UK Money News
25th February 2008
Competition to reduce home insurance premiums
Increasing competition in the home insurance market will cause premiums to get more affordable, according to Datamonitor.
A new study by the company suggests that the increasing popularity of online price comparison sites was leading to consumers to be more aware of the products available and picking their insurance on basis of cost.
This, in turn is leading to cheaper premiums, providing downward pressure across the industry, Datamonitor said.
Meanwhile, the sector as a whole was affected by last summer's floods in England - with £167 million of profits for home insurers in 2006 turning into a £300 million loss for 2007.
Datamonitor added that it expected profitability to increase once more this year, should widespread flooding not occurring again.
Analyst Mahreen Hussain commented: "As more consumers use the internet to purchase their insurance and with these online consumers more likely to switch their household insurance exclusively on the basis of price, insurers may fall into a trap of continuing to compete aggressively in 2008 in a bid to retain their market share.
"These sustained competitive elements in the market may, therefore, hinder the ability of insurers to bring in very strong rate increases."
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