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Customers stay loyal despite pricing concern

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The vast majority of general insurance customers do not bother checking alternatives at renewal time, according to Roy Morgan research.

This is despite “better premiums” being the main reason for switching or shopping around.

Local insurers dispute assertions by consumer groups here and in the UK that loyal customers are often charged significantly more than new customers, despite the fact that more is spent on acquisition than retention.

However, Roy Morgan surveyed 50,000 Australians who carry more than 120,000 general insurance policies to establish that, in the past year, 77.4% of policies were renewed with the same insurer without any other companies being approached for quotes.

This is down marginally from 79.3% five years ago, but the researcher says it represents “only a gradual change in buyer behaviour in this highly competitive market”.

Almost 20% of the more than 120,000 policies were subject to review, but even then most customers decided to stick with their current insurer.

Of the policies that were reviewed, about three-quarters were renewed with the same company after approaching others, while one-quarter changed.

The most loyal customers, based on the proportion of policies renewed without review, are with RACV Insurance (81.7%), Perth-based RAC Insurance (81.6%) and RACQ Insurance (80.8%).

“These companies are well above the industry average of 77.4%,” Roy Morgan said.

Two smaller insurers, both owned by South African-based interests, have the least loyal customers. Budget Direct retains 60.8% of its customer and Youi 70.3%.

Roy Morgan Industry Communications Director Norman Morris says the analysis has shown that despite the fact the clear majority of general insurance policies being automatically renewed with the same company, “there are risks and opportunities”.

“The number of policies being considered for change over the past 12 months was 9.8 million, an increase from 7.9 million five years ago.

“The number of policies actually changing insurers over the past year was 2.3 million, down from 2.6 million in 2013.

“These large numbers represent major marketing potential and, as a result, it is important to understand why policyholders move or at least look around.”