The 6 hard instalments questions you need to be asking now

Instalments are going to become a big issue for motor insurers in 2020, and beyond. In a volatile market and against a backdrop of recession, more people are going to need to spread the cost of large insurance premiums. And that means all insurers and brokers need to be asking themselves some hard instalments questions…

Here are just some of them - covered in detail in Consumer Intelligence's research - and which our forthcoming report will help brands to answer.

1. Who’s looking to pay in instalments?

Not just who is currently on your books, but who will be, and why. The impact of coronavirus on people’s finances is likely to mean demand for credit will rise over the coming weeks and months, especially amongst vulnerable and newly vulnerable customers.

Those customers will have a profile – age, employment, risk.

Understanding them is key in being able to predict their behaviour, and adjusting your strategy, pricing and products accordingly.

2. How often are you offering it?

You need to know what you’re doing with credit now before you can make changes, and that includes how often you’re offering it – to who, and why.

Is it an option on all of your quotes? Who isn’t seeing an instalment plan? Why not? Are you discriminating against a particular group – or increasing their vulnerability?

All of these are questions you need to answer not just to your own satisfaction, but very possibly to the FCA’s satisfaction, too. Looking at the direction of travel on risk-based pricing and the FCA’s wider attitude to credit, lending and the support of vulnerable customers, the cost of paying by instalments is clearly on its radar.

3. How much are you charging?

How much are you actually charging to pay by instalments, as a percentage of the total insurance cost? Is it fair? Is it a flat rate or a variable one – and what is that based on? Are you using variable rates to target specific customers, and if you’re not, should you be? What are your competitors charging?

4. How do you look on PCWs?

Does my credit look big in this?

Well, possibly, and it’s certainly worth finding out. If you’re out of line with the market and PCWs are showing your total cost of insurance, could it be affecting your rankings, and your wider acquisition strategy? What systems do you have in place to monitor and track your performance against theirs?

5. How dependent is your business on instalment income?

Lending money is for some car insurance brands more profitable than selling insurance itself.

Currently, some 32% of drivers pay their insurance premium in instalments. At first glance that number going up might seem like a good thing - but what it really means is more competition, and more scrutiny.

Are you realistic, and ready for the impact both of these will have on your business model?

6. What are your competitors doing?

As always in the insurance market, this is probably the biggest question of all.

Over the coming months, insurance brands are likely to find their instalment strategy will have an increasing impact on new business, renewals, consumer trust - and their overall competitive position.

Finding out about the competition is therefore absolutely vital.

You’ve now got an incredible opportunity to make sure your credit strategy is credible for the next stage of the living-with-covid world.