A recent analysis of the Financial Conduct Authority’s (FCA) Financial Lives Survey indicates that UK motorists are increasingly adjusting their insurance coverage in response to rising premiums.
Research conducted by Broadstone shows that 15% of policyholders have reduced their cover in the past two years. Of this group, 7% contacted their insurer to lower their coverage, while 9% selected a reduced level when purchasing a new policy.
The trend is more pronounced among those with significant credit burdens. Among these individuals, 25% opted for a policy with less coverage, and 9% reached out to their provider to make reductions. This shift comes amid notable premium increases through 2023 and 2024. Nearly 78% of those who switched or renewed their policies reported a premium rise, up from 49% in 2022.
Insurers have responded to these market changes by offering more basic products with optional add-ons, giving consumers increased flexibility at the point of sale. The data suggests that customers are engaging more actively with these choices.
Price comparison websites continue to be the primary channel for motor insurance purchases. In the last three years, 64% of UK adults who took out, renewed, or switched their motor insurance used an aggregator platform, compared to 58% in 2022. Direct purchases from providers accounted for 24% of policies, while only 4% of consumers used an insurance broker.
Cormac Bradley (pictured above), senior actuarial director at Broadstone, noted that two main factors are influencing these changes.
“Ongoing cost-of-living issues and falling discretionary incomes are squeezing household budgets, forcing individuals onto cheaper policies,” Bradley said. He also pointed to the surge in motor insurance premiums, which, despite a slight decrease, remain historically high.
Bradley added that it is not unexpected to see policyholders reducing their coverage to maintain affordable payments.
Recent data show that, while quoted car insurance premiums in the UK have dropped by 10.5% over the past year, younger drivers are not experiencing the same relief. Premiums for drivers under 25 have actually increased by 3% in the last quarter, diverging from the broader market trend.
This is partly due to telematics providers showing less interest in offering competitive rates to this age group, particularly those aged 17 to 19.
Another notable trend is the change in how consumers pay for their car insurance. The proportion of customers choosing to pay in instalments has risen from 25% in late 2021 to 42% by late 2024.
“These trends are likely to increase the need for flexible products like usage-based or pay-per-mile cover that can keep premiums manageable without stripping out essential protection to avoid coverage gaps. Similarly, communication will be an important tool to inform drivers about the potential financial consequences of reduced cover and to promote mid-term review options or instalment plans,” Bradley said.
He also noted that digital brand visibility and maintaining a balance between underwriting profitability and competitive pricing will be important for insurers aiming to stand out on aggregator platforms.
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