Just over a fifth (21%) of UK adults are considering or have already reduced the number of insurance policies they have, or have reduced the level of cover they have, in order to save money according to new research from Smart Money People.
The research project, undertaken with YouGov, also found that just over a third (36%) of people are unsure whether they have the right financial products to deal with the current economic situation and over two-thirds (68%) of people are more worried about their finances now than during the pandemic.
Despite the FCA’s ban on price walking, otherwise known as the loyalty penalty – where loyal customers are often quoted a higher price for renewing their policy than they would pay if they were a new customer – Smart Money People believes that insureds are looking to make drastic savings, perhaps more radical than just shopping around for a better value or cheaper policy.
COST OF LIVING
Jacqueline Dewey, CEO of Smart Money People said: “The rising cost of just about everything is clearly causing people to review which insurance products they could switch or do without, to leave a little bit extra in the household wallet for energy bills and food.
“There is a real risk that some households may try to cut corners and switch to products that mean they don’t have sufficient levels of protection or worst-case scenario, may not be insured at all.”
Smart Money People suggests that providers can address the issue in three ways:
Providers could step up their communication, to help customers make informed choices. Helping customers to understand which products are mandatory, as well as helping them make sensible judgments about the value of their home and its contents – particularly as repair or replacement of values might be higher than expected.
Secondly, insurers need to recognise that increasing numbers of households will be struggling financially and many pushed into financial hardship. Call centres and customer service teams need to be sensitive to these matters and ensure they are well-prepared to deal with the possibility of increasing numbers of vulnerable customers.
Thirdly, agile product development will mean there is more product flexibility available, giving customers a better sense of value for money and encouraging more people to remain insured. For example, extended terms for annual renewals, payment breaks and forbearance support measures, extending underwriting capacity and pay-as-you-go / on-demand policies.
Jacqueline Dewey continued: “Although the headline statistic doesn’t make for good reading, insurance providers have a great opportunity to support their existing and prospective customers during this time. Winning back consumer trust has been a great theme in the industry for a while, and now is the time to walk the walk.
“Non-mandatory insurance providers are most likely to feel the reduction in renewals and may therefore benefit from proactively tackling the matter. The cost-of-living crisis isn’t going anywhere fast, and insurance may be a cull that many households have little or no choice to make unless they are persuaded otherwise.”
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