Cost of living crisis causes 43% of insurance customers to cancel policies when seeking to cut cover costs

Of the 7% of insurance consumers who have cut back on their insurance provision over the last three months to make financial savings due to the UK’s cost of living crisis, 43% have chosen to completely cancel certain policies, according to new research by Bristol-based market research company Consumer Intelligence.

Its Cost of living consumer behaviour tracker, November 2022 – which polled 1,096 respondents between 19 and 20 November 2022 – found that 7% of survey participants have reduced their insurance protection over the last three months due to the financial pressures arising from the cost of living crisis. A further 7% of respondents are considering taking this step in the future.

Of the respondents that have already stripped back their insurance costs, 43% have done so by cancelling certain policies, while 67% have swapped their previous provision for a cheaper alternative.

The most popular cover that has been cancelled by survey respondents was home buildings and contents insurance (35%), pet insurance (35%) and appliance insurance (35%). Just under a third of respondents (31%) opted to cancel mandatory car insurance policies too.

In terms of respondents swapping existing policies for something cheaper, 63% had taken this step on their car insurance policy, 39% had found a less expensive home buildings and content insurance deal, while 33% had opted for cheaper pet insurance and breakdown cover respectively.

Consumer Intelligence’s data further showed that 5% of respondents have become more likely to make a false or exaggerated insurance claim since May 2022 – when the organisation first started collecting cost of living-related data.

Being an adequate ‘safety net’

Catherine Carey, head of consumer strategy at Consumer Intelligence, described these findings as depicting a “worrying trend”.

She explained: “It’s clear that consumers are looking for as many ways as possible to save money. These results show that in a bid to do as much as they can to save money, a high number of consumers are cancelling insurance policies or switching to a cheaper deal.

“This is extremely concerning - especially when it comes to home buildings insurance, which although it isn’t a legal requirement, is generally required by mortgage lenders and should the worst happen, could result in enormous financial and personal loss.

“We know the general insurance market is already responding to the FCA’s general pricing practices rules with essential products – their own ‘basic’ ranges. But as an industry, we might not be doing enough to be the safety net that newly financially vulnerable customers really need.”