The UK motor insurance market has witnessed a significant rise in premiums, with a 20% increase year on year till April 2023, according to a poll by One Poll for Confused.com, causing considerable concern among consumers. Low switching rates among customers is one of the contributing factors to the sharp premium hikes. Against this backdrop, there is a need for consumers to switch insurers regularly to combat rising costs, says GlobalData, a leading data and analytics company.

GlobalData’s 2022 UK Insurance Consumer Survey found that only 28.8% of motor insurance customers switched insurer at renewal (down from 30.7% in 2021). This was despite a further 46.6% shopping around but staying with the same provider. The survey also found that 68.5% of consumers visited a price comparison site to review prices before renewal.

Ben Carey-Evans, Senior Insurance Analyst at GlobalData, comments: “This might be because customers were seeing increases in premiums regardless of who they chose. The Financial Conduct Authority pricing reforms introduced in January 2022 made it harder for insurers to undercut each other by banning offering better deals to new customers than those received by renewing customers.”

As premiums were increasing throughout the year, consumers may have found cheaper options than their existing provider was offering, but they still would have been more expensive than their previous annual premium, which makes switching less appealing.

Carey-Evans continues: “An average increase of 20% in annual premiums  is considerably higher than inflation and will stretch consumers who are already struggling. While motor insurance is mandatory for drivers, this trend could force individuals to look to alternative options. Pay-per-mile insurance is a way for consumers to save money on their premiums if they do not drive great distances.”

The Royal Automobile Club (RAC) says such policies offer value for consumers driving under 6,000 miles a year, while By Miles puts this figure at under 7,000 miles per year.

GlobalData’s 2022 UK Insurance Consumer Survey found that only 3.5% of consumers had an active pay-as-you-go or usage-based motor insurance policy in 2022, but sharp premium increases could push customers towards more innovative and cost-cutting policies.

Carey-Evans concludes: “Overall, this is more bad news for consumers, who continue to be hit by high inflation. Value is the key factor in purchasing motor insurance, which is already a grudge purchase, and a lack of perceived value over the past year has reduced the level of switching. However, consumers can still make some savings by switching, even if it results in an annual increase in premiums. Otherwise, consumers should look towards slimmed down policies such as pay-as-you-drive for increased value.”