One in five adults cut back on insurance to save money or because they cannot afford it, according to the Financial Conduct Authority’s latest Financial Lives cost of living (Jan 2024) recontact survey.
Conducted between 8 December 2023 and 28 January 2024, a total of 3,450 individuals responded to the survey into consumers and how they are handling the cost-of-living crisis.
Looking at the results for cutting insurance, the FCA said: “11% of UK adults in the 12 months to January 2024 had cancelled (6%) or reduced (6%) the level of cover of an insurance policy to save money or because they could not afford the premiums.
“Similar proportions of adults said the same in January 2023, but about their actions in the previous six rather than 12 months.
“So it would seem that the rate at which people are cancelling policies or reducing the level of cover they buy is going down.”
But the FCA noted that in the January 2024 survey, it had also asked if people had chosen not to buy an insurance policy, either to save money or because they could not afford the insurance premiums. A total of 12% had done this.
For those not coping financially in January 2024 or finding it difficult to cope, the results were even starker.
For example, 17% had cancelled or reduced the level of cover of an insurance policy to save money or because they could not afford the insurance premiums (compared with the national average of 11%).
And over twice as many (26%) as the national average (12%) had chosen not to buy an insurance policy.
Mental health
The mental health of millions of people was also affected.
The FCA said: “The increased cost of living continues to affect some people’s mental health – although there is some recent improvement in the numbers affected. “
In the 12 months to January 2024, due to the rising cost of living:
- 43% (22.7m) suffered anxiety or stress, an improvement on the 54% (28.4m) who felt this over the six months to January 2023
- 20% (10.4m) had suffered with their mental health, an improvement on the 24% (12.6) who felt this over the six months to January 2023
The FCA asked respondents whether they had stopped saving or investing, used their savings or investments to cover day-to-day expenses, cut back on their pension contributions, cashed in a pension to cover daily expenses, or cancelled or reduced their level of cover of any insurance or protection policies to make ends meet.
A total of 57% of all UK adults had taken at least one of these measures in the 12 months to January 2024.
The FCA said: “This is a marginal improvement on the 59% of adults who took one of these measures in the six months to January 2023.”
Overall improvement
Overall, the FCA said that since January 2023 there had been an improvement in the number of people finding it hard to manage the higher costs of living, although challenges remain for some groups.
“The cost of living continues to have an impact on the financial lives of some adults in the UK,” the FCA said.
The FCA said that in January 2024, 7.4 million people (14%) had felt heavily burdened by their domestic bills and credit commitments, while 5.5 million people (11%) had missed any of those bills in the previous six months.
Also, 14.6 million people (28%) were not coping financially or finding it difficult to cope and a total of 5.9 million people (11%) had no disposable income
The results represented an improvement on those recorded in January 2023, but were worse than the FCA’s historic data.
For example, results from the FCA’s 2020 survey, conducted before recent cost-of-living increases, found that just one in 10 adults (11% or 5.8 million) felt heavily burdened by their domestic bills and credit commitments, with a similar proportion (10% or 5.2m) having missed paying one or more domestic bills or credit commitments in the previous six months.