New regulation announced by the Competition and Markets Authority (CMA) aims to introduce measures that it ‘expects to increase competition in the car insurance market’*. In an already fiercely competitive industry these are liable to have short term implications on how insurers offer products, as well as longer term ones on consumer behaviour. Yet, they also present insurers with opportunities as they adjust to the new landscape.

The measures respond to two findings. Firstly that agreements existed between insurers and price comparison sites that prevented insurers from offering cheaper policies through other online channels. Legislation has been introduced which will effectively ban the practise. Secondly the CMA has concluded that ‘the way motor-insurance-related add-on products are sold makes it hard for customers to obtain the best value’. In addition to requiring insurers to provide clearer information for consumers in this regard, the CMA is calling for the Financial Conduct Authority (FCA), as part of its ongoing work on insurance add-ons, to consider how drivers could be better informed in making their choices.

Despite this light approach, sharper scrutiny in how insurers present their add-ons – the most profitable part of policies - is unlikely to dissipate. Indeed, several rules have already been enforced in recent times, and more can certainly be expected. The challenge therefore is for insurers to be responsive to changes quickly. It need not necessarily follow that offering users more information results in a loss of uptake. Indeed, testing has repeatedly shown that users respond positively to clear value propositions. For this to be so it requires insurers to be adept at understanding when and how to sell add-ons within their sales funnels. The current model of offering them on separate pages within the sales funnel is adopted as standard. Challenging this framework should be a key strategy of insurers adapting to the new environment.

The effects of ban on agreements between insurers and price comparison sites are unlikely to be felt immediately. The present framework presents shoppers with a simple choice: go direct or go to a comparison site. However, with insurers now enjoying greater freedom to experiment with new marketing channels, the possibility that some of these will become effective is high. In articulating to consumers that comparison sites are not necessarily the cheapest option, over time the industry is likely to see a shift in behaviour away from using price comparison sites as a first port of call.

Such a shift would require a revaluation of pages outside the sales funnel. The dated look of many high profile motor insurance homepages is indicative of their diminished importance within sales funnels. The current model has made them redundant; re-absorbing them as effective components in the marketing funnel means they would require serious optimisation.

The CMA announcements are likely to be viewed as a favourable outcome for insurers. Their reliance upon aggregator sites has been weakened, whilst an anticipated clampdown on current practises has not materialised. For this verdict to bring about significant change in user behaviour and the insurer’s financial performance, insurers must be willing to innovate. Optimisation offers a unique framework to do this. In many aspects motor insurance is grounded in orthodoxies established close to a decade ago. If these can be challenged, and new approaches adopted, then CMA announcements might prove to be a significant milestone in the online insurance industry.


Published on: 4:45PM on 13th February 2015