How add-on giveaways and pricing reshape brands competitive position

For something that sounds like an afterthought, add-ons are anything but in the eyes of customers.

Some 18% of motor policyholders have breakdown cover, with most of those selecting it as a standalone extra, and 25% hold legal expenses, our Insurance Behaviour Tracker shows.  

But while brands quote the core premium with a variety of sophisticated data inputs, the vast majority have a fixed unit cost for add-ons or give it away with a core policy. It’s a blunt instrument which helps some brands more than double the number of competitive quotes returned on PCWs, while others are wiped out from the leaderboard entirely when the cost of popular add-ons is factored in.  

Bundled up (or not) 

Consumer Intelligence data shows that 15% of brands included breakdown at no extra cost across Price Comparison Websites (PCWs). For those that did sell it, prices were as low as £3.48 and the average was £38.39.  

Legal expenses cover was given away more often, and cheaper when sold. The average price was £27 and ranged between £2.61 and £39.95. It was included at no extra cost for 36% of the quotes returned to our basket of 3,600 risks in March.  

Whether brands gave away or charged extra for breakdown cover was entirely consistent across the PCWs we looked at.  There was only a very small variation of tactics with legal expenses; Atlanta Group’s Autonet and Got You Covered which offered it for free on Confused and Barry Grainger on MoneySuperMarket.  

Giving away or selling add-ons also varies between some brands within the same company. Swinton Classic, for instance, includes legal expenses, Swinton Essentials offers it as an extra for £24.99. Aviva includes legal expenses online for new customers, Quotemehappy does not. Policy Expert Premier includes breakdown, Policy Expert Plus does not.  

All change 

Including the price of add on cover can be transformative for how competitive the total price is for customers. AA Insurance, for example, achieved 11% rank 1-5 quotes on CompareTheMarket last month, but when the low cost of breakdown cover is factored in, it would win 19% of top spots.  

Others are less competitive when breakdown costs are included, including One Call and Right Choice which slip from 5% Rank 1-5 quotes to zero.  

For legal expenses, those gaining ground include Dial Direct, Admiral and Halifax.  

If both legal and breakdown add-ons are included, the AA gains the most ground, followed by Lloyds Bank. However there are 21 brands in total which are wiped out from the Top 5 when both adds are included, including some big brands.  

Added scrutiny 

Firms have recently been prompted to review their add-ons strategy by the FCA’s general insurance pricing practices review. Though the final rules will not be confirmed until the end of May, the proposals included the expansion of product governance to include add-ons. The FCA has also confirmed that when it does publish its final policy statement next month it expects firms to implement the rules on product governance by the end of September.  

Under the consultation the FCA explained it wants firms to ensure a “fair relationship” between the price and the quality of add-ons, including those that are included in the product. It proposed that firms should assess the value of each product and whether being sold together impacts the value of the package overall. 

This may challenge the strategy of giving the product away for free by some brands, and heightens the value of market benchmarking in order to demonstrate fair value assessment.  

The impact on competitive quotes can be severely affected by changes in this arena. For insurance brands, too, add-ons should not be an afterthought.  

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