Buildings and contents insurance are mainly being dropped by those seeking savings

Customers are increasingly depending on credit to purchase insurance as financial pressures rise from the cost of living crisis and energy bill increases, according to Premium Credit’s latest research, published today (24 October 2022).

The study found that – in September 2022 – 40% of 1,043 respondents had borrowed more than they had in the previous 12 months to pay for one or more insurance policy.

This was an increase from 34% of 1,026 respondents surveyed in March this year.

Only 2% reported borrowing less in the most recent research.

Around 35% of respondents said they had borrowed more because their spending in general had increased, while 23% blamed rising energy bills.

In May, however, 27% of respondents reported increases in the cost of cover as a common cause.

Adam Morghem, Premium Credit’s strategy, marketing and communications director, said: “Rising interest rates, the cost of living squeeze and eye-watering energy bills are having a major impact on how people pay for insurance with rising numbers borrowing more to ensure they keep important cover, but not always considering the most efficient payment options available to them.

“Our existing support for vulnerable customers is tried and tested and we are reviewing what additional support is appropriate during this time of uncertainty.”

Deep dive

Of those who have used credit to fund insurance purchases in the past 12 months, 13% have taken out an extra £500 or more in credit.

Approximately 10%, furthermore, have borrowed £1,000 or over.

Around 6% of those who used credit to pay for insurance reported defaulting on repayments during the past year, while 7% fear missing repayments in the next 12 months.

For those who are being forced to drop policies they can no longer afford – 5% cancelled buildings insurance and 2% cancelled contents cover.

Credit cards (34%) remain the most popular form of borrowing, compared to those relying on finance from their insurer or premium finance (29%).

Morghem added: “Premium finance is specifically designed for insurance buyers to help make important insurance policies affordable and improve cashflow.

“Premium finance has become a very cost-competitive means for consumers to buy insurance and better manage their finances. At a time when household finances are under pressure it can be a good alternative to other forms of credit.”