Cut-Price War in Home Cover

Article excerpt

THE COST of home insurance cover for millions of policyholders is expected to fall as competition increases between direct insurers, building societies and telephone broking companies.

The drive towards cheaper home cover comes as more companies set up telephone- based insurance companies and pass on the benefits of lower overheads to customers.

Increasing numbers of clients are prepared to shop around rather than stick with existing policies.

Research by Guardian Direct, a newly launched telephone insurance company, showed that in 1992 10 per cent of Britain's 30 million householders changed their insurer. Last year, the figure doubled to 20 per cent and it is expected to be even higher in 1994.

Companies such as Direct Line and Guardian Direct that underwrite their own policies don't pay brokers commission, which usually averages between 13 and 17 per cent of the cost of a premium.

Churchill Insurance is the second-biggest direct insurer after Direct Line, with about 75,000 home insurance policies. Chris Kennedy, business development director, said: "The price war in the car insurance market, started by the direct insurers, is inevitably going to spill over into the household insurance market."

There are signs that the war is creating victims. Swinton, the insurance intermediary, last week announced it is to close almost 10 per cent of its 690 branches as it switches to a telephone broking service.

Building societies are fighting back. …