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NEWS

THE IMPACT OF PCWs ON HOME INSURANCE - 12/04/2017

With the rise and rise of Price Comparison Websites (PCWs), is there still a role for intermediaries in selling home insurance?

More than half of consumers are now using PCWs to research their home and other insurance policies before they buy. But far fewer are actually buying from them.[1] Many people who report using a PCW for research purposes, then do one of two things. They either reach for the phone and call the insurer or they go to the insurer’s website and buy direct.[2]

This behaviour suggests that people want more information than is provided by a PCW. The FCA criticised PCWs in a report in 2014[3] for ‘failing to provide clear information’. This means that some people may buy policies which don’t cover their needs because they don’t understand some of the key features.

Consumers have been encouraged to see PCWs as cheaper and more convenient than using an intermediary. What’s more, the FCA requirement which came into force on 1st April that renewal invitations must now encourage consumers to shop around may well encourage even greater use of PCWs.

However, you’re the experts in the insurance market and you know where to get the best value for your clients. You can also ensure that your client is getting the right cover for their needs. And having the right cover will save them money in the long run. There’s a difference between ‘price’ and ‘value’. The PCWs can deliver on price, but not always on value.

However, there is some evidence that the increasing use of PCWs in the UK is now driving up the price of insurance premiums[4]. The use of PCWs in the UK is far greater than in other European markets and customers have been actively encouraged to switch providers to get lower prices. So, there is a relative lack of customer loyalty to insurers, which means that customers are often not benefitting from loyalty discounts. The dominance of PCWs in the marketplace also means that more and more insurers are paying commission for every policy sold through a PCW, and this is also contributing to premium inflation.

Where intermediaries score highly over the PCWs however is convenience. Although people think they’re more convenient, PCWs can mean a lot more hassle for the client. They have to key in all their data and then sift through the results. If you know your clients and their needs, you can get back to them quickly with your best recommendations –  rather than a list of hundreds. Everyone likes to have their lives made easier.

In addition to price and convenience, brand recognition is also important in making a choice of insurance provider, especially for older consumers[5]. The flip side of this is that younger consumers with less experience of insurance claims may care less about brands, and so may be more willing to shop around for the lowest price. PCWs are exclusively price driven and so may not entirely meet the needs of older consumers who are also interested in brand recognition.

You can offer your customers convenience, competitive prices, including a selection from well-known providers, if you feel that the customer would appreciate that. On top of it all, only you can offer the personal reassurance that the policy you’re recommending provides the cover the client really needs. And your knowledge of the insurance products available – which ones perform and which ones don’t – is invaluable. At the end of the day, the human element is something that no digital channel can ever replace.

 

[1] P.41, Home Insurance, UK, December 2016, Mintel

[2] Ibid. p.23

[3] https://www.fca.org.uk/news/press-releases/price-comparison-websites-failing-meet-fca-expectations

[4] P.27, Home Insurance, UK, December 2016, Mintel

[5] Ibid. p. 46