One in four 'cancelling home insurance' to save money

Nearly one in four Britons has cancelled their home insurance in a bid to save money due to the economic downturn, research showed today.

Around 22% of people said they had either cancelled or not renewed their home contents cover during the past 12 months, while 17% no longer have buildings insurance, according to the Association of British Insurers.

The figures are even starker among people living in Scotland, with 28% cancelling or not renewing their contents cover and 21% giving up buildings insurance.

A further 13% of people across the whole country have also ditched their life insurance as they try to cut down on their outgoings.

The ABI, which released the figures ahead of its biennial conference today (Tuesday), warned that cutting back on insurance was a false economy.

Stephen Haddrill, the ABI's director general, said: "In these uncertain times, insurance provides a vital financial safety net to steer individuals and families through the recession, as well as helping to provide long-term security. Ditching insurance or reducing your cover must only be a last resort."

The research also found 21% of people are seriously considering reducing the amount they save or stopping saving altogether.

Around 45% of people said they wanted to save more but could not currently do so, while 49% said they worried about their ability to cope with an unexpected event, such as a burglary.

Meanwhile, the AA is calling on the insurance industry to do more to recognise steps taken by young motorists to improve their driving.

One in every five young drivers has a crash during the first year after which they gain their licence, with young drivers 10 times more likely to be involved in a serious collision than more experienced ones.

As a result, many insurers will not offer cover to people who are aged under 21, while in some cases firms will not insure people under 25.

The AA warned that this was reducing competitiveness in the insurance industry and driving up premiums, which was in turn encouraging fraud.

The group has recently teamed up with the police to offer free driver safety training to young people who are deemed to be at risk, such as those who have been caught speeding, using mobile phones while driving or not wearing seatbelts.

The scheme was launched in North Wales last month and the AA Charitable Trust plans to fund at least 2,000 free courses across the country.

Addressing the conference, Simon Douglas, director of AA Insurance, will say: "It's disappointing that while both the police and the Government recognise the benefit of training courses such as Drive Smart in reducing accident rates among high-risk young drivers, the insurance industry so far has not.

"Perhaps it's time for greater investment in targeted driver training at a younger age to enable new drivers to get on the road safely and responsibly, help reduce claims and make insurance more affordable."

The ABI's conference will focus on the challenges posed by today's economic environment, as well as looking at the opportunities for the future.

Adair Turner, chairman of City watchdog the Financial Services Authority, will speak about the future of regulation, and Shadow Chancellor George Osborne will also address delegates.