UK motor insurance switching rises as premiums stabilise

A report from LexisNexis Risk Solutions indicates that more UK consumers shopped around for better motor insurance deals in 2024 than during the previous two years.

The LexisNexis Insurance Demand Meter UK for the second half of 2024 analysed shopping and switching trends within the UK motor insurance sector. According to the report, an average of 30,000 consumers per day searched for improved motor insurance offers during H2 2024, representing a 4% increase compared to the same period in 2023.

The analysis found that one in four UK consumers switched motor insurance providers in 2024, up from one in five in 2023. This level of switching activity marks a return to elevated levels last observed before the Financial Conduct Authority's (FCA) ban on price walking in early 2022, which had temporarily dampened switching behaviour.

The top ten motor insurance providers in the UK collectively gained 400,000 more policies from the remainder of the market during this period. However, they also lost 420,000 policies to competitors outside the top ten, suggesting heightened competition among insurers of all sizes.

The report highlighted a general increase in policy cancellations across the market. The cancellation rate stood at 13% among the top ten insurers, while for the rest of the market it reached 18%. According to LexisNexis Risk Solutions, this difference could indicate the larger insurers benefit from more robust customer verification processes during application, quotation, and policy onboarding.

Tom Lawrie-Fussey, Senior Director of Insurance Product Management for UK and Ireland at LexisNexis Risk Solutions, commented on the report's findings.

"Our analysis shows that the U.K. motor insurance market went from one in five consumers switching motor insurance providers in 2023 to one in four in 2024. This underlines the price competitiveness in the market and the ease with which consumers are now able to shop and change insurance providers," he said.

He also discussed potential industry trends following recent movements in premium prices.

"We see motor insurance premiums now levelling off with some insurance providers suggesting the price surges seen in the last few years have ended. Due to initiatives such as the Motor Insurance Taskforce, insurance providers are working collaboratively to tackle the factors that have contributed to higher premiums, and we should see more price competition in the market. Cost-of-living pressures remain, and therefore it is likely that shopping and switching activity in motor insurance will stay elevated in 2025," Lawrie-Fussey said.

"While the big insurance providers appear to be more equipped to select and retain a more favourable profile of risk, the rest of the market appears to be catching up, with the top ten losing marginally more business than they won in the final quarter of 2024. As costs for insurance providers ease, niche providers should remain in a strong position to compete effectively into 2025," Lawrie-Fussey noted distinctions between larger insurers and other market players.

Analysts attribute the sharp uptick in shopping and switching activity to a combination of rising insurance premiums and wider cost-of-living challenges. Many UK consumers have become increasingly price-sensitive and are utilising the ease of digital comparison tools to regularly reassess their insurance options in pursuit of lower costs.

The FCA's 2022 ban on price walking – a practice in which insurers offer lower premiums to new customers while raising renewal prices for existing ones – initially reduced switching behaviour. However, the ongoing financial pressures faced by consumers and stabilisation of premium prices have reignited interest in shopping around within the motor insurance market.

The study draws on hundreds of millions of consumer shopping transactions since early 2022, offering what LexisNexis describes as a market-wide perspective on changing consumer behaviour in the automotive insurance sector.

Collaboration between insurers, as well as government and industry-led initiatives to address rising costs for drivers, continues to shape the competitive landscape in UK motor insurance. The coming year is expected to see continued high levels of consumer engagement and competition amongst both established and niche providers.