The vast majority (89%) of British consumers do not believe that paying more for their car insurance results in the delivery of a better product or service from their insurance provider according to a market survey conducted by Datamonitor.

“These findings are extremely worrying for UK insurers,” said Liz Hartley Datamonitor’s Principal Consultant for Financial Services Consulting.

“It shows that British consumers do not see any point of differentiation among providers, and essentially believe that car insurance is a price-based commodity. It is therefore important in this economic climate – particularly given that premium rates are currently hardening due to weak investment returns – that insurers look to reinforce their value proposition with consumers.”

This view is supported by other findings from the study. Compared to the US, for example, where over half of car insurance policy holders automatically renew their policies each year, only 9% of British consumers actively allow their policies to roll over, while 44% claim that they shop around for better deals each year.

According to Datamonitor, these inherent high rates of customer churn mean that, for UK insurers, the cost-to-serve will continue to rise. However, it appears drivers in Britain do see comprehensive car insurance as being an essential insurance to hold and maintain, even during the economic downturn, and are not willing to compromise the features and perceived benefits that they currently receive.

Indeed, only 5% of survey respondents claimed that they would look to trade down to third-party-only cover in an effort to save money, and 13% said that they would look to reduce their premiums through increasing excess amounts or through reducing the total sum insured.

“This is reflective of the open and competitive insurance market that exists in the UK generally,” said Ms Hartley.

“It is a buyers’ market and, as such, consumers do not believe that they need to compromise when negotiating their insurance policies; indeed, there is almost an expectation of ‘more for less’ each year.”

Datamonitor said the price mentality adopted by British consumers is in part being fueled by the high penetration of price comparison websites in the UK, with 34% of respondents claiming to have used a site of this type to find the best priced car insurance, compared to only 23% of respondents who used a comparison site to find the best priced house and contents insurance.

“The economic downturn and the high cost of motoring in the UK generally mean that consumers will continue to spend a disproportionate amount of time looking for savings on their car insurance policies,” said Ms Hartley.

“However, over the medium to long term, the onus will be on car insurance providers to actually begin to re-establish value in their proposition through understanding the need states and drivers that are important to consumers, and marketing their products accordingly. At the moment, nearly every car insurance marketing campaign in the UK centers on reduced price, and the essential benefits of the product, such as safety, security and well-being, are lost.

“These messages and the underlying importance of needing to have car insurance have to be re-emphasized, along with the reassurance that, if people do need to make claims, they will be treated equitably and fairly.”