Recent years have brought calm and stability to the UK motor insurance market, with near-static renewal premiums bringing with it increased loyalty and fewer consumers shopping around to find a better deal at renewal.
The second half of 2015, however, disturbed this period of calmness, with the 3.5% increase to insurance premium tax introduced by Chancellor George Osborne in November 2015 sending premiums soaring by as much as 10%.
“The big story over the last year has been things have quietened down a bit in the motor market,”
said Consumer Intelligence chief executive Ian Hughes.
“You had years and years of people switching, but because renewal premiums were pretty static for the last 12 months people stopped shopping around."
“Things were getting more settled and then suddenly the whole market had this 3.5% insurance premium tax increase go through from the Chancellor, but prices didn’t just go up 3.5% they kept going to 10%.”
This shock to the market put a dent in consumer loyalty.
Being adaptable is even more important
In the highly competitive motor insurance market, being adaptable to changing market environments and consumer wants and needs is vital.
The hike in premiums at the end of 2015 after the increase in Insurance Premium Tax made this even more important, with the resulting shake up of the market looking set to fundamentally change the way motor insurance is bought and sold.
Insurers not prepared to chase down premiums even further and squeeze already dwindling profits must reinvigorate their focus on branding.