The challenging economic environment in the UK is pushing some consumers to take on significant levels of financial risk, with GlobalData findings suggesting that consumers are unlawfully cancelling motor insurance policies as the cost-of-living crisis bites.

As per GlobalData’s 2022 UK Insurance Consumer Survey, 13.4% of respondents who do not have car insurance said they cancelled due to the cost-of-living crisis. Consumer price inflation in the UK reached 11.1% in October 2022 – the highest in over 40 years. This has put pressure on consumers financially and will potentially impact the affordability of car insurance policies. Additionally, fuel prices have soared in recent months, attributed to the Russia/Ukraine conflict and moves by a number of countries to reduce their dependence on Russian oil. According to Office for National Statistics data, petrol prices rose by 18.1p per litre in June 2022, which was the largest increase since records began.

In response to a growing number of uninsured vehicles, the Operation Drive Insured campaign is running from November 21 to 27, 2022, with all 43 UK police forces engaging in a national effort to reduce uninsured vehicles. According to the Motor Insurers’ Bureau (MIB), over 130 people are killed and 26,000 are left injured in collisions caused by uninsured and untraced drivers annually. As a result, MIB paid out GBP322 million in financial support to victims in 2019.

Police can check the central database of active car insurance plans in the Motor Insurance Database to determine whether a vehicle is uninsured. If the driver disputes the claim, MIB can speak with insurers right away to verify the existence of proper insurance. If the car is proven to be uninsured, the driver is fined GBP200, six points are added to their license, and their car is impounded. The owner cannot retrieve their vehicle until they provide proof of current insurance; the release charge alone may cost them another GBP150 or more.

One way insurers can help combat this problem is by offering telematics or usage-based insurance (UBI) policies. Take-up of telematics policies has traditionally been higher among younger drivers, as it help them get on the road for less. Yet with the cost-of-living crisis having a damaging effect on consumers’ disposable income, all age groups will be looking to cut costs where possible.

As per GlobalData’s 2021 UK Insurance Consumer Survey, 7.9% of respondents said they are considering taking up a UBI policy, while 29.8% said that they would be interested in a UBI policy if it saved them 20% on their premiums. Going forward, more consumers may feel that they need to take on the risk of driving uninsured as the cost-of-living crisis bites. Telematics and UBI policies can help consumers who have been negatively affected by the cost-of-living crisis by making insurance policies more affordable, which in turn will help decrease the number of uninsured vehicles on the road.

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By GlobalData