More than a quarter of insurance customers in the UK would reduce their cover or switch to cheaper policies if they could no longer pay premiums monthly, according to new research from Premium Credit.
The findings, published in Premium Credit’s latest Insurance Index, show that 27% of customers would either cut back or choose lower-cost alternatives in the absence of monthly payment options. In total, 39% of respondents indicated they would be financially impacted if the option to spread premium payments over time was removed.
Among the consequences highlighted, 8% of drivers surveyed said they would consider selling their cars, while a further 2% said they would continue to drive without insurance. Another 8% of respondents indicated they would cancel home contents cover entirely.
The research also suggests that affordability remains a concern for policyholders looking ahead. About 13% of insurance customers expect to cancel cover they still require in the next two years due to cost constraints. Policies most likely to be cancelled include motor, buildings, and home contents insurance.
Over the past 12 months, 11% of respondents reported cancelling policies they still needed. Home contents and pet insurance were cited most frequently among discontinued policies. Of those who cancelled, 29% said they did so without informing their partners.
Mona Patel (pictured above), consumer spokesperson at Premium Credit, said the ability to pay in instalments is valued by customers, and that financial pressure is influencing decisions around cover.
“Substantial numbers of customers say they have cancelled policies they needed in the past year and others plan to reduce cover in the years ahead underlining the need for affordable options to fund cover,” Patel said. “Cancelling insurance cover is a major risk and, in many cases, will be a false economy if consumers have to fund major unexpected bills which they could have claimed for.”
Previous research also noted an increase in the use of credit to fund insurance purchases. According to Premium Credit, 76% of insurance customers now use some form of credit to pay for at least one policy. This figure has risen from 71% in March 2024 and 70% the previous year, indicating a broader shift towards credit as a tool for managing insurance-related expenses.
Of those using credit, 43% said they had borrowed more in the past 12 months compared to the year prior. The average amount borrowed increased to £400, a 32% rise from £302 in 2024.
That said, the Financial Conduct Authority (FCA) is currently reviewing the premium finance market in response to concerns that consumers may be paying significantly more for insurance when opting to pay in instalments. The review will examine whether premium finance products provide fair value, particularly for financially vulnerable individuals, and could lead to changes in how insurers and finance providers structure and disclose the costs of monthly payment options.
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