Central Bank Publishes Research on Insurance Engagement and Switching December 2022
On 1st December 2022 the Central Bank published an Economic Letter, “Engagement, switching, and digital usage in consumer and insurance markets: who does it and why it matters
” examining engagement and switching patterns among car and home insurance consumers.
The Letter examines the traits of consumers who find it difficult to look for and buy financial products, including insurance, online.
The Letter highlights factors that may prevent policyholder participation and switching from a comprehensive survey of Irish policyholders as well as behavioural economics. Among its main conclusions are:
- 8 out of 10 car and home insurance consumers engage with their provider on renewal. Around 1 in 4 switch provider.
- Policyholders are more likely to engage with and/or switch provider if, on renewing their policy, the price increases.
- Behavioural characteristics play a role in engagement and switching. Specifically, certain consumers may be more likely to stick with the status quo, even when doing so may not be financially beneficial. These consumers are less likely to engage or to switch provider.
- Perceptions also play a role in consumer behaviour. Around 1 in 4 believe that loyalty to an existing provider will be rewarded. These consumers are significantly less likely to switch.
- Where consumers believe that they can make significant savings by switching, they will be more likely to do so.
- Time-poor consumers are less likely to switch their policies.
- Around 55% use digital information and channels as part of their engagement and switching. However, 1 in 5 policyholders report difficulties in using the internet to search for and purchase financial purchases, including insurance. These consumers tend to be older, lower income, and less educated.
- Policyholders that are less comfortable with digital channels are more likely to exhibit status quo bias.
The Central Bank expects firms to take into account consumer psychology and insights from behavioural economics to design effective disclosures and consumer protection policies to support consumers in making fully informed decisions.
The Letter also highlights the importance of digital literacy in supporting consumers to engage and switch.
The Central Bank reminds firms of its Consumer Protection Outlook Report
which highlights the key cross sectoral risks facing consumers of financial services and the Central Bank’s expectations of firms to avoid these risks materialising.
The Letter also refers and reminds firms of its Dear CEO Letter
published in November 2022 detailing its expectations in the context of a more challenging economic outlook characterised by energy-driven inflation and uncertainty – please find RegSol’s article on the Letter here
If you have a query regarding any of the issues highlighted by the Central Bank above, please contact us at firstname.lastname@example.org