As financial confidence grows and credit becomes increasingly accessible, insurance customers are demonstrating a greater acceptance of credit as a means to pay their premiums. This insight is according to new research from Premium Credit, the UK’s leading premium finance company.
Key Points
- A growing number of insurance customers are comfortable using credit for their coverage.
- The increase in credit usage is driven by improved financial confidence and credit availability.
- However, some individuals are finding it harder to access credit due to the cost of living crisis.
- Premium Credit’s data reveals that 70% of adults use some form of credit to pay for insurance.
Growing Acceptance of Credit Usage
Approximately 24% of customers have expressed a growing comfort with using credit to fund their insurance coverage over the past year. This figure is a slight increase from the 23% reported in last year’s Premium Credit Insurance Index. The index monitors insurance purchasing trends and how they are financed.
Challenges in Credit Accessibility
Despite the overall growth in credit acceptance, not all customers are finding it easy to access credit. The research found that about 14% of adults have experienced increased difficulty in borrowing since the onset of the cost of living crisis. Furthermore, over one in six (17%) have faced rejection when applying for credit cards, particularly if they have to repair their credit histories after encountering financial difficulties.
Credit Usage for Insurance Coverage
Premium Credit’s data indicates that 70% of adults utilise some form of credit to pay for at least one type of insurance coverage. This includes credit cards, loans, premium finance, and finance from insurers. The company’s Insurance Index shows that the proportion of people using credit to pay for at least one insurance policy was 66% in March 2022 and 69% in October 2021.
| Date | Percentage of Adults Using Credit for Insurance Cover |
|---|---|
| March 2022 | 66% |
| October 2021 | 69% |
| Current | 70% |
Driving Factors for Credit Acceptance
The research suggests that the increasing acceptance of credit usage for insurance is driven by growing financial confidence. Over a third (35%) of those more accepting of credit attribute this to becoming more financially savvy. Additionally, 33% believe that more credit is available, and a fifth (20%) feel they are better off and more comfortable using credit.
Impact of the Cost of Living Crisis
The research also offers a potential explanation for the increased credit usage: people are depleting their savings. Over two in five (41%) respondents reported a decrease in their savings since the start of the cost of living crisis. Around 17% have seen a dramatic drop in their savings, while only one in five (20%) have seen an increase in their cash savings over the same period.
| Statement | Percentage of Respondents |
|---|---|
| Level of savings has decreased | 41% |
| No savings | 12% |
| Level of savings has dropped dramatically | 17% |
| Amount of cash saved has increased | 20% |
Adam Morghem, Premium Credit’s Strategy, Marketing & Communications Director said: “Using some form of credit to pay for one or more insurance policy is widely accepted although many people may be unaware they are using credit when they finance from their insurer.
“While customers are becoming confident about using credit to buy insurance there is a growing issue that getting credit and credit cards in particular is becoming more difficult.”
“Premium finance is specifically designed for insurance buyers to help make important insurance policies affordable and improve cashflow. It is a very cost-competitive means for consumers to buy insurance and better manage their finances through spreading payments.”