Cutting back on personal insurance could cause people to be at financial risk, it is claimed, possibly needing the expertise of a debt management firm to recoup their losses.

Graeme Trudgill, technical and corporate affairs executive for the British Insurance Brokers’ Association (Biba), believes some are reducing the policies they take out.

Mr Trudgill suggests: "It might be how much it costs to replace their contents or rebuild their house.

"They are taking that risk, because they know they are going to save perhaps £50 or £80 pounds on their insurance and think that’s a good saving."

In the long-run, however, this could create financial setbacks, leading people to foot hefty bills, he adds.

Biba recently revealed that over one-fifth of brokers surveyed have seen their personal lines customers reduce their level of insurance protection during the recession.

Furthermore, 29 per cent of brokers have seen a reduction in non-essential cover and add-ons for personal lines business and 16 per cent have seen personal lines clients reducing sums insured.