Consumer trust declines following surge in insurance premiums

Consumer trust in car, home and travel insurance has dropped over the last six months, new data from Fairer Finance has revealed.

For its latest index, the firm tracked the sentiments of customers who have made claims on their policy in the last three years.

It found that trust fell more among those who had not claimed on their policy, with policyholders citing three reasons for a lack of faith in insurance.

One of them was cost,  with 47% of consumers stating that the price of policies was their primary grievance, rising from 39% in August 2023.

Meanwhile, around 30% expressed dissatisfaction due to poor customer service experiences, while 28% of consumers cited issues with their insurance provider.

The data used for the index came from a poll of 10,000 consumers.

Other figures

This came after research published by Love2Shop, published on 27 March 2024, found that only three in 10 UK adults trusted their insurance provider.

It also highlighted that 35% of young adults, over 2.5m people, admit they do not understand how insurance works, while 45%, avoid renewing policies because they find the process too difficult.

This compares to 12% of UK adults overall who avoid renewing their policies and 22% who don’t understand how insurance works.

Price rise

The lack of trust comes at a time when premiums have been increasing amid economic headwinds, such as inflation.

For example, ABI figures showed that the average motor insurance premium paid in the UK increased by 12% between 1 October and 31 December 2023 – up from £562 a year to £627.

James Daley, managing director at Fairer Finance, said: “The sharp rise in insurance prices is inevitably taking its toll on levels of customer trust in the sector.

“Household budgets have been under enormous pressure over the last two years and just as there seemed to be some light at the end of the tunnel, the recent huge hikes in car insurance premiums have dealt another blow to cash strapped families.

“The industry’s response has been to try and keep premiums down by raising excesses and cutting cover levels, with more and more policies now coming without standard coverage such as windscreen and key cover.

“This is likely to lead to a growing expectation gap and deeper longer-term trust issues for consumers. In the is environment, it’s essential that insurers are doing everything they can to help customers understand what they’re buying and what they’re not.”