The majority of British homeowners without home insurance say they have not taken out cover due to the cost, new research has revealed, suggesting that home cover could be catching up with auto in being perceived as unaffordable.
The rising cost of insurance premiums looks to be impacting on consumers. Twenty-one per cent (21%) of UK homeowners admitted to not having home insurance in the study, conducted by insurance firm Coverbuilder.co.uk, and more than a third of those cited ‘wanting to avoid the additional financial outlay’ as the reason why.
“In the last couple of years there have been additional external factors that have impacted on home insurance premiums that have had nothing to do with the individual customer’s risk profile – IPT has increased twice and is now double what it was two years ago (6% - 12%) coupled with an estimated £10-£20 pa levy to cover the Flood Re initiative,” Rob Rushton, head of
Coverbuilder, told Insurance Business.
Through the increasing availability of data, insurers are also able to assess customers’ risk profiles much more accurately now, which in turn has led to more accurate pricing, Rushton explained.
“This will have priced some people out of the market, as well as making it much more difficult for others to find the right cover at an affordable premium,” he said.
Commoditisation of home insurance products is also playing a part, according to Rushton, who said that the real value of home insurance isn’t fully appreciated by policyholders until a claim is made.
“Given the significant choice available in the market, it can be daunting and confusing for the homeowner to find the right product at the right price,” he commented.
“Home insurance is still a relatively complex product, further complicated by insurers trying to gain a foothold by developing innovative or quirky products or simply stripping out much of the valuable cover in an attempt to get the lowest possible premium, which just creates a race for the bottom resulting in poor cover for the homeowner who may think they are adequately covered when in fact they are not.”
Ultimately, with homeowners not legally obliged to take out insurance, “it looks like this is a risk some people are prepared to take to save money,” Rushton said.
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