Payment structures are often treated as administrative detail. In reality, they may be quietly shaping how clients buy cover, how long they stay, and whether they are properly insured at all.
That shift is becoming harder to ignore as more customers move away from upfront payments. A recent FCA review found that 23 million insurance customers opted to pay in instalments in 2023, highlighting just how embedded spread payments have become across the market.
For Owen Thomas (pictured), chief sales officer at Premium Credit Ltd, that behavioural shift carries implications well beyond convenience. Clients increasingly value the ability to pay in instalments and spread costs over time.
Thomas argues that instalment-based payment models can directly influence retention and, in turn, the stability of client relationships.
“Those clients paying in instalments tend to show a higher retention rate with their broker and insurer than clients paying upfront in full,” he said. “Once premium finance is set up, the process is very straightforward to renew and does not require a new credit agreement to be signed.”
That continuity can shift the dynamic of renewal conversations. With payment already structured, brokers and clients can focus less on affordability barriers and more on ensuring the level of cover remains appropriate.
But the implications go further. Thomas points to a subtle but important distinction around when cover is clearly in force.
“When a client buys insurance, there can be some ambiguity around whether cover is in place if a claim happens before the policy is paid for,” he said. “In the case of premium finance where the first instalment is made earlier, full insurance cover can often be confirmed earlier than policies that are paid in full.”
That clarity may prove critical in claims scenarios, where uncertainty over cover can quickly become a point of friction.
If payment structure influences behaviour, it also has a direct bearing on underinsurance.
“Premium finance or instalment payments often allow the client to purchase the full coverage required as the costs are spread and more manageable than a single, potentially large, annual payment,” Thomas said.
For many SMEs, the issue is not a lack of awareness, but the challenge of funding a large upfront premium. Spreading costs can change that decision. Rather than scaling back protection to meet short-term cash flow constraints, clients are more able to maintain appropriate levels of cover. In more complex cases, it can also support capital allocation into structures such as captives.
The result is a closer alignment between the cover purchased and the risk exposure faced, something pricing alone cannot solve.
The role of premium finance also shifts across client segments. For SMEs, the decision is often driven by practicality, what fits with cash flow and what is easiest to manage operationally. For larger commercial clients, the calculation is more strategic.
“Larger commercial clients with higher premium spends are likely to have other choices for where they borrow money,” Thomas said. “But as many as one in four will still choose to use premium finance to maintain headroom in those other lending facilities.”
In these cases, premium finance is less about affordability and more about capital efficiency. As long as pricing remains competitive, it becomes a tool for preserving liquidity and flexibility elsewhere in the business.
The growing influence of payment structures raises a more fundamental question: whether they are being treated as part of the advice process or left as an afterthought.
“The role of the broker is to provide the best advice to their client and to source the best coverage and price based on their requirements,” Thomas said.
In practice, that means offering compliant payment options that reflect both the client’s financial position and the nature of the risk being insured. While most policies align to a 12-month cycle, longer-term arrangements still require brokers to present choice rather than steer decisions.
Thomas is clear that premium finance should support, not replace, that advisory role. “It should not replace the need for the right advice to be given to the client,” he said.
If payment structures influence what clients buy, how long they stay and whether cover responds at claim, they are no longer a back-office consideration but a core part of advice.
