Is insurance on the chopping block as we continue to cut spending?
5 September 2023
| 4 minutes
With the cost of living still squeezing our finances, and August already bringing with it another hike in the Bank of England base rate to 5.25%, more and more of us are missing our household payment deadlines. Which? reports that the rate of missed payments by UK households in July 2023 jumped to 8.6%, compared with 6.9% in May and 7.2% in June. In human number terms, this is around 2.4 million households that missed their payments on housing, utilities and loans in July.
We’re looking everywhere we can to cut costs so we can eat, keep warm and pay our bills, and insurance cover seems to be high up on the list for the chopping block when looking at where to cut back on spending. Which?’s recent survey found that 30% of us were spending more on insurance cover in March 2023. For the period May 2022 to January 2023, the FCA reported that 6.2 million (13%) policyholders cancelled and/or reduced at least one insurance or protection policy to a cheaper one. Our August 2023 survey revealed a steep increase in these numbers, with more than a quarter (27%) of us both starting and cancelling an insurance policy within the same period, the most common reason for cancellation being cost with over a third (39%) saying cost played a role in their decision.
Of course, some insurance policies are mandatory, such as car insurance, so many of us are instead looking to cut cover on our phones and household contents. The FCA reported that the most common insurance policy to be cancelled was for an extended warranty with 5% of policyholders ending their cover, followed by separate home contents insurance and pet insurance at 3.8%, gadget insurance at 3.1% and mobile phone insurance at 2.5%.
However, more troublingly people are still having to cut back on vital insurance protection, with Which? reporting that many policyholders are resorting to cancelling car insurance, building insurance and even life insurance policies.
Insurance by its very name and nature is intended to bring us reassurance and security to protect us against unexpected financial blows. Not having insurance cover can leave us with a massive bill if something unexpected happens, so it is worrying that so many have reached a point where it’s no longer an accessible protection for them.
Feeling stretched and powerless over our finances can be demoralising and isolating. With 94% of a recent Which? survey sample of UK adults feeling like they’re simply existing rather than living, and many of us worried about the effect of our financial strain on our future mental and physical health, we’re not alone in this and it’s okay and important to seek help.
So we want to highlight that help is out there to seek free advice from experts who can support us in getting the protection we need that is right for us and our finances. We’ve put together a list below of resources to help with finding a way to stay protected against the unexpected:
Check this blog to read more from our recent survey on what people had to say about where insurance fits in with their financial priorities at the moment, and what you think insurance companies could do to better support you.