An increasing number of insurance customers are resorting to borrowing more in order to afford their cover, as the cost of living continues to rise, according to new research from the UK’s top premium finance company, Premium Credit.
The company’s Insurance Index, now in its fourth year, revealed that nearly two in five (38%) customers who use credit to pay for one or more insurance policies have borrowed more in the past 12 months than they did in the previous year. This marks an increase from one in three (34%) in March 2022 and one in four in October 2021.
The number of people using credit to pay for at least one insurance policy has also risen to 70%, compared with 66% in March 2022 and 69% in October 2021.
Premium Credit attributes this trend to the rising cost of insurance. Data from Confused.com, for instance, shows that average car insurance premiums have soared by 20% to a 12-year high of £657 in Q1 2023.
Among those who use credit to purchase insurance, 44% cited the ongoing cost of living squeeze as the primary reason for borrowing more. Another 16% borrowed more due to rising premiums, while 6% said their income had dropped, and 3% had lost their jobs.
The research also showed a slight increase in defaults on repayments, with 6% of those who use credit to pay for their insurance reporting defaults in the past year, compared with 5% in 2022.
The use of different forms of borrowing remained mostly unchanged, with credit cards being the most popular form, used by 35% of respondents.
Adam Morghem, Premium Credit’s strategy, marketing & communications director, said: “The ongoing economic strain and cost of living crisis is having an impact on borrowing to fund insurance with total numbers using credit rising.”
Premium Credit advises customers to consider premium finance, which allows them to spread their insurance payments over the year instead of paying in a lump sum. This can help ease cash flow issues and make paying for vital insurance more manageable.
