UK drivers are seeking to reduce their insurance cover as they struggle to meet the rising cost of living.

Analysis of the Financial Conduct Authority’s (FCA) Financial Lives Survey by insurance consultancy Broadstone points to growing evidence that drivers are cutting back on their policy coverage.

The company added recent increases in insurance premiums are beginning to alter policyholder behaviours with over one in seven (15%) customers having said that they had reduced their level of cover in the past two years. Seven percent said they had proactively contacted their insurer to do so and 9% opting for a reduced level of cover when purchasing a new policy.

Cormac Bradley, senior actuarial director at Broadstone, added: “Two separate phenomena are likely to be driving these changing attitudes and behaviours when taking out motor insurance products.

“Firstly, ongoing cost-of-living issues and falling discretionary incomes are squeezing household budgets, forcing individuals onto cheaper policies. Secondly, the surge in motor insurance premiums over the past few years which, while coming down slightly, remain historically elevated.

“As such, it is probably unsurprising that we are seeing policyholders begin to reduce their levels of coverage so that they can keep their regular payments affordable.”

The company added its research found reducing levels of coverage was particularly prominent among those who described their credit burden as heavy – a quarter (25%) of these people opted for a policy with a lower level of coverage with nearly one in 10 (9%) contacting their provider to cut down.

It follows significant premium inflation through 2023 and 2024 with nearly four in five (78%) of those switching or renewing stating that they had seen a noticeable increase in their premium, up from 49% in 2022. At the same time insurers have responded to the rising cost of insurance with more ‘no frills’ products with optional add-ons which is presenting customers with greater choice at the point of sale. The data suggests that consumers are interacting with these product choices more proactively.

The data also showed that price comparison websites remain the dominant source of business for motor insurers, with 64% of UK adults who took out, renewed or switched motor insurance in the last three years using an aggregator platform compared to 58% in 2022.

Around a quarter (24%) still purchased their policy directly from their provider with only 4% using an insurance broker.

Bradley concluded:  “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.

“Finally, digital visibility of brands alongside a healthy balance between underwriting profitability and the need to remain competitive on pricing will be key for providers to keep their edge on aggregator platforms.”