Apathy towards insurance hurts consumers
The internet savvy can save hundreds of pounds on insurance as living costs rise, says our financial expert.
Since October 2022, energy bill credits have proved a welcome blessing for millions of people struggling to counter significant rises in the cost of living.
Taxpayer-funded energy support was extended in last week’s Budget until June. And though wholesale gas prices have fallen rapidly, it appears inevitable that next autumn’s energy bills will cause a considerable dent household budgets.
Meanwhile, figures published by the Office for National Statistics revealed that although inflation has fallen, the drop is disappointingly modest: from 9.2% in December to 8.8% in January. One wonders whether the National Institute of Economic and Social Research was being overly optimistic when it declared that “inflation will remain well above 3% for the whole of 2023 and our current forecast is that it will not return to target [2%] until mid-2025”.
Research published by Consumer Intelligence found that some 7% of households have already cut back on their insurance costs, with a further 7% contemplating whether to do so in the future. Of those who have already realised savings on their insurance outgoings, almost 43% have cancelled some insurance policies altogether, with home buildings and contents insurance the most likely to be cut.
Pet and appliance insurance cover has also been dropped by households trying to make ends meet. But among those who recently switched to cheaper insurance deals, car insurance was the most popular – with 63% switching their policy.
These findings will not come as a surprise. The internet ensures that consumers prepared to invest a modest amount of time comparing insurance quotes could save hundreds of pounds.
Unlike cover for home buildings and contents, car insurance is compulsory if you want to take a vehicle on the road. Yet it is also an area that has traditionally suffered from notorious levels of inertia.
Personal finance website Moneymapp.com found that insurance inertia amongst British consumers is rife, virtually guaranteeing that consumers are likely to be paying far too much for their insurance.
Analysis by Moneymapp.com revealed that in the 12 months to February 2023, more than 13 million car and home owners simply renewed their insurance cover without bothering to look for a better deal.
Moneymapp’s head of insurance Ken Carter said that failing to spend “little more than 10 minutes” searching for a less expensive home or car insurance deal is costing consumers an average of £241 a year. “This means that, in total, consumers are ignoring the opportunity to make a colossal £3.13 billion in annual savings.
"This is a vast sum of money, especially considering that as inflation remains persistently high, millions of households are trying to save money.”
Moneymapp.com reports that the level of annual savings some drivers could make on their car insurance is £319. The potential savings on home insurance could reach £146.
“In effect, huge sums of money are being thrown away by people when they renew their car or home insurance year after year without searching for a better deal,” added Mr Carter. “This seems crazy when you consider that it’s never been easier to search the market for insurance alternatives online.
“In fact, when we see inflation hovering around 8%, it seems strange that more consumers – and UK consumers are as internet-savvy as any on earth – do not take the time to see if they can save money by checking out alternative insurance providers."
As the spectre of an increase in energy bills looms, coupled with the irritating presence of inflation, millions of families who jettison insurance cover are potentially at risk. Logging on to see if they can save a few hundred quid on their annual insurance bills makes enormous sense.
For more financial advice, check out Peter Sharkey’s regular blog, The Week In Numbers.
This column is for general information only and cannot be relied on as financial advice for individuals. Consult your professional adviser.