The Consumer Trends Shaping the Future of the UK Insurance Industry

The UK insurance market has remained resilient throughout the cost-of-living crisis. The essential nature of insurance has protected the industry from the worst of the challenging economic environment. Nine out of ten adults own at least one type of insurance, and even categories of insurance that aren’t seen as necessary e.g. pet or travel, markets have performed strongly. In some cases, the cost-of-living crisis has had a positive impact. For example, Mintel’s market analysis found that three-quarters of consumers who recently purchased, or are planning to purchase, travel insurance believe that the cost-of-living crisis has made having insurance for travel more important.

However, this does not mean that there is room for insurers to become complacent. Rising living costs may not have had too much of an impact on the value of the UK insurance industry itself, but it has led to changes in consumer behaviour and expectations. Insurance policies have come under increased scrutiny. Below, we explore the four key consumer trends and innovations in insurance that will shape the future of the industry.

This article examines the latest consumer trends in the UK insurance industry, to learn about the US insurance industry take a look at Comperemedia’s Insurance Marketing Trends.

Due to the ongoing squeeze on household finances, consumers are now, more than ever, looking for good value when shopping for insurance. Mintel’s market research found that over a third of UK consumers think low price is one of three most important factors when renewing an insurance policy. Shopping around is an engrained human behaviour, highlighted by the huge popularity of price comparison websites. A harsh economic environment encourages consumers to be more price-savvy, and this is reflected in the 5% increase in consumers using price comparison websites in the past 12 months compared to the year before. Even Amazon has thrown its hat into the price comparison ring, launching the Amazon Insurance Store as an alternative approach to insurance comparison.

The three most popular products shopped for on price comparison sites are all insurance products (car, home, and travel insurance, in that order). But, fortunately for insurers, many customers who shop around at the point of renewal don’t actually go on to switch providers. Mintel has found that almost two-fifths of home insurance customers, and two-thirds of car insurance customers stayed with their current provider even after shopping around.

Consumers are looking for ways to lower costs beyond using price comparison sites. Over half of UK motorists expect to take some action to reduce the cost of their car insurance at their next renewal. The car insurance market has been leading innovation in the industry for some time now with telematics policies, but now technology has evolved beyond black-boxes fitted in cars. For example, the app DriveScore enables drivers to track their driving behaviour with their personal phone, and then empowers them to make their own decision over whether to share that data with their insurer or not.

Insurers should develop ways to educate consumers on the benefits of technology in motor insurance, particularly in terms of reducing costs. This would be particularly beneficial to Gen Z and young Millennials, who are more open to using technology and who tend to have higher car insurance premiums.

It is also important to remember that perceived value sometimes goes beyond upfront cost, and there is space for technological innovations to provide something beyond lower prices. In February 2023, pet insurance firm Waggel announced a partnership with the vet technology firm Vet-AI to offer its policyholders unlimited access to Vet-AI’s Joii Pet Care App. The partnership allows Waggel customers to get 24/7 access to vet video consultations, vet nurse consultations and a symptom checker.

Technological innovation can also be utilised to encourage retention and improve customer satisfaction. The majority of UK consumers say they only want to engage with their insurer when renewing a policy or making a claim, which can lead to a lack of brand loyalty from consumers. Encouraging the use of provider apps could help bolster positive engagement on a regular basis and ultimately build trust. By focusing on customer experience and engagement throughout the policy term, rather than just at the point of purchase or renewal, providers can boost the likelihood that customers will renew their insurance policy rather than switch.

In order to meet consumer demand for convenient customer service, insurers need to consider how they can boost initial app engagement, especially among a younger demographic, who Mintel have identified as more willing to use apps to manage policies. This could be achieved by exclusive in-app deals and rewards. Brands can take inspiration from the health insurance market. The Vitality health insurance app, for example, allows subscribers to track their activity points and access cinema and film reward vouchers.

Investment in digital services is vital for the future of the market. However insurers need to make sure that this does not come at the expense of traditional services, such as telephone helplines. Over four in ten insurance policyholders prefer to speak to someone on the phone when it comes to making a claim.

In response to the cost-of-living crisis, consumers are seeking more flexibility in their insurance policies, both in terms of payment and coverage options. Brands need to respond to this demand, and it is particularly important for insurers to find ways to cater for those who are facing tight financial pressure but need to retain access to vital insurance cover. A good example of a product that is responding to this need is AXA’s tiered home insurance, which allows customers to choose what items they want to include in their cover both inside and outside the home.

Mintel’s Global Outlook on Sustainability 2023 found that consumers’ awareness of environmental issues are growing. 9% of adults with insurance rank the sustainability credentials of their provider as a top three priority at renewal. Although green and ethical insurance remains a niche segment of the market, interest and development are growing and will continue to do so as climate and sustainability efforts continue to gain momentum. In the long term, particularly once the economy strengthens, sustainability will become even more important. As these factors become more significant, insurers will need to find ways to explicitly demonstrate their sustainability credentials.

Despite challenges posed by the cost-of-living crisis, insurance remains an essential purchase for the majority of consumers. Insurers need to continue providing value, both through competitive prices and policies with added extras. It is important that the insurance industry embraces technology and the use of apps to engage with younger consumers, but not at the expense of alienating older consumers.

Is your business responding to the evolving attitudes and preferences of insurance customers? With Mintel’s leading independent market and consumer research, you can focus your strategies to align with the latest trends and developments in the UK insurance industry. Explore our extensive Insurance Market Research, or fill out the form below to sign up to Spotlight, Mintel’s free newsletter for exclusive insights.