Up to 56% of customers will consider switching in response to insurance premium tax rise in November
27% of insurance customers will cut cover or cancel policies
Consumer Intelligence Switching Index shows 35% of home insurance customers and 39% of drivers switched in the year to May
The planned rise in Insurance Premium Tax will trigger a surge in insurance customers moving to new providers and cutting back on or cancelling policies, new research1 from insurance experts Consumer Intelligence shows.
Its study shows 56% of customers will switch or consider switching once the tax rise takes effect in November while 27% of customers will cancel policies and/or reduce cover.
The Summer Budget increased insurance premium tax from 6% to 9.5% which is estimated to raise nearly £1.5 billion and boost premiums for motor, breakdown, home, buildings, pet, private medical and mobile insurance. Consumer Intelligence2 estimates it will add £20 to the average motor policy and £50 for under-25s.
Consumer Intelligence’s authoritative Switching3 Index based on responses from more than 11,000 home and motor policyholders shows 35% of home insurance customers switched in the year to May and 39% of motor customers did.
The main reason for moving was price – 50% of home customers switched for a lower premium and 54% of motor customers moved for a lower price.
However the tax rise is likely to boost switching – although 16% of customers believe that as all insurers will be affected there is little point in moving.
Worryingly 21% of customers say they will reduce cover on some policies while 5% say they will cancel policies and 2% of drivers will reduce cover.
Ian Hughes, Chief Executive of Consumer Intelligence said: ”The rise in Insurance Premium Tax will have a massive impact with customers looking to move in response to premium rises which are nothing to do with insurers.
“The biggest concern is that people are considering cutting back or cancelling insurance policies in response to the price rises. It is an easy saving to make but could end up costing them and other road users more in the long run if the means more uninsured drivers.”
Consumer Intelligence’s Switching Index shows 73% of home insurance customers facing renewals shopped around in the year to May with 48% deciding to move – the equivalent of 35% of all customers.
Around 82% of motor customers facing renewals compared prices with 48% making a move to a new provider – the equivalent of 39% of all customers.
Motor customers were most likely to use price comparison websites to buy insurance – 50% did so in the past year – while 40% of home customers bought through price comparison sites.
The study shows insurers managed to retain around 52% of motor and home insurance customers who shopped around.