Insurers will struggle in the current competitive market to increase premiums and retain customers according to Defaqto.
In its fourth annual report into the UK Home Insurance Market, Defaqto says that with a massive range of products available insurers need to differentiate themselves from their competitors.
In its report “Changing Policies for a Changing World”, Defaqto states that marketing continues to be focused on price rather than on service or product features making it even more difficult for the public to make an informed purchasing decision.
Defaqto says that despite attempts by some leading companies to educate the general public that insurance should not be seen as a commodity product, whole swathes of the market persist with the “price is everything” approach.
The report identifies 115 companies selling home insurance under their own brand, in addition to intermediaries selling other insurers' policies.
Home insurance premiums offered by the majority of companies have remained largely static over the past ten years and are likely to do so in the immediate future, Defaqto said.
Report author and Defaqto's head of general insurance Brian Brown said: “This is a tough market where success will require insurers to increasingly tailor their products to meet customer needs. The area where we expect to see the most growth is in the mid-net worth market with insurers moving in to meet the demand created by the ownership of the higher value products that are finding their way into people's homes. Looking ahead, it is likely that the banks will be the big winners with their ability to cross-sell to existing customers".
“We can expect to see distribution patterns change as insurers try to reduce costs. This is most evident from the increasing use of the Internet for purchase as well as research in the home insurance market. However, the use of web aggregators (comparison sites offering quotes from many insurers) means that individual insurers will have to work harder to attract and retain customers.”
With increased competition insurers have been taking a number of steps to remain competitive, says Defaqto. These include reducing administration expenses through offshore staffing, reducing claims costs, minimising acquisition costs and improving claims handling procedures. Many insurers are also making better use of use of repair management companies and an increasing number are directing customers to purchase online.
Overall, Defaqto believes that there will be a number of significant changes in the home insurance market over the next two to three years:
