1 in 5 cancel insurance as Covid-19 piles on the financial pain
Rising premiums were already putting insurance customers under strain
Average household bill for insurance is up 14% to more than £1,000
Nearly one in five UK consumers have cancelled or cut back on insurance policies as the financial impact of the COVID-19 pandemic has turned up the pressure on spending on insurance, new research from Premium Credit has found.
According to its study, 19% of consumers have cancelled or cut policies directly as a result of the pandemic. While travel insurance is the worst affected, customers have also cut important home and car cover as well as pet, life and health.
Premium Credit’s Insurance Index research highlights that even before the onset of COVID-19 insurance customers were feeling the strain – analysis of the most recent Government data2 shows the average household’s total insurance costs increased 14% year-on-year to £1,045.
The Index, which monitors insurance buying and how it is financed, found a growing reliance on credit. Before the onset of the pandemic, around one in four customers (25%) borrowed money to pay for their insurance - the pandemic has driven another one in twenty (5%) to take out credit.
The research also found that, of the consumers that have used credit to pay for insurance, on average they are using £520 more credit than 12 months ago – a significant rise.
Rising premiums are the main reason for people taking out more credit, with 35% of those who have borrowed money saying prices have increased. The reliance on credit for insurance underlines how important customers believe it is – around 61% say paying for their insurance is a high priority in their household finances.
However, Premium Credit’s research shows households are taking risks with their finances to afford insurance – more than two out of five (44%) say they pay on credit cards while more than half (53%) use the monthly direct debit finance offered by insurers.
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 – currently only around 7% of consumers say they do so. Spreading payments in such a way can help alleviate cash flow challenges and make paying for vital insurance simpler.
Adam Morghem, Premium Credit’s Strategy & Brand Director said: “The financial pain of COVID for millions of households is mounting and insurance is one of the bills that people are cutting back on to save money. The affordability issue was already a major concern for households before the pandemic with average bills rising 14% in a year – way ahead of inflation – and making it more difficult for people to pay for the insurance they need and value.”
Owen Thomas, Chief Sales & Marketing 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 insurance is becoming more expensive it can be a good alternative to other forms of credit.”
Separate Premium Credit research, conducted in March this year before the pandemic, found 41% of customers who had increased borrowing to pay for insurance did so because premiums had increased while 14% had done so because their finances were being squeezed. Around one in ten (9%) who have borrowed money to fund insurance fear they might default on the loan in the next year.
To see The Premium Credit Insurance Index infographic CLICK HERE
Authored by Premium Credit
We are the leading provider of premium finance in the UK and Ireland, and the only company endorsed by BIBA. We are authorised and regulated by the Financial Conduct Authority, and work with over 3,000 producers of all sizes. We serve over 2.1 million customers, process 24 million direct debits and receive advances of £3.5 billion.
For over 30 years, we’ve led the market through thought leadership, innovation and technology and have helped our partners offer finance compliantly to their customers through face-to-face, telephony and online channels.
We continue to invest to ensure we provide a quality service and support that helps you grow your business and commission. From the delivery of a seamless customer journey, which includes real time decisioning for financing and 24/7 account servicing, to consultation that improves the offer of finance to customers, we are committed to growing the premium finance market.
Our Specialist Lending division also provides finance to pay other annual costs, such as professional fees, membership subscriptions, commercial service charges, golf clubs and school fees.
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