The home insurance sector has grown rapidly since 2004, with 73 per cent more providers in the market today, meaning more choice for consumers.
According to a report from Defaqto, an independent financial research company, the home insurance industry is going through a challenging period for insurers, which are struggling against an influx of new competitors, but one of opportunity for customers.
A "number of challenges and a period of transition" are currently facing the home insurance industry, says Defaqto, following a 73 per cent rise in the number of providers in the last six years, driven by comparison websites and major retail brands like supermarkets entering the market.
While this change has created "unprecedented choice for consumers", the greater competition is creating a difficult climate for insurers, says Defaqto.
For consumers, this change has seen providers target their individual needs, rather than offering a 'one size fits all' approach to home insurance, but on the downside, there is also greater focus on price, with more consumers using cost as the primary motive when comparing home insurance deals, rather than cover and benefits.
Commenting on the challenge facing insurers in the coming years as they adjust to changes in the home insurance market, Mike Powell, insight analyst for general insurance at Defaqto, said: "We believe there are long-term implications for insurers, who may need to consider how they restrict premiums while simultaneously lowering the cost of acquiring and retaining new customers."
While more insurers means more competition for consumers, Mr Powell suggests that it is not all good news for customers, as the race to offer the cheapest premiums could have a detrimental effect on the quality of cover.
"Our comprehensive analysis of the home insurance market is focused on helping insurers understand the key trends in the sector, and consumers' priorities when purchasing products," he said. "Ultimately, this understanding can help firms develop products that meet people's needs."
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