Nearly one in five UK consumers have cancelled or cut back on insurance policies as the financial impact of the Covid-19 pandemic has turned up the pressure on spending on insurance, Premium Credit has found.
According to the study, 19% of consumers have cancelled or cut policies directly as a result of the pandemic.
While travel insurance is the worst affected, customers have also cut important home and car cover as well as pet, life and health.
Premium Credit’s Insurance Index research highlights that even before the onset of Covid-19 insurance customers were feeling the strain. Analysis of the most recent government data shows the average household’s total insurance costs increased 14% year-on-year to £1,045.
The index, which monitors insurance buying and how it is financed, found a growing reliance on credit. Before the onset of the pandemic, around one in four customers (25%) borrowed money to pay for their insurance. The pandemic has driven another one in 20 (5%) to take out credit.
The research also found that, of the consumers that have used credit to pay for insurance, on average they are using £520 more credit than 12 months ago.
Rising premiums are the main reason for people taking out more credit, with 35% of those who have borrowed money saying prices have increased. The reliance on credit for insurance underlines how important customers believe it is—around 61% say paying for their insurance is a high priority in their household finances.
Premium Credit’s research shows households are taking risks with their finances to afford insurance, with more than two out of five (44%) saying they pay on credit cards while more than half (53%) use the monthly direct debit finance offered by insurers.
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—currently only around 7% of consumers say they do so. Spreading payments in such a way can help alleviate cash flow challenges and make paying for vital insurance simpler.
Adam Morghem, strategy and brand director at Premium Credit, said: “The financial pain of Covid for millions of households is mounting and insurance is one of the bills that people are cutting back on to save money. The affordability issue was already a major concern for households before the pandemic with average bills rising 14% in a year—way ahead of inflation—and making it more difficult for people to pay for the insurance they need and value.”
Owen Thomas, chief sales and marketing officer at Premium Credit, added: “Premium finance has become a very cost-competitive means for consumers to buy insurance and better manage their finances through spreading payments. At a time when insurance is becoming more expensive it can be a good alternative to other forms of credit.”