Living Cost Increases Lower Insurance Policies

Brits have been hit by a 26 per cent rise in the cost of living over the last two years as everyday bills creep up, according to insurance provider, Combined Insurance.

The insurer’s cost of living tracker, which follows monthly spends on living costs, shows the cost of average monthly commitments has soared by 26 per cent since June 2006.

Brits are now spending 77 per cent more on child care costs and up to 30 per cent more on everyday bills such as TV subscriptions and water rates, Combined Insurance said.

The results show that people's average monthly outgoings have risen from £945 in June 2006 to £1,281 June 2008.

Nigel Brittle, director at Combined Insurance, said: “The many cost of living hikes are taking their toll on the monthly budget and many Brits are living on the edge with their finances.”

He added: “As Britons prepare to make cutbacks on their spending, which may include cutbacks on various insurance commitments, Combined Insurance urges the public not to cancel insurance policies designed to protect incomes in hard times or in bad health.”

In London, those hit the hardest by costs in the country, people are spending 55 per cent more of their household income each month on bills.  The south is the second hardest hit region (38 per cent increase) followed by Scotland (32 per cent), the Midlands and west (27 per cent) and the north (24 per cent).

The rise in costs as measured by the consumer price index (CPI) puts inflation at 3.3 per cent in May, although people's perception of inflation is much higher, at 4.9 per cent, according to the Bank of England.

The CPI, shows the average price of goods in the economy such as bread, drinks and fuel. These prices are measured annually to note how prices for goods have changed, when these prices increase the rate of inflation as well as the growth rate in prices can be seen.

Consumers are cutting back on their spending to cope with the increase in costs, the Confederation of British Industry said in May, with the service sector faring the worst from the slowdown.

This comes after recent reports have indicated that consumers in the UK, are now limiting their purchases of insurance policies.  It was found that over a quarter of consumers in the UK are looking to save money by cutting back on their insurance policies in light of the current credit crunch.  

This has caused a £1.5 billion lose for the insurance industry, according to a survey by business analysts, Deloitte.

Commenting on the findings, David Rush, insurance partner at Deloitte, said: “It is understandable that many consumers are looking to cut back on items but they should carefully consider about which types of insurance are needed in a downturn.”

The much talked about payment protection insurance policies (PPI) - an insurance policy, which provides a source of finance, in the event of an illness or accident that would stops someone from working - are likely to be cancelled by 26 per cent of consumers, after a report revealed that 2 million customers have been sold potentially worthless PPI.