Benign weather conditions have attracted more players into sector
Home insurers have benefited in recent times from a combination of strong economic performance and benign weather conditions, according to Defaqto, the financial research company.
In a recent report, Defaqto said that this has attracted many new entrants and has in turn has made the market increasingly competitive.
Defaqto said that the rapid increase in the ability of consumers to compare policies via “web aggregators” – web sites dedicated to providing comparative quotes from insurers - has meant that price is becoming more dominant is product selection. This is, it said, was compounded by insurers offering ever more attractive discounts or cash back deals to new customers, generally without any reduction in the cover offered.
At the same time, home insurance is a relatively easy market to enter and with around 200 standard policies to choose from, the market is clearly becoming oversupplied and premium increases have not kept up with inflation over the past 10 years, Defaqto said.
While the current conditions persist, the market remains attractive to insurers. The risk is that should there be a run of weather related claims some insurers could find themselves exposed with the likely beneficiaries being those that decided to offer value related cover and not operate on price alone.
Defaqto’s Head of Insight, Brian Brown said: “There has never been a better time for consumers to buy home insurance as providers compete so fiercely to for their custom. Instead of trying to differentiate themselves by extending covers or improving services, providers seem to have been bitten by the price bug. We can expect to see the downward pressures on premiums continue as use of the internet to research and to buy home insurance intensifies and consumers become even hungrier for bargains.”
Overall, Defaqto believes that there will be a number of significant changes in the home insurance market over the next two to three years. These include:
· Brokers not able to deal with customers on websites and through emails will struggle to survive.
· More big retail brands will enter the market
· More price comparison websites will appear.
· Insurers will move into the higher value end of the market.
· Insurers will seek to use green issues to market and sell their policies.
