Some who have used credit to pay for cover have not been able to claim on their insurance policy in the past five years
Nearly seven out of 10 customers (69%) have used some form of credit to pay for their insurance policy over the past year, according to research by premium finance firm Premium Credit.
Its Insurance Index, conducted by Consumer Intelligence between 1 and 4 October 2021, surveyed 1,017 adults aged 18 and over. This found that many insurance customers are increasing the amount they borrow on credit in order to deal with rising insurance premiums amid a financial squeeze on household finances.
For example, one in four respondents had borrowed more on credit in 2021 than they had in the previous year for this purpose.
Owen Thomas, chief sales and marketing officer at Premium Credit, said: “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.”
The research highlighted the cost of not having the right insurance - 8% of those who used credit to pay for insurance have not been able to make claims in the past five years because they have either had no cover in place or bought inadequate cover.
More than half of these respondents lost out on claims worth £1,000 or more.
Around 73% of customers who have seen their insurance premiums rise said they have shopped around more to find cheaper cover.
However, 13% said they changed insured items or got rid of them completely to help reduce the cost of cover, while 12% of respondents increased their claims excess. A further 12% simply reduced their level of cover.
As a result of not being able to afford their insurance, some customers resorted to cancelling their polices.
For example, 4% of those who use credit to fund insurance have cancelled buildings insurance, while 3% have cancelled contents cover.
This is still an improvement compared to Premium Credit’s research in March 2021, which found that 5% of respondents had cancelled or amended buildings insurance and 7% had cancelled or amended contents insurance.
Premium Credit’s findings also showed that some people may rely on credit more to help fund their insurance in the future because 29% of adults surveyed believe their household income would fall over the next 12 months.
In addition to this, 41% of those who use credit to pay for cover said premiums have risen since the coronavirus crisis started in early 2020, while 49% noted that premiums have stayed the same or fallen.
Adam Morghem, Premium Credit’s strategy, marketing and 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.”
Premium Credit’s Insurance Index monitors insurance buying and how it is financed.
This month’s index found that credit cards are the most popular form of borrowing (36%) compared with 23% of respondents who rely on finance offered by their insurer or premium finance options. Only 9% use personal loans for insurance spending and 6% have borrowed from friends or family to cover policy costs.