Retailers and restaurants may not be the only ones to feel the effects of reduced household spending following the credit crunch. Research by YouGov for Deloitte, the business advisory firm, has found that 26% of consumers who buy insurance from a price comparison site are looking to reduce their insurance spending. Only 40% of those surveyed said they definitely wouldn’t cut back on the insurance products they buy in the next 12 months to reduce the cost of their insurance policies.

One in five consumers (21%) looking to reduce insurance spending said they would cut Payment Protection Insurance (PPI), which covers repayments on products such as personal loans, mortgages and credit cards if the borrower is unable to do so due to loss of earnings as a result of accident, sickness, unemployment or death.

18% of those looking to reduce their insurance said they would consider changing from comprehensive motor insurance to third party cover. Travel insurance (12%), pet insurance (9%) and health insurance (9%) also look set to be cut.

Commenting on the survey findings, David Rush, insurance partner at Deloitte, said: “At a time when households have less disposable income, it is understandable that many will look at how they can reduce their spending. However, consumers should think carefully about which types of insurance they most need in a down-turn.  A short-term saving could cost a lot should an accident occur and adequate insurance cover isn’t maintained.

David Rush said: “Of particular concern is the number of people who are looking to cancel PPI policies. As the economy faces a difficult period, this is the time when people may most need PPI cover. Many have questioned the value of PPI in recent years when unemployment has been low and the economy buoyant. However, with things looking less certain over the next few years, for those people who are made redundant, PPI cover could mean the difference between staying solvent and losing one’s house.”

Based on the responses to their survey, Deloitte estimates that around £1.5b of insurance premium revenue is at risk due to consumers rationalising the use of their disposable income.  This comes at a time when the market is already very competitive.

While average insurance premiums for motor insurance have risen by 8.2% in the last year, in contrast household insurance premiums are 3.1% lower than they were a year ago. Insurers may find future price increases difficult to achieve as 68% of consumers surveyed by Deloitte said they are more likely to shop around for insurance than a year ago.

Catherine Barton, actuary and insurance partner at Deloitte, said; “A significant amount of premium income could be at risk as consumers tighten their belts.  Insurers will need to decide whether they are happy to cede volume, or become more competitive on price to protect market share.  A better deal may be in store for consumers, particularly on non-compulsory purchases, if insurers become keener on price to mitigate loss of volume. What is clear from our survey is that insurers will be under pressure not to increase premium levels if they wish to maintain their market share.”

On a more positive note for insurers, 29% of those surveyed said they are less likely to make an insurance claim for a small amount than a year ago because they don’t want their premium to go up.

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Notes to Editors:
The survey was carried out online by YouGov on Research was conducted on a sample of 2,286 adults between 23-27 May 2008. The figures have been weighted to be representative of all GB adults (aged 18+).

About Deloitte

In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities.  Neither DTT nor any of its member firms has any liability for each other’s omissions.  Services are provided by member firms or their subsidiaries and not by DTT.  Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.  The information contained in this press release is correct at the time of going to press.