The rise of price comparison websites (PCWs) has changed the dynamics of how insurance products are sold. However, insurtechs have the potential to challenge PCWs, offering similar benefits but improving the customer experience.
Over time, PCWs have established themselves as an important channel for the distribution of certain general insurance products. Motor insurance has become the insurance product most sold through PCWs. As per GlobalData’s 2020 UK Insurance Consumer Survey, 31% of individuals bought their motor policy through a PCW. The advantage of PCWs is that they enable customers to check the price of multiple insurance products simultaneously in one place, saving them time and potentially money on seemingly homogeneous products.
The sale of motor insurance through PCWs is attracting the most disruption. Most recently, car management platform Caura started selling motor insurance policies. According to the company, customers can research and take out a car insurance policy in as little as 60 seconds – less time than the several minutes typically spent on a PCW to purchase insurance. Advanced technology allows Caura to streamline the signup and verification process for customers. An advantage over traditional PCWs is that upon purchasing a car insurance product, customers can manage their policy through the app. In addition, the app is intended to be a one-stop-shop for car owners, enabling them to manage a range of administrative tasks such as road tax, tolls, and MOTs.
Another example is Honcho’s platform, launched in mid-2019 and marketed as a “reverse auction” app. Unlike conventional PCWs, where customers enter specific details to receive motor insurance quotes, the Honcho app allows customers to enter the terms they want for their car insurance and then receive bids from insurers. Each insurance policy offer comes with a Honcho score, indicating how close it is to the user’s desired terms.
Insurtechs are excelling at improving the customer experience, narrowing the gap between customers’ needs and wants, the products and policies on offer, and removing pain points in the purchasing journey. PCWs will be forced to keep an eye on digital challengers as they are bound to increase competition in the market.
As digital challengers grow, PCWs will be forced to innovate and redesign their value proposition. This comes at a time when the Financial Conduct Authority has indicated it will ban the practice of dual charging, which has seen existing customers charged more for their motor premiums than new customers. Such a ban is likely to lead to an increase in the price of new policies, potentially prompting consumers to look for better priced policies online. Thus, platforms that offer the best customer experience are set to benefit from peer-to-peer referrals as well as repeat customers.