Cost-of-living crisis spurs insurance cancellations worldwide

As global inflation persists, households are being stretched to their financial limits, leading many to make difficult choices about what to keep and what to cut. New data shows that insurance, once regarded as a financial safety net, is increasingly viewed as expendable. Global financial advisory firm Capital for Life warns that the trend could leave millions without vital protection when they need it most.

The growing impact of financial pressure

The global cost-of-living crisis is driving an alarming rise in insurance cancellations as households struggle to balance everyday expenses with long-term financial commitments. GlobalData’s 2024 survey reveals the extent of the strain:

• Rising cancellations: Nearly half (49.5%) of customers who canceled motor insurance cited the cost-of-living crisis as the main reason.
• Inflation as a key driver: Across all lines, 45% of departing customers blamed inflation for their decision.
• Life insurance under pressure: 16.3% of life insurance policyholders have canceled a policy in the past year, while 12.2% are considering doing so, and 21.4% are thinking about switching providers.
• Falling behind on payments: 14.6% of customers globally have missed insurance payments, with the problem most acute in the US, where 21.5% are struggling to keep up.

“Insurance is often viewed as a non-essential expense because its benefits aren’t immediate. When faced with higher bills for necessities, consumers may see premiums as flexible spending. Something that can be paused or eliminated.

This mindset, while understandable, carries long-term consequences. For many families, cancelling or reducing coverage provides short-term relief but creates greater vulnerability in the long run. Without adequate protection, unexpected illness, accidents, or income loss can have devastating financial effects.

Maintaining some form of cover is almost always preferable to losing it entirely. Advisors can help clients adjust their policies, restructure payments, or explore flexible coverage options that keep them protected through difficult periods,” says Carlton Crabbe, Finance and Insurance Expert at Capital for Life.

Safeguarding coverage through challenging economic times

• Review existing policies: Identify areas where coverage can be adjusted or streamlined without eliminating key protections.
• Explore flexible payment options: Many insurers offer revised schedules or temporary relief programe to help clients stay up to date.
• Seek professional guidance: A financial advisor can help balance short-term affordability with long-term security.