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Insurance policies cancelled because of cost

Journalist: Rebecca Goodman, Freelance

ended 22. January 2023

Hi,

I'm writing an article for the Mail on Sunday about people cancelling insurance policies because of the cost of living crisis. 

Looking for comments and analysis to support this as well as comments on the dangers of cancelling something you may need down the line.

Thanks,

Rebecca

12 responses from the Newspage community

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Craig Fish
Director at Lodestone Mortgages
Sadly this is all too common an occurrence. When people start to struggle with monthly outgoings, one of the first things to face the chop is personal protection. However, people still think it's acceptable to keep that gym membership in place, even though they don't go, or keep their Netflix subscription rather than cancel these over something that is far more important. You never know what is around the corner, so please seek professional advice, as things can be done if you are struggling with the cost of living, and don't just cancel your insurance premiums. Policies are sold for a very good reason, not just to make the adviser some commission, so remember the advice you were given when you took the policy out because it's highly likely that it still applies now and therefore the cover is still required.
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Justin Moy
Managing Director at EHF Mortgages
At a time when safeguarding yourself and the family is so important, cancelling important protection to save a few pounds could end up costing your home, and the lives of those around you. it should be one of the first direct debits you keep. If policies are cancelled, and you suffer an illness or condition, purchasing that same insurance in the future may be more expensive, or even unavailable, because such policies are underwritten on your health status at the time of application. Anyone failing to declare such medical issues, to keep the cost down, is liable to not have their cover payout in the event of a claim. Sit down with a broker or adviser to discuss and review your protection. Make sure you understand the cover you have, what it provides, and if you have a budget to work to, discuss your options don't cancel the Direct Debits
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Mike Staton
Director at Staton Mortgages
It’s a fact that homeowners are looking at reducing outgoings as the cost of living increases, unfortunately clients are putting their own and their children’s future at risk by cancelling protection policies such as life insurance and income protection. I have seen an increase in cancellations of policies which shows the sorry state that the UK is in when people are sacrificing their children’s inheritance in order to put food on the table for their family. Insurance is the 2nd most important purchase you can make as a homeowner, my opinion is,’if you can’t afford life insurance then you can’t afford a mortgage.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
We’ve had an increased cancellation rate of about 300% in the last quarter of 2022, we always get in touch with these clients and see if we can help. The majority have cancelled because they have less disposable income, due to high inflation pushing up their bills and their income not keeping pace. Some clients take a less expensive, less comprehensive policy out. Others become newly uninsured.

If you cancel personal protection policies with a view to reinstating them at a later date this is dangerous because they’ll be more expensive, might have exclusion of worse policy terms and in the worse scenario, you may need to claim when you don’t have them.
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Kylie-Ann Gatecliffe
Director at KAG Financial
We were proactive in communicating with our clients early on with this, as it's pretty common that when income is tight insurances and additional costs are the first to go. By speaking with our clients and reminding them of the importance of the policy and why they took it out in the first place, we have actually had very few cancellations. I think communication is key here as it would be truly awful seeing a client cancel a policy and then becoming ill, as this would put even more strain on their finances.
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Colin Wallace
Director at Wallace Home Finance
We've had several clients cancel policies that were protecting their income in the event of long-term illness. The sentiment is very much "we can't pay everything" and even though we have revisited the benefit of the individual plans to the specific customers, the decision has been made. It seems to be employees rather than the self-employed at this stage as they often have a small amount of employer coverage available.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Fortunately, this is something we're not seeing at the moment in personal protection, despite many in the insurance market feeling we would. I think that people having to look closely at their outgoings, combined with the shock of Covid in the not-too-distant past, has made people realise how potentially financially vulnerable they are to death, accident or serious illness. If someone does get to the point where they are strugglingg and thinking of cancelling things such as life insurance, critical illness cover, or income protection plans they should first contact their insurer or insurance adviser; many insurers now have help and support for these people, such as deferring premiums and advisers can help clients look at alternatives that reduce, rather than remove, cover to lower costs, as some cover is always better than no cover.
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Rhys Schofield
Brand Director at Peak Mortgages and Protection
Touch wood, this is proving very rare. With cost of living going up, the safety net from the government looking ever more inadequate, people need their insurance more now than ever. Just to put this into perspective I've had 7 clients of mine claim on their policies in the last 12 months, every one of them who would have been in real dire straights without their insurance in place. Not having anything to soften the blows life throws at us doesn't bear thinking about.
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Lynette Webb
Director at Mortgage Saving Experts
I think it's important to think about what is being cancelled at the moment, I understand times are hard for people, but cancelling insurance policies shouldn't be one of them. To put these back in place when the economy is better will only cost you more, and if the worse should happen after this has been cancelled you will not be covered.
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Dave Corbett
Head Of Protection at Protection 1st
It’s not a trend we’ve seen, it’s likely skewed towards more call centre based models as traditionally that is where the highest drop off rates occur. If the insurance is advised, has followed a process and was not done in 15 minutes over the phone then it’s unlikely to claw back whatever the economic climate and the protection industry is quite robust in poor market conditions. Good advice, written in trust, and understood by the client tends to stick.
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David Conway
Director at Clayhall Financial Services Ltd
Belt tightening and reviewing finances is good - but to cancel when times are hard is counter intuitive. When you've got less savings to fall back on, having a safety net can be invaluable. Replacing your fridge and mobile phone may be expensive so gadget insurance is understandable, but not if you first cancelled the insurance to replace your home, salary, savings, and medical costs. If you value your TV over your livelihood it comes down to a poor financial understanding.
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Lee Thomas
Protection Advisor at Pangea Life
With the cost of living crisis squeezing family budgets ever tighter, it's perfectly understandable why some people might start cancelling, what they consider to be non-essential, insurance policies like life insurance and income protection. In my opinion, these should come way down the pecking order when families are trying to find ways to reduce their outgoings. The whole point of these insurances is to protect your family from a more severe cost of living crisis should the worst happen. If finances are tight now, how much worse would they get if you died or were incapacitated and unable to work? Imagine having no income for 6 months, a year or even longer!
Think about what else you can sacrifice first and if you still have a problem speak to your broker or the insurer to see how they can help before you just cancel them.