Many Brits are planning to cut back on insurance despite the increased uncertainty in the market.
More than one in ten (13%) British workers fear they will lose their job in the next year, with the latest official unemployment figures showing the number of people out of work rising by 60,000 in the three months to June.
Yet despite this, the number of people taking out insurance policies such as income protection and payment protection insurance (PPI) is actually falling. In fact, a recent survey by American Express found that almost half (48%) of us are planning to cut back on financial products, ranging from life insurance to ID theft protection.
However, it appears some people have taken note of the warning signs: British Insurance managing director Simon Burgess says his company has seen an "exponential" rise in demand for redundancy only cover.
Worrying, but understandable
But that is just a small segment of the market. Association of British Insurers spokesman Malcolm Tarling feels that there are still an alarming number of people reducing their cover at the moment.
“Given the general uncertainty in the market, insurance is perhaps more important than it was before,” says Tarling. “The reality is that some people could be leaving themselves open to a financial disaster from which they may never recover.”
The reason why so many people are cutting back on cover at this crucial time is largely due to the rising cost of living. With savings already drying up - UK households are saving just 1% of their gross disposable income, the lowest level in nearly 50 years – it seems non-compulsory financial products are next in the firing line for cash-strapped Brits.
This is perhaps understandable. Insurance is certainly not one of those products we think often about, and of course we receive no tangible benefit from it each month (unless the unthinkable happens).
Importance of shopping around
But forsaking cover is an extremely risky strategy in these volatile times. Certainly, if your present policies are burning too big a hole in your wallet, you should first shop around for cheaper alternatives before dumping your cover altogether.
The difference can be astounding: Burgess at British Insurance estimates that a homeowner with £600 monthly mortgage repayments could shave £500 a year off their annual mortgage PPI premiums simply by switching from the most expensive to the cheapest provider.
“This vast difference is because some mortgage lenders charge inflated commissions, often in excess of 80%,” says Burgess.
Cumulative savings
And it is a similar story across the insurance spectrum. No one insurer is cheapest across the board, so anyone looking to secure a cheaper deal needs to take the time and compare the various deals on the market.
Figures from price comparison site Confused.com suggest that you could save an average £186 by shopping around for home insurance, and up to £208 on car insurance. You can further cut your premiums by paying for your policies annually rather than monthly and by taking advantage of discounts for buying online (these can be as high as 30%).
Do all of this and you could well find you’re able to afford all your existing policies, despite the clampdown on your finances. If not, perhaps it is worth analysing your priorities - is it worth, for example, eating out once a week if it means forsaking vital cover for your family?
"I often hear about people who would rather cancel their life insurance policy than their Sky subscription," says Burgess. "It's sad, but true."
