Half of car insurance customers relying on credit, with premiums continuing to rise
New research from Premium Credit reveals that nearly three out of four personal lines insurance customers use some form of credit to pay for at least one policy. Half of these customers rely on credit to cover their car insurance.
The study found that 71% of customers use credit to pay for insurance, a figure that is consistent with the 72% reported in last year’s Premium Credit Insurance Index, but significantly higher than the 61% recorded two years ago.
The research indicates that the use of credit is most prevalent among car insurance customers, with 50% using credit to pay for their premiums, up from 48% the previous year.
Additionally, 75% of car insurance customers have seen their annual premiums increase in the past year, with 13% reporting hikes of 20% or more. In response, around 10% of customers have reduced their driving to lower their insurance costs.
The Premium Credit Insurance Index, which monitors insurance purchasing trends, also shows an increase in credit use for nearly all types of insurance, except for home insurance and critical illness cover, where a slight decline was noted.
Nearly half of all insurance customers (48%) value the ability to pay monthly using premium finance or financing options offered by insurers. Of these, 19% use it for all major insurance bills, 14% for some, and another 14% have used it in the past.
Budgeting was cited as the main reason customers prefer paying monthly, with 71% of respondents highlighting this benefit. Additionally, 27% said that paying monthly makes sense, as they already pay other bills, such as mortgages and mobile phones, on a similar schedule.
Premium Credit survey results
Among those who use credit to pay for insurance, 41% reported borrowing more over the past 12 months compared to the previous year, up from 38% in last year’s index. In contrast, 43% said they have not increased their borrowing, while 2% reported borrowing less, down from 3% the previous year.
Of those who borrowed more, 36% pointed to the ongoing cost-of-living pressures as the primary reason, 24% cited rising insurance premiums, and 14% attributed the increase to higher energy bills.
The research also revealed a rise in the use of credit for various types of insurance over the past year. For car insurance, 50% of adults now use credit to pay monthly, compared to 48% last year. Home insurance saw a slight decrease from 49% to 48%, while life insurance rose from 33% to 34%.
Pet insurance increased from 22% to 26%, and health insurance grew from 16% to 22%. Travel insurance saw the largest jump, from 15% to 24%, while critical illness cover dropped from 13% to 12%. Specialist insurance, such as boat or horse cover, saw an increase from 4% to 10%.
Read More: The challenges around justifying fair value in premium finance
Credit cards remain the most popular form of borrowing, with 40% of respondents using them, while 30% rely on finance offered by insurers or premium finance. However, the research found that some customers have encountered difficulties securing credit, with 5% being rejected for credit cards and another 5% being offered higher rates than anticipated.
Adam Morghem (pictured above), strategy, marketing & communications director at Premium Credit, commented that nearly three out of four people now use credit to pay for one or more insurance policies, highlighting the importance of finding efficient payment methods.
“Credit is particularly important in the car insurance market where premiums have soared recently,” he said. “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.”
Premium Credit’s research also underscored the potential consequences of inadequate insurance coverage. Around 11% of respondents reported being unable to make a claim in the past five years due to either having no cover or insufficient cover. Of these, about a third missed out on claims worth £3,000 or more.
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