Price rules in the land of the soft market

Winning new business in the private motor insurance market is easy, just offer a cheaper price. But, if you want to keep your customers, you have to focus on service. These are the main findings of research carried out by Consumer Intelligence which interviewed 5,000 consumers for its half-yearly survey. The survey results emphasise this message - a massive 77% of consumers changed their motor insurer because they wanted a better price. Just 11% changed because they wanted better cover and only 8% changed because they wanted better service. The results also show that all companies are not equal. Organisations like Frizzell, Saga, Cornhill Direct, the AA and Royal & SunAlliance have customer groups that are less price orientated.But, companies like Sainsbury's Bank, Esure, Diamond and Hastings all had over 90% of their business derived as a result of price. This means that they all have to focus heavily on keeping their prices and costs down in order to sustain growth. It is little surprise that five out of the top 10 companies whose customers buy on price also appear in the Price Check top 10 for lowest prices.In essence, these companies are winning business based on their low prices. The key issue then arises as to how much of this business can they keep? Consumer Intelligence asked customers about their intentions at renewal time. On average 87% of people say they would renew their insurance with their existing insurer. It is interesting that the customers of only two companies in the Price Check Top 10 showed a high propensity to renew - Sainsbury's and Esure. Consumers often say one thing but do another. One of the measures in Consumer Intelligence's survey is the propensity to shop around. The difference between this and their propensity to renew shows that most consumers believe they will renew with their existing company. But they are still planning to shop around for a quote. Royal & SunAlliance put in a competitive performance with over 40% of its customers not planning to shop around for a competitive quote. This compares with just 2% for People's Choice and an industry average of 12%An even more important indicator is what customers plan to do once they have finished obtaining quotes.Consumer Intelligence asked people what they would do if they were offered a price that was 5% cheaper. Some of the large and established brands would have a very high retention rate; 42% of Royal & SunAlliance customers would stay with the company compared to just 2% of Endsleigh customers.Meanwhile, at the other end of the spectrum, the worst performing brands would all lose a third of their customers without a follow-up call, if a competitor offered a saving of just 5%.Admiral Group suffer particularly badly from a lack of customer loyalty to its brand. Diamond and Admiral were likely to lose a third of their customers if they failed to keep their prices in line at renewal time.Over the past six months the number of policies bought as a result of internet research has dropped slightly. In February the research showed that 47.7% of policies where either bought online or as a result of going to the company's website prior to calling them directly. This fell to 46% in September. The main beneficiary appears to be call centres which now account for 40% of all insurance sales, up from 33% just six months ago.Consumer Intelligence analysts then turned their attention to consumers' attitudes towards companies.

TrustworthyCustomers were asked how much they trusted their current insurer. Generally, most people trusted their providers but Saga, CIS, AA, RAC, Frizzell, Tesco, Liverpool Victoria and Prudential all scored 'highly trustworthy'. At the other end of the spectrum People's Choice customers were much less sure of how trustworthy the company was.One of the key criteria that companies should look at is the propensity to recommend. This is a crucial measure because it not only gauges the attitude of customers to the company but it also indicates the potential for the company to get referral business.All the above companies achieved scores of strong propensity to recommend by their customers, but AXA, Fortis and Budget all had customers who were more indifferent.Finally, customers were asked to give an overall satisfaction rating of their motor insurance provider. The winners, ranked as best overall insurers, delivered all the elements of price, cover and service.The research shows that companies like Liverpool Victoria and Saga don't necessarily win business on price, but they hold on to their customers through better service, product and niche marketing. Consumer Intelligence's survey was carried out in August and September 2004, using a sample size of 5,000 people who had primary responsibility for the purchase of their car insurance. These results are mapped against results from Consumer Intelligence's Price Check service.For more information about the results and how they impact your business contact andya@consumerintel.com . For a free overview presentation go to www.consumerintel.com .