As the cost of living continues to escalate, insurance buyers are increasingly relying on credit to fund their coverage.
According to the latest research from Premium Credit, nearly two out of five (38%) customers using credit to purchase insurance policies have borrowed more in the past year. This represents a significant increase from previous years, with only one in three (34%) borrowing more in March 2022 and one in four (25%) in October 2021.
Premium Credit's Insurance Index, now in its fourth year, revealed the key financial challenges faced by insurance customers.
The study found that 70% of adults resort to some form of credit to pay for one or more types of coverage. Credit cards remain the most popular choice for borrowing, surpassing finance options from insurers and premium finance providers.
The research indicates that the primary driver for increased borrowing among credit-dependent insurance buyers is the ongoing squeeze on living expenses, with 44% borrowing more to alleviate financial pressures.
Additionally, 16% cited rising premiums as the reason for increased borrowing, while 6% reported a decline in income, and 3% faced job losses.
While the number of customers cancelling policies due to affordability concerns has remained relatively stable, the study reveals a slight increase in cancellations for buildings cover, with 4% cancelling compared to 3% in the previous index.
Adam Morghem, premium credit's strategy, marketing, and communications director, urged customers to consider premium finance as a viable option for managing insurance costs.
He emphasised that spreading payments through premium finance offers convenience and can alleviate cash flow challenges. With a small charge, customers can opt for monthly payments, making essential insurance coverage more affordable.
Premium Credit's comprehensive study also highlights the widespread use of credit across various insurance types, except for specialist insurance, where credit usage remained unchanged.
Notably, travel insurance saw the most significant increase in credit utilisation.
Morghem added: "Premium finance provides a cost-competitive solution for consumers to purchase insurance while effectively managing their finances through manageable monthly payments. In times of financial strain, it serves as a favourable alternative to credit cards or bank overdrafts."
