Company News from yesinsurance

01 September 2006 40% Motor Insurance Price Rises Will Encourage Shift to Online Insurers

Norwich Union's decision, announced on Wednesday, to increase motor insurance premiums by up to 40%, means that drivers' opportunities to save significant amounts of money by shopping around, particularly on the internet, will increase, according to yesinsurance.co.uk.

Norwich Union say that their price rises will be up to 40% on high-risk business, with a general average of a 16% price rise across its customer base. Norwich Union says that the move, which comes as a reaction to the rising cost of claims, will hopefully be followed by similar decisions by other motor insurers.

However, Paul Purdy of yesinsurance.co.uk says that while prices generally are likely to increase over the next few years, many drivers will be able to save money by moving to one of the specialist online insurers, which benefit from the lower costs of web-based business.

"Whilst it is likely that a number of insurers may raise their rates, the new breed of specialist online insurers will use this as an opportunity to widen the price gap between themselves and the rest of the market," he said.

"Norwich Union has taken a bold stance in raising its prices and, in the longer term, it is a move that other insurers will also be making. However, in the shorter term, those insurers that manage to hold price increases to a minimum will pick up significant amounts of business as Norwich Union policyholders shop around when their policy comes up for renewal."

Purdy says that the move to raise prices will put pressure on Norwich Union's "Quote Me Happy" catchphrase, which is currently being used in its advertising campaign.

"In the immediate future, the only people who are happy will be the online insurers which pick up the business that Norwich Union loses," he said.