Price shopping brings mixed blessings for U.K. auto insurers

The rapid evolution of Internet-driven direct response insurance models in the United Kingdom has created competitive pricing for consumers, but also some problems for insurers, research firm Celent says in a new study.

Swift changes in the British market towards direct channels such as telephone, Internet and social media forums have resulted in “an increasingly educated and price-sensitive consumer,” according to The Customer, Google and UK Car Insurance: Lesson from Evolving Customer Search Behavior.

The changes benefited customers, but caused several “pitfalls,” such as consumer price sensitivity, increases in overall claims costs (particularly in personal injury claims) and regulation affecting how rating and pricing is done, Celent notes.

“In recent years, the rise of price comparison sites has been a key concern and has led to a new set of lean insurers leveraging this channel,” according to the report. “The U.K. insurance industry now faces a new challenge: as insurers seek the best drivers and best risks, there is a new class of U.K. customer who can’t get insurance at a reasonable cost.”