Insured Borrow to Cover Rising Premiums
UK consumers are increasingly relying on credit to pay for insurance as cost of living pressures persist, with the average borrower now taking on roughly £505 per policy. This shift marks a significant rise from previous years, when the average debt was £302, according to new findings from the UK’s leading premium finance company, Premium Credit. The Insurance Index, now in its seventh year, found that 76% of customers use some form of credit to pay for one or more policies, a figure that has remained stable compared to the previous year but represents an increase from 71% just two years ago.
Most customers attribute their increased borrowing to the general cost of living rather than specific insurance premium hikes. Over half (53%) cited rising living costs as the primary reason for borrowing more, nearly double the 26% who blamed rising premiums. This trend highlights a broader financial strain on households. However, nearly a quarter (23%) of respondents stated that they took on more credit simply because paying for insurance monthly is more convenient and helps with their overall budgeting. This suggests that while economic pressures are a factor, the method of payment itself has become a deliberate choice for many.
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More than half (51%) of those using credit for insurance have borrowed more than they did in the previous 12 months, a jump from 43% last year. While 39% reported no increase in borrowing, the proportion of those who have borrowed less has dropped slightly to 2%. Credit cards remain the dominant tool for these purchases, with 55% of users relying on them, up from 41% the previous year. Despite the high interest rates often associated with credit cards, the convenience they offer continues to outweigh the potential financial cost for a large segment of the population.
The reliance on unsecured borrowing comes with tangible risks. The data indicates that 11% of customers who used credit to pay for insurance have defaulted on repayments in the past year, nearly double the rate recorded last year. Furthermore, around one in eight (12%) of those questioned have been turned down for credit cards in the past two years. These figures suggest a tightening of lending standards and increasing difficulty for consumers to manage their debts.
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While many struggle to meet these costs, the outlook for the coming year is mixed. Nearly a third (32%) of respondents expect their financial situation to worsen over the next 12 months, compared to 19% who expect improvement and 38% who believe it will be unchanged. Around 11% did not know or would not say.
