1 in 4 using credit to buy insurance have borrowed more to fund cover

Premium Credit’s Insurance Index shows 69% of adults use some form of credit to pay for one or more types of cover

Credit cards are the most used form of borrowing ahead of finance from insurers

Many insurance customers using credit to buy their cover are increasing the amount they borrow in response to rising premiums and a growing squeeze on household finances, new research from the UK’s leading premium finance company, Premium Credit, shows.

The study found that over the past year, nearly seven out of ten (69%) people used some form of credit to pay for one or more insurance policies, and one in four borrowed more than they had in the previous 12 months for this purpose.

Some people may rely on credit more to help fund their insurance in the future because around a third (29%) of adults questioned believe their household income will fall over the next 12 months, and 41% of those who use credit to pay for cover say premiums have risen since the Coronavirus crisis started. Nearly half (49%) say premiums have stayed the same or fallen.   

Around three out of four (73%) of customers who have seen premiums rise said they have shopped around more to find cheaper cover, but 13% say they changed items or got rid of them to help reduce the cost of cover. Some 12% of people increased their claims excess, and the same percentage reduced their level of cover.

As a result of not being able to afford their insurance, some customers have had to cancel polices – around 4% of those who use credit to fund insurance have cancelled buildings insurance while 3% have cancelled contents cover. That is an improvement on research conducted by Premium Credit in March which found 5% had cancelled or amended buildings insurance and 7% had cancelled or amended contents insurance.

Premium Credit’s Insurance Index, which monitors insurance buying and how it is financed, found credit cards are the most popular form of borrowing with 36% using them compared with 23% who rely on finance offered by their insurer and/or premium finance. Nearly one in ten (9%) use personal loans and 6% have borrowed from friends or family.

Premium Credit is advising customers to consider premium finance which, for a small charge, enables them to pay monthly for cover instead of in a lump sum. Spreading payments in such a way can help ease cash flow challenges and make paying for vital insurance simpler.

Its study shows widespread use of credit by consumers, as the tables below demonstrates.

Adam Morghem, Premium Credit’s Strategy, Marketing & Communications Director said: “Premium finance is specifically designed for insurance buyers to help make important insurance policies affordable. Looking to spread the cost of an annual policy into more manageable monthly payments works for many consumers and businesses.”

Owen Thomas (pictured), Chief Sales Officer at Premium Credit added: “Premium finance has become a very cost-competitive means for consumers to buy insurance and better manage their finances through spreading payments. At a time when household finances are under pressure it can be a good alternative to other forms of credit.”

Premium Credit’s research highlighted the cost of not having the right insurance – around one in twelve (8%) of those who use credit to pay for insurance have not been able to make claims in the past five years either because they had no cover or had inadequate cover. More than half of them lost out on claims worth £1,000 or more.

Authored by Premium Credit