Consumers Are Borrowing to Pay Premiums and That is Unsustainable

The latest from Premium Credit suggests that more people are shopping around for the best quote, which kind of makes you wonder if the loyalty discount was actually a practical set of regs in a time of 30-40% inflation in materials costs, food prices, energy etc.

Maybe if more people are paying premiums using installment plans, credit cards or loans, then the possible FCA regulation of interest rates being charged is going to ease some of that pain? Hard to say, but when the cost of insurance per month can exceed the cost of the car lease deal, we have a serious problem.

We are now in a time when drivers with no points on their licence, and no claims in a decade, are being quoted over £3000 for car insurance. It’s unsustainable long term. The industry needs to face up to the reality that the law abiding majority cannot pay for the activities of the uninsured indefinitely, or underwrite the transition costs to an elitist EV car market.

Here’s the word;

The numbers of insurance customers putting more effort into shopping around for the best cover has increased sharply as people look for the best deal available, new research from the UK’s leading premium finance company, Premium Credit, shows. Its research shows 62% of customers say they are now working harder to find the best price and quality of cover compared with 53% in last year’s Premium Credit Insurance Index  and 43% when the index reported in 2022.

The rapid rise in the numbers spending more time on shopping around is mainly driven by the ongoing  cost of living crisis. Around 66% who are spending more time on comparing prices and quality of cover say they are motivated by rising prices across the economy. However nearly a quarter (24%) say increased innovation in the insurance industry has made it worthwhile spending more time on shopping around and 20% say they have become more confident using digital technology so find it easier to shop around.

MORE CREDIT BEING USED

Premium Credit’s Insurance Index, which monitors insurance buying and how it is financed, found that the numbers of people using some form of credit to pay for one or more insurance policy has increased to 71% compared with 70% in March 2023.

The research shows one in seven (14%) of adults have found it more difficult to secure credit such as mortgages, credit cards or loans since the cost of living crisis started. Around one in five (20%) say they have been turned down for forms of credit during that period with 12% saying a credit card application has been rejected.

Premium Credit is advising customers to always consider premium finance which, for a small charge, enables them to pay monthly for cover instead of in a lump sum. Spreading payments in such a way can help ease cash flow and make paying for vital insurance more convenient.

Owen Thomas, Chief Sales Officer at Premium Credit said: “The numbers of insurance customers spending more time on shopping around are growing rapidly which is inevitably due to the impact of the cost of living crisis affecting the economy in general.

“The insurance industry has however made it easier for people to shop around and innovation across the sector makes comparing prices and levels of cover worthwhile. Premium finance is specifically designed for insurance buyers to help make important insurance policies affordable and improve cashflow while also being more convenient.”

“It is a very cost-competitive means for consumers to buy insurance and better manage their finances through spreading payments. It is firmly established as a good alternative to other forms of credit.”