If you have renewed your motor insurance recently you may have noticed that the price your insurer has asked you to pay has probably increased. A combination of higher Insurance Premium Tax (rates have doubled over the past two years), bigger injury pay-outs and rising vehicle repair costs mean that motor insurance prices are now at an all-time high.
Even for those of us savvy enough to shop around and switch provider, prices have also typically risen, despite the fact that the market remains as competitive as ever. However, it still generally pays to switch, as the vast majority of motor insurance providers are still willing to chase new business and therefore many still offer introductory discounts.
Given this, it is somewhat concerning that, according to our Financial Research Survey (FRS), that the number of drivers who do switch has remained basically unchanged compared to four years ago.
The number has held steady at around a quarter of drivers. So it would seem that many drivers don’t know, don’t consider, or just can’t be bothered, to change provider, despite the rising prices.
Motor insurance renewal transparency: early signs of increased shopping around
But there are tentative signs that this might be changing. Since April 2017, insurance providers have had to disclose prior year premiums on renewal notices. These new rules mandated by the FCAallow customers to compare more easily what they paid last year versus what they may pay this year, if they remain with the same provider.
Early signs suggest renewal transparency has helped encourage greater levels of shopping around but this hasn’t so far translated into actual switching.
According to the FRS, the proportion of drivers who “actively renew” their motor insurance (renew but take out at least one quote) has grown and now stands at 29%, the highest-ever level. In addition, a high proportion of those who have switched in the last 12 months also state that they are likely to switch again.
On the other hand, large numbers are still auto-renewing on their motor insurance, particularly across older age groups where auto renewal rates remain stubbornly high at over 45%. For these customers, renewal transparency rules mean that providers must now also include additional disclosures on renewal notices explicitly encouraging people to shop around.
Overall, renewal transparency has definitely been a useful step forward in making the motor insurance market more consumer friendly, and it will be interesting to see if it helps encourage greater levels of switching in the months ahead.
The Financial Research Survey (FRS) is one of the largest and longest running surveys tracking personal financial holdings and behaviours and is considered the industry benchmark within the British financial industry.