Around one in seven UK consumers have cancelled or decided against buying insurance in the past year, according to new research from Premium Credit.
The company's latest Insurance Index showed that 15% of customers have cancelled or opted not to proceed with certain types of insurance in the past 12 months, up from 11% reported in the previous edition of the index. At least 20% of those who cancelled a policy said they still needed the cover they had given up , underlining the extent to which affordability pressures, rather than reduced risk, are driving behaviour.
According to the data, nearly one in eight UK adults have, in the past five years, been unable to claim for damage to property or belongings because they either did not have insurance in place or did not hold adequate cover at the time of loss. For many, the financial hit has been significant: around 45% of those who missed out on a claim say the loss would have been worth more than £1,000, while nearly a quarter (23%) report that the value was £3,000 or more.
This compares with the 8% recorded in last year’s Insurance Index who said they had been unable to make claims over the previous five years because they had no cover or insufficient cover. The shift suggests more households are being exposed as they trim back protection in response to rising premiums and other living costs.
Against this backdrop, Premium Credit is urging customers to consider the use of insurance premium finance to help them retain essential cover rather than cancelling outright.
Under a premium finance arrangement, policyholders spread the cost of an annual policy into monthly instalments, paying a charge for the credit facility instead of funding the full premium up front. Used appropriately, this can ease cash flow for households that might otherwise struggle with a single payment and can help prevent gaps in cover at renewal.
Jon Howells (pictured), chief commercial officer at Premium Credit, warned that short-term savings from cutting back protection can quickly be outweighed by the cost of a claim that cannot be made.
“It can be tempting to cancel policies or decide not to have cover as a way of saving money, but the reality is that it will often be a false economy," he said. “Premium finance can take the sting out of a large lump sum allowing consumers to break it down into instalments in much the same way as they might pay for other large outgoings.”
Premium finance in the UK is treated as consumer credit and falls within the Financial Conduct Authority (FCA) perimeter. That links it to the regulator’s focus on fair value, affordability and good customer outcomes under the Consumer Duty, which came into force for open products in 2023.
From a distribution standpoint, offering instalment options has become a core part of the customer proposition for many intermediaries.
Dave Taylor, chief customer officer at leading MGA Somerset Bridge, said that for a growing share of the market, paying in one go is no longer realistic.
“Premium finance is now a necessity rather than a choice with many customers unable to pay for their insurance in one lump sum. The instalment option is invaluable and the convenience of using premium finance rather than other sources of credit is a key factor in why customers choose to use it," said Taylor.
