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Cheap or Quality in Choice of Car Insurance Policy?

A Car-Insurance-UK-Supermarket.co.uk Survey

Research Report: 3 June 2011
by Heather Ferrier

Introduction

Car insurance consumers in the UK saw an increase in the cost of car insurance by 40% during the year ending March 31 2011 according to the AA's Insurance Price Index that reports quarterly figures. Even before this time period, car insurance prices had begun to escalate well above inflation.

The causes of the increase in the cost of car insurance are numerous and include increasing numbers of personal injury claims and increased insurance fraud.

This escalating cost strengthened the already well-established culture of using price comparison sites to reduce the cost of car insurance and the leading price comparison sites have reported an increase in their use.

Consistent with this, the car-insurance-uk-supermarket.co.uk sales patterns shifted towards greater use of the price comparison sites and away from direct car insurance sales although uptake of popular direct brands continued.

As would be expected from these changes, car insurance consumers began to reduce their level of cover to save money and the British Insurance Brokers' Association (BIBA) reported that 57% of people had reduced their level of insurance cover in 2010.

It was clear that low cost was becoming much more important in people's choice of policy and we wanted to know to what degree people were de-prioritising the cover they were getting in order to save money. This is an important question to ask as there are significant financial risks to cutting back on cover if a claim is later necessary.

Our study therefore set out to investigate this question.

Methodology

As we were relying on voluntary completion of our study, it was necessary to keep it simple. We therefore published a single multiple choice question alongside the main text on most of our (thousands of) pages and rewarded those that took the time to provide their 'vote' with a display of the voting patterns so far.

It would seem that their curiosity to see these voting patterns and the ease with which they could vote led to reasonably good uptake for a survey of this type and we were able to conclude the study over four weeks from May to early June.

Our simple multiple choice question was displayed on the website as follows:

Optional Survey
(If you vote, you'll be shown the results)
What matters most when you buy car insurance?

Saving money only
Getting best policy only
Both matter equally
Cheap more important
Policy more important
Not sure
None of these

Those that took part simply needed to select one option then vote. Voting more than once was automatically prevented.

Results

103 took part, generating 100 responses as three had not selected any of the seven options. The results were as follows:

Option	No. of Votes	% of Votes
Saving money only:	9	8.74%
Getting best policy only:	1	0.97%
Both matter equally:	29	28.16%
Cheap more important:	54	52.43%
Policy more important:	7	6.80%
Not sure:	0	0.00%
None of these:	0	0.00%
Total:	103	100.00%

From these numbers, it can be seen that 63% of people regard getting cheap car insurance as more important than getting the best policy. Almost a tenth (9%) said that saving money on their car insurance was all that mattered.

Only 8% said that getting the best policy was more important than getting cheap cover while only 1% did not consider the price in making their policy selection.

Just a quarter (29%) regarded saving money and getting the best policy as equally important.

From this, only 37% regard the cover they're getting to be as important or more important than the price they pay for it.

Discussion

It is concerning that for almost a tenth of car insurance consumers in this country, what they are getting in terms of policy features, or indeed not getting if they select a very 'no frills' car insurance policy, is not something that they take into account before buying.

If our survey is representative of the population in general, and there is no reason to believe that it is not, then as many as 2.7m drivers are buying car insurance paying no attention at all to what they are getting, being only focused on buying as cheaply as they can.

A further 54% although interested in the policy features are more interested in buying cheap and are clearly willing to compromise on their cover to do so.

Only just over a third are anxious to secure a better level of cover even if they have to pay a bit more for it.

These findings are consistent with the trend for people to buy less inclusive car insurance cover as outlined in the introduction and they would suggest that in 2011 as many as 63% will attempt to reduce their level of cover to cut costs.

It would appear that saving money by buying cheap car insurance via a price comparison site while paying limited attention to the associated policy features has become the norm for the majority in this country.

Understandable as it is in the context of the ever-increasing cost of car insurance, to buy an insurance product without any effective quality control, especially when using powerful comparison systems to find the cheapest of hundreds or even thousands, is a high risk approach and it is unfortunate that many policy-holders will find out too late - when a claim is needed - that you pay for what you get and by buying very cheap you expose yourself to the risk of significant later expenditure.

It is important, dificult as it is, for motorists to swallow the bitter pill of accepting the need to pay more to maintain an effective level of car insurance cover. Choosing ever more 'no frills' policies that provide limited cover and are often associated with an increased excess, quickly becomes self-defeating if a claim is needed.

It also turns on its head the main reason for buying car insurance, which is, of course, to serve you effectively in an accident.

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