Analyst fears that without cover many could risk insolvency.
The Payment Protection Insurance (PPI) industry was dealt a fresh blow this week, with a study suggesting that one in five consumers would look to cancel it to save money as the credit crunch bites.
The findings come just weeks after the Competition Commission blasted the industry for overcharging consumers by £1.4bn a year.
Business advisory firm Deloitte, which commissioned the YouGov research into how the economic downturn will impact on consumer’s insurance buying habits, said PPI could be a vital purchase.
Insurance partner David Rush said: “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.”
The survey also found that one in four users of price comparison sites were looking to reduce their spend, and 60% would cut back on the insurance products they buy over the next 12 months in order to reduce their overall bill.
Eighteen per cent of those looking to reduce their insurance bill said they would consider switching from comprehensive motor insurance to third party cover. Travel, pet and health insurance were also identified as likely areas for cutbacks.
But 29% of those surveyed said they were less likely to make a claim for a small amount than they would have been a year ago, to prevent their premiums going up.
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.”
YouGov surveyed 2,286 adults in May 2008 and weighted the results to be representative of all UK adults.