17 Apr 2019 Insurance customers are increasingly banking on credit to pay premiums with nearly one in three planning to use more credit this year, new research from Premium Credit, the UK’s leading premium finance company shows.
Its nationwide study found 31% of customers will borrow more in 2019 to fund insurance, with rising premiums the biggest reason for increased use of credit. Just 8% believe they will cut back on credit this year.
Around 41% of insurance customers say they are relying on credit more in response to price rises on motor, home, pet, travel and life insurance premiums while one in five (21%) say they need to borrow as their disposable income is being squeezed.
However, 22% say they are using borrowing to spread the cost because the low cost of borrowing makes paying for insurance more affordable.
The bills they face are substantial – more than two out of five (43%) will put more than £500 of insurance premiums on credit with 13% borrowing more than £1,000, the research found.
The most popular form of credit to spread the cost of insurance is credit cards which are being used by 60%. However, 39% plan to use premium finance and pay monthly for insurance rather than in one lump sum.
Worryingly 13% are borrowing from family and 12% are borrowing from friends, while 4% are using high-cost credit including payday loans to ensure they can afford cover.
Premium Credit is warning that using high cost methods of credit is potentially risky and urges customers to consider premium finance; a purpose-built product, which for a small charge enables people to spread the cost of your cover monthly instead of paying for it all in one go.
Adam Morghem, Sfrom Premium Credit said: “The rising cost of insurance is driving increased use of credit to enable people to ensure they can afford the cover they need.
“With nearly one in three customers planning to increase the amount of credit they use to pay for their insurance, we encourage borrowers to ask about the premium finance option, a solution designed for this exact need and means customers are not underinsured and taking unnecessary risks.
“However, it is worrying that customers may be choosing to underinsure or borrow from family or friends- and in some cases rely on high-cost credit including payday loans.”
Its study found drivers are most likely to spread the cost of insurance cover with 84% of motorists using credit as the table below shows.
TYPE OF INSURANCE
NUMBERS BUYING ON CREDIT
Premium Credit is the market leader in the UK and Ireland and the only premium finance provider accredited by BIBA. For more information, please visit: www.premiumcredit.com