More motor and home insurance customers relying on credit to pay for cover

The number of home and motor insurance customers relying on credit to pay for one or more policies has increased in the past year, new research from Premium Credit has shown.

The firm’s insurance index, which was published yesterday (8 November 2023), showed 48% of consumers used some form of credit to pay for motor cover in October, up from 40% during the same period in 2022.

And 49% of adults had used credit to take out a home policy, a 9% increase from October 2022.

It was not just the home and motor sectors that saw rises, however, with Premium Credit seeing increases in the use of credit for all categories of insurance it covers, such as life, pet, health, travel, critical illness and specialist insurance.

Some 32% of adults blamed the rise on cost of living pressures, while 18% also cited the impact of energy bills and premium increases.

“There has been a sharp rise in the number of people turning to credit to pay for one or more insurance policies as the cost of living pressures continue to tighten budgets,” Adam Morghem, Premium Credit’s strategy, marketing and communications director, said.

“The increases have been particularly notable in car and home insurance, but the rises are across the board underlining not only the importance of credit in the insurance market, but also the need to find the most efficient payment options available.”

Premium finance

The survey was carried out using a sample of 1,073 consumers aged 18-plus between 6-9 October 2023.

Despite more people turning to credit, the research also revealed that there were issues with being accepted for it – some 6% were rejected for credit cards in the past year, while 5% were offered a offered a higher rate than the one they applied for.

As a result, Premium Credit is advising customers to consider premium finance, which enables them to pay monthly for cover instead of in a lump sum.

“Premium finance is specifically designed for insurance buyers to conveniently spread the cost of insurance policies,” Morghem said.

”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.”