Millions of UK consumers are still paying off debts used to buy insurance despite the policies having expired.
Research commissioned by Premium Credit, the UK’s leading premium finance company, shows that 2.3 million people in the UK are still servicing debt repayments for insurance products they no longer need, with the average debt at £229. This equates to around £530 million in total.
While the majority (43%) had debts of up to £100, one in 20 consumers said they had debts of £1,000 or more.
Premium Credit has found that 41% of consumers are relying on credit in response to price rises on motor, home, pet, travel and life insurance premiums. One in five (21%) said they need to borrow as their disposable income is being squeezed.
The most popular form of credit to spread the cost of insurance is credit cards which are being used by 60%. However, 39% plan to use premium finance and pay monthly for insurance rather than in one lump sum.
Premium Credit is warning that using alternative methods of credit is potentially risky and urges customers to consider premium finance which for a small charge enables people to spread the cost of cover instead of paying for it all in one go. Significantly, the duration of premium finance arrangements mean that the finance is repaid within the period of cover.
Adam Morghem, Strategy and Marketing Director at Premium Credit said: “It is really surprising to see so many people still paying for insurance they no longer need via payments methods that they really don’t need to use.
“Choosing the appropriate credit method can be a very sensible, convenient way to purchase insurance. Premium finance was specifically developed to fulfil this need and is increasingly being used by UK consumers to buy necessary insurance much more efficiently.”