Half of insurance customers who use credit have borrowed more in the past year

More than half (54%) of insurance customers who use credit have borrowed more in the past year, with the cost of living challenges as the key reason, according to new research from Premium Credit.

The data shows that around three out of four (75%) insurance customers use some form of credit to pay for one or more policies. 55% cited cost-of-living pressures as the biggest reason they’ve taken on more credit, although nearly a quarter (23%) said using credit is more convenient and a better way to manage their money. Just over a fifth (21%) named rising insurance premiums as the driving factor.

More than half (56%) of those questioned said the cost of their insurance premiums has increased in the past 12 months, including 10% who reported dramatic increases. That has led to some drastic action, with 19% saying they have cut back on driving or stopped driving altogether due to the cost of motor insurance. One in six (17%) said they had gone on holiday without travel insurance given the premiums.

Credit cards are the most widely used form of borrowing, with 58% relying on plastic to pay one or more policies, ahead of 24% who use premium finance or finance offered by insurers.

Using credit cards can be risky, however – one in eight (12%) who use them to pay for insurance say they have defaulted on interest or capital repayments in the past year. Applying for credit cards can also be touch-and-go, with one in seven (14%) reporting they had been rejected for a card in the past two years.

There are glimmers of optimism that cost of living challenges could ease in the year ahead – around 30% of adults believe their financial situation will improve over the next 12 months compared with 29% who believe it will worsen. Around 15% believe their financial situation will get much worse, however.

That is still an improvement on six months ago, when 32% said they expected their financial situation to worsen over the next 12 months, compared with 19% who expected it to improve.

Mona Patel, Consumer Spokesperson at Premium Credit, said “With household budgets under pressure, more people are choosing to spread the cost of their insurance, valuing the convenience and predictability of monthly payments.

“Having the right insurance in place is basic financial hygiene, and it is there to protect you should something go wrong. Paying monthly smooths out the impact of a single lump sum and improves cash flow whilst ensuring you’re properly covered.

“Spreading the cost of an annual policy into more manageable payments works for millions of UK consumers and businesses and it can be a good alternative to other forms of credit like credit cards or bank overdrafts.”