War for customer retention intensifies as competition between insurers heats up

However, on a positive note, fewer consumers are making spending cuts at their next renewal date than were last year. Twelve months ago, 13% of consumers said they would stop their contents insurance when it was next up for renewal.  Similarly last year 11% of consumers were considering stopping their payment protection insurance and 13% their travel insurance, however only 6% and 7% respectively would this year.

In addition, 12 months ago consumers were exploring ways to minimise their expenses by considering less comprehensive motor insurance policies or reducing the value of their insured property. This year only 4% said they would look in to reducing the insured value of their own property whereas. A much smaller 8% would downgrade their policy this year compared with 22% last year and 5% would reduce the value of their property insured to reduce their contents premium, compared with 13% last year.

Mark McIllquham, insurance partner at Deloitte, commented: “There is a war for customer retention. Insurers are under increasing pressure to keep premium levels low in order to maintain their market share. From January next year household and motor premiums will rise as the recently announced increase in insurance premium tax is passed onto consumers. Insurers will have to think carefully about how much they can raise their prices without losing customers.  As an alternative, insurers could look to increase their revenues through additional sales from ancillary products or find a way to differentiate themselves from competitors on issues other than price to increase their market share.”