New YouGov research has found that almost half of UK consumers believe that price is the only differentiator between different home insurance products.
In a survey of 2,059 UK adults, 49% agreed with the statement that “all home insurance products are generally the same with just differences in price.”
Agreement grew exponentially with age, creeping from 28% among 18-24-year olds up to 54% for consumers aged 45+.
The results also showed a widespread poor grasp of generic insurance terms among all consumers, with 73% admitting they were not confident they’d understand the meaning of different phrases like “trace and access” (65%), “loss adjuster” (37%), “rebuild cost (23%)” or “premium” (13%).
The research was commissioned by general Insurance provider Paymentshield, whose CEO Rob Evans says that such misconceptions around insurance products could expose consumers to serious financial risk.
Evans (pictured) said: “There’s a lot of noise out there when it comes to financial policies – lots of jargon, confusing terminology, and complex policies for customers to wrap their heads around. It’s not surprising that people often hone in on cost, because it’s the easiest thing to understand.
“Advisers can help customers to cut through all of this, offering tailored advice that encourages clients to consider quality and suitability – factors beyond just pound signs. This is particularly important at a time when we know many consumers are looking to reduce costs where they can. If price is the sole factor they’re making insurance decisions on, there might be alarming gaps in cover – which could come back to haunt them financially.”
Brian Brown, head of insight at Defaqto, the independent financial research firm, added: “With the boom of comparison sites in recent years, many consumers have felt more empowered to make financial decisions. Yet, crucially, because of how the information is presented, people could be forgiven for wrongly assuming that when sourcing products, it’s all about price.
“Price is a key consideration for many, but when it comes to insurance, the benefits and differences between each offering aren’t always as obvious as a mere difference in cost.”
Evans concluded “It’s undeniably alarming that almost 1 in 2 UK adults misconstrue how insurance products work. The introduction of the FCA’s General Insurance pricing rules at the start of this year aimed to put more focus on value over price, but it seems there’s clearly a need for greater consumer education.
“All is not lost, though: professional advice is a powerful tool that can help people to understand their protection needs in a way that impersonal, price-driven aggregators simply can’t.”
