How is the cost-of-living crisis impacting shopping and switching?

Shopping around and switching has fallen notably since the price walking ban.

With an industry-wide regulator-enforced guarantee that renewing customers wouldn’t be charged more than if they had been a new customer.

In the home market, 76.1% of customers shopped around in April-June 2019, dropping to 71.5% in April-June 2022. Switching fell from 37.1% to 34.7%.

Meanwhile in the motor market, shopping dropped from 83.1% to 79.4%, and switching from 39.7% to 36.9% in the same three-year period.

But with the cost-of-living crisis biting harder, consumers may well explore and realise that there are savings to be had, even if their renewal quote hasn’t jumped up.

So what is currently motivating shopping and switching behaviour - and what can providers learn from it ahead of the predicted spending crunch?

Home insurance shopping and switching

In Home, it’s interesting to see that only 25% of shoppers are currently driven by price. 56% shop out of habit – having been trained over many years that go (dot) comparing the market is the best way to get the best deal.

Some 10% of those shoppers chose to stay with their current provider after seeing what else was out there.

Of those that do switch, only 34% were motivated by the cheapest price, and only 10% by incentives like cashbacks. A quarter are switching mainly out of habit.

Motor insurance swapping and switching

In Motor insurance, slightly more shoppers were price driven – 14% because their quote had gone up a lot at renewal and 13% who wanted to use a quote to renegotiate with their current insurer. A further 56% said they shop around each year on principle.

Motor customers are far more motivated to actually make the switch by the cheapest price – with 50% citing it as their main reason for changing providers.

Where now?

As the rising cost of living takes hold and customers begin to feel the pinch, we’re expecting to see shopping rates increase. The big question is whether switching rates will go up, and that will only happen if customers feel as though they are saving money by switching.

With money being a big motivating factor already – especially in motor - it’s likely people will be keener for a deal.

This means new new-business opportunities – but there are also opportunities to increase the number of shoppers who choose to stay after looking around. Yes, price is going to be important, but it is clearly not the only front on which to fight for them. Communication will be absolutely key – especially for customers thrown into financial vulnerability, and at the point of a grudge expenditure. How can they be made to feel safe and valued? Will perks suddenly start to mean more – or less as people cut down on trips to the cinema and restaurants?

What we need to be sure of is that the proliferation of lower value insurance products we’ve seen entering the market doesn’t mean that saving money results in compromising cover.

Providers have a responsibility to provide, and articulate, fair value. Those able to do so may be the ones who prove most popular with cost-of-living shoppers and switchers.