The FCA recently published a Cost of Living survey, which looks at how UK citizens are coping with the inflation which was organised after Covid. The UK has suffered price inflation of about 50% on some items like food, car insurance or energy bills over the last year or two. Petrol and diesel spiked in 2022, then fell back, although profit taking by supermarkets and petrol retailers has seen typical prices hover at £1.33-£1.40 per litre, despite a near collapse in crude prices in summer 2023.
The study revealed that 11% of adults in the UK state they have no disposable income at all. Another 11%, or possible the same people, stated they had missed a bill payment in the last month. Unsurprisingly, the survey found that low income households were coping badly, with 64% of those pulling in under 15K a year struggling. These would be mainly pensioners, or single people working part-time or on a low benefits package.
CANCEL CULTURE
For insurance brands there is one sobering stat in this survey of over some 3400 people; 22% said they had cancelled an insurance policy in the last 12 months because they could not afford it. Mostly, that will be car insurance, not Life or Home.
That, as IE has said before, poses an existental risk to insurers. Once poorer people decide that car insurance premiums can be stopped, so that the heating can stay on in cold, wet Britain, then more uninsured drivers will have accidents. It’s an understandable calculation, especially if you have children or olde people in your house – they need heat, the car driver can risk shopping or work journeys uninsured for a few months.
The consequences for insurers could be serious if that temporary money-saving strategy becomes a lifestyle, as resentment builds against insurance companies who are perceived as “robbers” of worse. Just trawl social media if you don’t believe these attitudes exist.
More cars will carry fake plates to avoid seizure by the Polce or DVLA. Drivers will flee accident scenes.
That means bigger claims bills, which nobody except the MIB wants to pay. In the end a tipping point will be reached where the “good” customers who are paying for 2-5 million uninsured drivers via higher premiums, will cry enough, and join the no-cover party. That way leads to anarchy, violence and vigilante action by aggreived drivers who seek other ways to recoup their perceived losses.
The industry must act collectively to offer affordable car cover options and campaign for stiffer penalties for no-insurance, banned driver offenders, including jail time. Yes, we are talking about Katie Price here. People like her are laughing at those mugs who play by the rules and pay their bills – it has to stop.
There’s more detail from the FCA here.
INDUSTRY COMMENT
Paula Llewellyn, Chief Marketing Officer and Direct MD, Legal & General Retail comments on the FCA’s Financial lives cost of living survey (January 2024):
“It is understandably difficult for people to manage their finances in the short term due to the rising costs of living. The FCA’s latest report highlights the impact this also has on long-term financial planning, with 1 in 5 cutting back on insurance to save money. It’s worrying because it leaves many vulnerable.
“Life insurance may not seem very important during times when day-to-day living costs are stretched. But it can make a big difference in tough times. And this research shows that a large number of people in the UK are doing away with a financial safety net at a time when a loss of income could be more impactful than ever.
“There is often a range of support available for customers struggling to afford cover – from “payment holidays” to reduced premiums – and we encourage any customer who is feeling the pressure of rising living costs to get in touch with their provider to see what help can be offered, before cancelling a policy. We don’t want anyone to miss out on the help they deserve.”
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