Motor insurers should prepare for churn: more policyholders looking to switch than any other type of insurance

It’s a tumultuous time for providers. Motor insurance is set to see the lowest growth of all personal lines insurance. Customer satisfaction is down by a fifth and drivers are looking to switch insurers to save money.

Motor insurance premiums are increasing far above the rate of inflation. 37% of UK consumers said they intend to switch their provider in the next 12 months. This is considerably more than any other type of insurance, according to our new research.

The data is taken from the Insurance Uptake Score, our bi-annual barometer of insurance purchasing decisions. It's based on consumer predictions about whether they’ll continue with, purchase, increase, reduce, or cancel their cover of ten types of common annual insurance products.

After car insurance, home insurance has the highest number of policyholders looking to switch provider (27%).

Saving money the driving factor for switching

An overwhelming 87% of those planning to switch are doing so to try and find a cheaper policy.

The Association of British Insurers (ABI) recently revealed that in Q2 of 2023, the average premium paid for private comprehensive motor insurance was £511. This is up 21% on Q2 2022 and at its highest since it started collecting this data in 2012.

According to our research, other reasons for switching include:

• Changing the level of coverage (11%)
• Change in circumstances (10%)
• Having had a bad experience with their current provider (3%)

Slow growth in the sector

Our Insurance Uptake Score found that over the next 12 months, motor insurance will see the lowest potential growth (+3%) out of ten types of the most common, annually-purchased personal lines insurance products. It compares the net increase (respondents who will take out new cover or expect to increase their cover) with the net decrease (respondents who will stop their cover or reduce their coverage level).

Of the one in ten (11%) car insurance customers who stated they’d likely change their coverage in the next 12 months, 7% plan to increase their cover, and 5% intend to reduce their cover.

Of those decreasing their cover, 59% predict they’ll remove optional covers or add-ons, whilst 23% plan to decrease the limits they’re covered for.

Of the 7% who intend to increase their cover, 42% predict they’ll increase the limits they’re covered for and 40% say they’ll look to add additional cover/add-ons. The most popular add-ons drivers are looking to take out are protected no claims discount (62%), legal expenses cover (43%) and guaranteed courtesy car / hire (40%).

Over a third (33%) of those who intend to increase their cover, said it was to cover them for things they might not be able to afford on their own.

Changes in consumer habits

Our survey also found August to be the most common renewal month. However, this is fairly evenly split across several months. November and December are the least common renewal months.

How drivers pay for their premiums is also expected to change. More than half of people who don’t currently have insurance, who are taking out a new policy in the next 12 months, intend to pay monthly (51%) compared to 34% of those who currently have insurance.

In a competitive landscape, and an unpredictable economic climate, insurers can future-proof their businesses by understanding consumer behaviour and needs both now, but also in the future. From gearing up for more monthly payments, to considering their add-ons, this is how insurers can adapt to survive.

With growth for motor insurance looking slower than other personal lines insurance markets, it’s more important than ever for insurers to keep their finger on the pulse.

Customer satisfaction down

According to our data based on customer reviews, the average customer service score for all car insurance providers has dropped considerably in 2023 compared to previous years. We analysed more than 42,000 reviews left over a five year period, and across 105 providers.

In the past year alone, satisfaction is down 20%. Car insurance providers received an average rating of 4.64 (out of 5) by their customers in 2022 on our site, compared to 3.70 in 2023 so far. This year is the first time the average rating has dipped below 4.

Given the rise in premiums, our review data found that the overall value for money score for car insurers decreased from 4.58 in 2022, to 3.67 in 2023. Customer service scores have fared just as poorly: in 2023 the average score was 3.71 compared to 4.62 in 2022.

Specialist insurers and general insurers typically scored higher than banks and other financial services providers across the five years. In 2023, the latter achieved an average score of 2.6.

While it’s a difficult situation for drivers who are struggling with rising premiums, we know insurers are facing a tough time too. They’re doing all within their power to keep their policies competitively priced. But they're dealing with factors beyond their control that are pushing costs up. On top of this, there’s added pressure from customers who naturally tend to expect more when they’re paying more.

Analysing customer reviews is crucial to maintaining quality customer service. It also prevents a drop in customer loyalty. Now is the time for companies to analyse data and listen to what their customers really want from them.

Download the report here.