"The ongoing economic strain and cost of living crisis is having an impact on borrowing to fund insurance with total numbers using credit rising."
More insurance customers are using credit to buy their cover and are also increasing the amount they borrow to help ease cost of living pressures, new research from Premium Credit shows.
The data found that nearly two out of five (38%) customers who use some form of credit to pay for one or more insurance policies borrowed more than they had in the previous 12 months for this purpose.
That is an increase on the 34% borrowing more as reported by the index in March 2022 and the one in four recorded in October 2021. The number of people using some form of credit to pay for one or more insurance policy was also higher at 70% compared with 66% in March 2022 and 69% in October 2021.
Premium Credit is seeing an increase in customers opting for finance to afford insurance – data from Confused.com, for instance, shows average car insurance premiums have increased 20% to a 12-year high of £657 in the first quarter of this year.
The biggest driver for increased borrowing was the ongoing cost of living squeeze. Around 44% said they borrowed more to ease financial pressures. Just one in six (16%) said they borrowed more because of rising premiums while 6% said their income had fallen and 3% said they had lost their job.
Around 6% who used credit to pay for one or more insurance policy said they had defaulted on repayments during the past year which is slightly up on the 5% who said they had defaulted in 2022.
The number of customers cancelling policies as a result of not being able to afford cover has remained largely unchanged. Around 3% said they have cancelled contents cover – the same result as in 2022 – while around 4% have cancelled buildings cover which was slightly up on 3% in the previous index.
In addition, the use of different forms of borrowing remained unchanged. Credit cards remain the most popular form of borrowing, used by 35%, while 27% rely on finance offered by their insurer and/or premium finance provider, both the same as in 2022.
The numbers using personal loans and borrowing from family and friends dropped slightly from 9% and 7% in the 2022 index to 8% and 6% this year. Around 4% relied on high interest loans.
Adam Morghem, Premium Credit’s strategy, marketing and communications director, said: “The ongoing economic strain and cost of living crisis is having an impact on borrowing to fund insurance with total numbers using credit rising.
“Premium finance is specifically designed for personal and commercial insurance buyers to help make important insurance policies affordable and improve cashflow. Looking to spread the cost of an annual policy into more manageable monthly payments works for many millions of UK consumers and businesses.
“It is 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 like credit cards or bank over drafts.”
