Why are customers cancelling their insurance?
18 November 2020
18 November 2020
Policy and Public Affairs
New research reveals reasons why some customers have stopped paying for insurance.
According to research, nearly one in five customers in the UK have cancelled or not renewed their insurance due to the financial impacts of COVID-19.
Personal lines products, such as travel insurance, are understandably the most affected due to the huge reduction of people travelling out of the UK since the pandemic hit. With the UK under varying degrees of lockdown during 2020, motor insurance has also seen a decline with fewer people using their cars.
However, home, pet and health cover have also seen a trajectory despite a continued need for protection. The reasons for this are explored by Adam Morghem, Strategy & Brand Director at Premium Credit:
“The financial pain of COVID for millions of households is mounting and insurance is one of the bills that people are cutting back on to save money. The affordability issue was already a major concern for households before the pandemic with average bills rising 14% in a year – way ahead of inflation – and making it more difficult for people to pay for the insurance they need and value.”
As the UK enters a hard market, customers are struggling to afford to maintain their insurance products as premiums rise. Premium Credit’s Insurance Index reveals that households are taking risks with their finances to afford insurance – more than two out of five (44%) say they pay on credit cards while more than half (53%) use the monthly direct debit finance offered by insurers.
The danger of not maintaining adequate cover is that some customers may find themselves underinsured or without protection altogether. This means that they will not be able to make a claim in case of an accident or that any claims paid may not cover all the reparation costs.
One solution is taking out a premium finance loan so that customers can pay for their insurance in monthly instalments, rather than in one lump sum, as explained by Owen Thomas, Chief Sales & Marketing Officer at Premium Credit:
“Premium finance has become a very cost-competitive means for consumers to buy insurance and better manage their finances through spreading payments. At a time when insurance is becoming more expensive it can be a good alternative to other forms of credit.”
Premium Credit has undertaken a series of studies and unique market analysis to gauge sentiment towards buying insurance and the use of credit – among personal, SME and corporate customers in 2020 - that you can download below.
This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), Society of Claims Professionals or Chartered Insurance Institute, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the Society or Chartered Insurance Institute.