Consumers increasingly likely to pay for insurance with credit

Consumers increasingly likely to pay for insurance with credit

One in five adults more accepting of using credit than they were a year ago as household budgets feel the strainOne in three think their standard of living and ability to pay bills will suffer in the year ahead, Premium Credit research finds

Consumers are becoming increasingly likely to pay for insurance with credit as household budgets come under more pressure, new research from the UK’s leading premium finance company, Premium Credit, shows.

More than one in five (21%) of adults say they are more accepting of paying for insurance policies with credit than they were a year ago, Premium Credit’s Insurance Index found. That is substantially higher than the 15%2 who were more accepting of using credit when the index reported in October 2022.

The research found more than a third (34%) expect their standard of living and ability to pay regular bills to worsen in the year ahead with 8% fearing their standard of living will deteriorate dramatically forcing them to make substantial cutbacks. Just 16% believe their standard of living will improve.

Homeowners with mortgages are facing the most pressure, the study found. Nearly two out of three (64%) say they will have to make cutbacks or fear they will have to make cutbacks once existing fixed rate deals expire. Around 16% say they will have to make major cuts to their household budgets.

Mortgage customers are most likely to reduce spending on going out with 50% saying they will cut back. However, 46% say they will cut spending on clothes while 44% plan to spend less on holidays. Around 9% say they will cancel some insurance policies to keep costs down.

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Premium Credit’s Insurance Index, which monitors insurance buying and how it is financed twice yearly, found the growing acceptance of using credit to pay for insurance is mainly because it helps with managing money.

Around 44% said using credit helps with managing money while 40% say the rising cost of living is making it harder to pay for insurance with a lump sum. About one in five (20%) say price increases for their insurance has made them consider credit options.

Nearly one in 10 (9%) of adults say they have switched from paying for car insurance in one go to paying monthly in the past year while 9% now pay monthly for home insurance instead of in a lump sum. Around 8% who used to pay for car insurance monthly now pay in a lump sum and the same number have made the switch to paying for home insurance in a lump sum.

Premium Credit is advising customers to consider premium finance which, for a small charge, enables them to pay monthly for cover instead of in a lump sum. Spreading payments in such a way can help ease cash flow challenges and make paying for vital insurance simpler.

Adam Morghem, Premium Credit’s Strategy, Marketing & Communications Director said: “Paying for insurance with credit is becoming increasingly popular given the current cost of living squeeze on budgets which our research shows are set to tighten in the year ahead.

“People with mortgages are under the most pressure and it is understandable that many are considering cancelling important insurance policies as well as making major cutbacks to their standard of living.

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“Premium finance is specifically designed for insurance buyers to conveniently spread the cost of insurance policies. Premium finance is a very cost-competitive means for consumers to buy insurance and better manage their finances. At a time when household finances are under pressure it can be a good alternative to other forms of credit.”

Authored by Premium Credit