Nearly three out of four personal lines insurance customers use some form of credit to pay for one or more policies, with half using credit to pay for car insurance, research from Premium Credit has revealed.
The study found that 71% of customers use some form of credit to fund cover, virtually unchanged from the 72% recorded in last year’s Premium Credit Insurance Index, but substantially higher than the 61% who were using credit two years ago.
Use of credit was highest among car insurance customers – 50% use some form of credit to pay for car insurance compared with 48% a year ago.
The research found that 75% of car insurance customers had seen a rise in their annual bill in the past year, with 13% saying premiums had increased by 20% or more.
Around 10% said they are driving less to cut their insurance bill.
Premium Credit’s Insurance Index, which monitors changes to insurance buying trends, found use of credit rose for almost all types of insurance it monitors apart from home insurance and critical illness where use of credit dropped slightly.
The index found almost half (48%) of insurance customers valued the ability to pay monthly through premium finance or finance offered by insurers.
Around 19% said they use it for all major insurance bills while 14% used it for some insurance bills and 14% have used it in the past.
Around 71% said that the key reason they value paying monthly is that it helps with budgeting, while 27% said it makes sense as they pay other bills such as mortgages and mobile phones monthly.
Around two out of five (41%) customers who use some form of credit to pay for one or more insurance policy borrowed more than they had in the previous 12 months, the research found, compared with 38% who said this in last year’s index.
However, 43% said they have not borrowed more compared with 42% last year while 2% said they had cut borrowing compared with 3% last year.
Of those who have borrowed more, the ongoing cost-of-living squeeze was highlighted as the biggest reason (36%), while 24% blamed insurance premium increases and 14% said it was because of rising energy bills.
Credit cards remained the most popular form of borrowing with 40% using them compared with 30% relying on finance from their insurer and/or premium finance.
However, the research showed there are issues with being accepted for credit – 5% were rejected for credit cards in the past year while 5% were offered a higher rate than the one they applied for.
Adam Morghem, strategy, marketing and communications director at Premium Credit, said: “Nearly three out of four people use credit to pay for one or more insurance policies demonstrating the need to find the most efficient payment options available.
“Credit is particularly important in the car insurance market where premiums have soared recently.
“Nearly half of all customers value the ability to use premium finance or finance offered by insurers to pay monthly for insurance policies although credit cards remain the most used form of finance among those using credit.”
He added: “Premium finance is specifically designed for insurance buyers to conveniently spread the cost of insurance policies.
“When compared to other forms of credit such as credit cards or overdrafts it is very cost-competitive and helps customers manage their money.”
