UK insurers see 13% of policies cancelled or reduced
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Around one in eight people with insurance, equivalent to 6.2m of people, has cancelled or reduced insurance cover as a result of the high cost of living, according to research.
The Financial Conduct Authority will publish its Financial Lives 2022 survey report later in the year, but today the watchdog provided selected statistics in its survey to examine the financial situation UK adults experienced over the six months to January this year.
Of those who were insurance or protection policyholders in May 2022, 8% cancelled one or more of their policies, and 7% reduced the level of cover on one or more their policies in the six months to January 2023, specifically to save money due to the rising cost of living.
As some policyholders did both (cancelled and reduced cover), this means that 13% of policyholders, or 6.2m people, cancelled and/or reduced cover.
A spokesperson for the Association of British Insurers said insurers are “acutely aware” of the pressure the cost of living crisis is putting on people’s budgets, adding: “At this time, the protection and security provided by insurance is more important than ever. Anyone concerned about paying their premiums should talk to their provider who may be able to help.”
Which types of insurance products are affected?
According to the FCA, the policies cancelled by the highest proportions were: extended warranty (cancelled by 5% of policyholders); separate home contents insurance (cancelled by 3.8% of people); pet insurance (cancelled by 3.8% of policyholders); gadget insurance (cancelled by 3.1% of policyholders) and mobile phone insurance (cancelled by 2.5% of people).
No more than 1.5% of policyholders cancelled any other type of policy.
Commenting on pet insurance, Kara Gammell, money expert from price comparison site MoneySuperMarket, said the cover is not one-size-fits-all and the cost depends on factors such as breed, age and previous conditions.
For contents insurance, Ryan Fulthorpe, a spokesperson for rival site Go.Compare, said his firm’s own research between Sept 2021 and Aug 2022 found that a fifth (21%) of 18 to 24-year-olds who have contents insurance will be looking to cancel their policy at renewal, citing the cost of living crisis as the reason for opting out.
“The current economic situation means that the cost of everything is a major factor for many and that’s to be expected,” he said.
The FCA’s Financial Lives survey was completed in May 2022 with 19,145 responses. From 6 December 2022 to 16 January 2023, it ran a short survey among respondents and gained 5,286 responses. The City watchdog weighted these responses to provide nationally representative results.
Insurers were recently under scrutiny by the FCA over undervaluing payouts when settling claims. The regulator noted rising cost of living could be pushing insurers to control claims costs, but some of their methods to cut expenditure “could ultimately be harmful” to consumers.
Last year, the regulator warned some people might cut back on insurance due to the cost of living crisis and wrote to insurance bosses to help consumers and businesses.
Do you experience an increased rate in cancellations or cover reductions?
