to consumers.
Proportion of top five prices by brand type
So how are direct brands managing to be more competitive on average than intermediary products?
In a flat market, every pound counts. It is harder for brokers to be in control of their costs and make margins when they have less influence over the premiums than direct brands. They rely on the net rates they can negotiate from their panel, then have to layer on the additional costs of ancillaries, their own margin and the cost of credit. Meanwhile direct brands are more in control of the final premium offered to consumers and are able to use offers such as cash back or free add-ons to increase market share.
Competing online doesn’t help either. Brokers used to be an essential route to market for insurers. Our data shows that some of those insurers are offering better premiums themselves direct online than when on an intermediary’s panel. Sometimes a consumer could be quoted 15 policies via different brands, all underwritten by the same insurer, but where the price to the consumer differs by more than 300%.
It’s little surprise we’ve seen that Castle Cover and Kwik Fit brands disappear in recent months.
The other appeal of brokers has been the ability to customise the policy to the specific needs of the customer. Brokers traditionally able to offer a tailored policy with greater flexibility to the customer. But many intermediated brands available via the main purchase channel, price comparison websites, now offer fixed products/cover underwritten by a panel. This removes the benefit of tailoring a policy to the specific needs, meaning more competition based on price.
But hope is not lost. The average premium gap between direct and intermediary brands is small enough that good service could keep customers loyal at renewal. There are enough bad or mixed experiences that better brands will be chosen and rewarded with advocacy. The most common reason for not shopping around is because consumers like the brand they’re with.
The best brokers won’t lose customers for the sake of a tenner if they trust them to be there in a crisis. Communicating that trustworthiness and service just got more important.
Insight that will enable you to optimise your pricing strategy . . .