Our research has revealed there are 17.5 million people in financially vulnerable circumstances in the UK, and further analysis suggests that there could be 8.6 million people with already low financial resilience who are struggling to afford their insurance protection.
We surveyed a representative sample of our segmentation model on the impact of the cost of living and their ability to afford insurance.
We found that:
- 9% have cancelled an insurance policy in the last year
- 9% have reduced the amount of insurance coverage they have
- 31% say that the cost of living is making it harder to afford insurance
- 10% say the cost of living is preventing them from taking out an insurance policy
- Overall, 49% of our segmentation group – 8.6 million people – are seeing the cost of living crisis affect their ability to afford insurance.
With this in mind, we responded to the FCA’s recent consultation on guidance for insurance firms, welcoming proposals to extend and update their Covid guidance on supporting customers in financial difficulty.
Many of the difficulties people needed to be supported through during the pandemic, such as ill health, bereavement, or loss of work – are issues that affect people every day. And there are also important parallels with the impact of the current cost of living crisis.
In order to prevent more people losing their insurance, and even greater financial exclusion, we would like to see the guidance supports greater use of forbearance by insurers, so that people experiencing financial difficulty do not have their protection cut off when they need it most.
Based on lessons learned from our research into the banks’ response to the pandemic, we would also like to see more proactive identification, engagement and outreach to customers who may be experiencing financial difficulty.
Fair4All Finance has also set up a Financial Inclusion in Insurance Action Group with membership from across industry, which will develop an action plan so more people can access insurance at a fair price.