Customers cancel insurance they can no longer afford

Rising costs are causing millions of customers to cancel vital insurance policies they can no longer afford, leaving them vulnerable financially if things go wrong.

A survey conducted by the financial services provider Premium Credit found that 38 percent of people had canceled one or more insurance policies over the past three years because they could no longer afford them.

This includes car insurance—which is a legal requirement if you own and drive a car—and home insurance, which your mortgage lender will likely require you to have.

Worryingly, in about 56 percent of these cases, the cancellations took place in the past 12 months.

The research also reveals that over the next 12 months, as many as 12 million people are considering canceling one or more of their insurance policies.

Respondents cited the high cost of insurance and low income as a reason for canceling.

“It’s appalling to see so many people lose out on vital, sometimes legally necessary coverage because of cost or concerns about payments,” said Adam Morjim, Premium Credit’s director of strategy.

“This leaves millions exposed to unnecessary risks and potentially greater costs later.”

Has insurance become more expensive?

The survey, conducted by Premium Credit and conducted by the research firm Consumer Intelligence, included 1,198 people across the country.

When asked, 40 percent of respondents who canceled said they could no longer afford insurance because the premiums had become too expensive, while 21 percent said they They cut back because they experienced a significant drop in income.

However, most forms of insurance are actually getting cheaper for most policyholders.

Car insurance is declining. The latest edition of the British Association of Motor Insurance Premium Insurance Tracker shows the price paid for the average comprehensive car insurance policy is now £466, the lowest quarterly figure since the early months of 2017.

But this is not the case in all regions. Confused.com found that the southeast bucked the national trend in the first three months of the year, rising by £8, or 1 per cent, compared to a year ago.

The research shows that one in five motorists in London has stopped buying car insurance within the past three years.

The Association of British Insurers says the decline in car insurance purchases in London could reflect a rise in alternative modes of transport, such as an increase in car rental, rather than owning a car.

It could also partly be a response to London Mayor Sadiq Khan’s introduction of an ultra-low emission zone, which has made driving more expensive in some parts of the capital.

Auto insurance premiums are expected to continue to fall as government reforms roll in, limiting the amount of compensation critical injury claimants will receive.

But this is not a sure thing. Insurance companies have already slashed rates in anticipation of the rule changes, and some industry experts fear that if the reforms aren’t as generous as they had expected, they will have to send rates back up.

Home insurance costs also drop. In the first quarter of this year, the combined average price paid for buildings and contents covers was at a two-year low, despite an increase in the landing and flight of water claims.

However, the cost of insuring pets is on the rise, according to Direct Line Pet Insurance — due to more expensive vet bills resulting in higher claims costs.

Life insurance cancellation

Perhaps the most alarming response to the survey was the 12 percent of people who canceled their life insurance within the past three years.

Once again, London has been particularly hard hit, with 22 per cent of Londoners canceling life insurance coverage since 2016.

Life insurance is often one of the most important financial products a family can buy, acting as a buffer against loss of the home or going into debt in the event of the death of the breadwinner.

And most life insurance premiums are guaranteed, which means that the cost of the policy is the same each month as it was when you first drew it. Since a policy can last for decades, that means those who cancel them don’t because new policies are getting more expensive.

This may indicate that it may not be the cost of the insurance, but the generally higher cost of living that contributes to people canceling their life coverage.

Malcolm Tarling, spokesman for the Association of British Insurers, said: “We are of course aware that any trend in falling premiums does not mean that everyone will feel affordable.

Many on low incomes for example, and those in high-risk groups, such as young drivers, may find it more difficult to obtain affordable insurance.

“Shopping around is of course always worthwhile, especially since there are such a wide variety of products out there to help people get affordable insurance.”

More plan to unlock

The consumer intelligence organization also asked 1,198 respondents if they planned to stop buying insurance in the next 12 months.

The responses were similarly grim: About 7 percent plan to cancel their life cap. 6 percent of their critical illness coverage; 5 percent car; 5 percent home; and 8 percent of health insurance.

This does not necessarily mean that the total number of insurance customers in the UK will decrease. People’s circumstances change, and there are always new customers in the market looking to either switch from an existing insurance company or get a new type of coverage.

But the research may indicate that those who are financially insecure increasingly view insurance as a cost they can do without.

Malcolm Tarling, ABI spokesperson, said: “Insurance provides invaluable financial protection and peace of mind to millions of families.

Anyone considering scrapping their shell should think long and hard, as it can turn into a false economy if the worst should happen.

“Shopping in the highly competitive insurance markets can ensure the right coverage at the best rates, with a variety of policies available to meet the needs of people on a tight budget.”

What happens if you are caught without insurance?

Finally, Consumer Intelligence asked respondents about their current situations.

About 28 percent of those who canceled their car insurance admitted that they still owned a car.

This does not necessarily mean they are still driving, but for those driving without insurance can result in six points on your license and a flat fine of £300. If the case goes to court, you may face an unlimited fine.

If you cause a collision, the driver on the other end will have to file a claim through the auto insurance office. This is funded by insurance companies, and the cost passed to the average driver is estimated to be between £15 and £30 each year.

And about 51 percent of those who canceled their home insurance admitted having a home mortgage, even though most lenders require mortgage holders to have a home insurance policy.

This means for example that if their house burns down, they will have huge debts without the asset they were originally insured against, leaving them in a financial black hole.

If the lender finds out, there can also be consequences even if nothing goes wrong.

“If the lender knew, I would expect they would remind the customer of their obligations but in theory they could eventually demand the mortgage be repaid if the breach is not rectified,” said David Hollingworth of London & Country Mortgage Broker.