SPECIAL FEATURE: Household premiums drop

According to figures issued by one of the main premium finance companies last month, almost a third of Britons have cut back on their insurance spend because they could not afford it.

Its survey found that 28% of people had pared back cover while 15% had opted to risk it and not buy an insurance product at all.

The most likely policy to be cut back on was home insurance, with 12% of those surveyed reducing their cover.

It isn’t surprising that people cut back when times are tough and spend on insurance can often be one of the first that they’ll review, hoping perhaps that ‘it’ll never happen’ to them.

As intermediaries, you’re no doubt used to price driving many of the decisions your clients make so perhaps now is a good time to start sharing some good news with them – household rates are on a downward trend.

Our own figures here at The Source reveal that we’ve consistently introduced reductions on behalf of our panel of household insurers over the past four months.

The latest price index released by the British Insurance Brokers’ Association in the summer showed that home insurance premiums fell by 4.2% in the second quarter of 2014.

What’s driving prices down?

Despite the heavy and sustained storms of last winter, the actual cost to the industry was not as severe as a major surge event and rainfall has been pretty well spread out through the year.

As we enter the next winter period, it’ll be a game of wait and see. If, however, activity is no worse than last time then we should see insurers holding prices and possibly continue to apply reductions.

However in my opinion one of the biggest influences on household rates that should help keep prices down was the decision by the UK competition regulator on most-favoured-nation (MFN) clauses. It has ordered an end to wider clauses that restrict insurers from offering their products more cheaply on other aggregator sites.

The regulator confirmed that it would still allow narrower clauses which allow insurers to offer policies cheaper than on the aggregator through other channels, as long as the policy is not available more cheaply from the insurer direct – so through its own website or call centre.

This is likely to lead to a fight amongst the price comparison websites to get the cheapest premium for their users. It is also likely to lead to insurers offering cheaper rates through other channels to ensure they continue to get the market share they’re looking to achieve.

While price is always going to be important to your clients, the good news is that it looks like household premiums will continue to be competitive meaning that you should be able to source the cover they need at a price they can afford without having to cut corners.