51% of SMEs rely on credit to buy cover
47% of those using credit are borrowing on cards, and 40% are relying on finance from insurance and premium finance companies
Premium Credit research shows one in four SMEs have reduced levels of insurance cover in the past year
New research from the UK’s leading insurance premium finance company, Premium Credit, reveals that 51% of SMEs are relying on credit to pay for their insurance, borrowing on average around £1,130. Around 13% of SMEs who use credit to pay for their insurance claim to have borrowed over £3,000 to fund their cover.
Premium Credit’s Insurance Index, which monitors insurance buying and how it is financed, found that of those companies using credit to pay for their insurance 25% say they have taken on more credit over the past year while 22% have borrowed less and 35% are borrowing the same amount.
That compares to 21% who said they have taken on more credit as reported by Premium Credit’s Insurance Index last year2 which also saw 24% borrowing less and 37% borrowing the same amount.
This year’s index shows 47% who are using credit borrowed on cards while 40% used finance from insurance and premium finance companies. That is up on last year’s index which found 41% relied on credit cards and 34% used finance from insurance and premium finance companies.
However, this year’s index found a quarter (25%) of SMEs have reduced the level of cover they have across a range of insurance with vehicle, property and public and product liability most likely to see reductions in cover. Around a third (32%) of SMEs which have reduced the level of cover cancelled at least one policy. Up to 10% questioned said they plan to increase the level of cover in the year ahead.
Around 45% of SMEs questioned said the value of their insurance premiums had increased in the past year with nearly one in ten (9%) saying it had increased dramatically.
Premium increases were not the only issue for SMEs, research shows. Among those businesses using more credit, 53% said they were borrowing more because of rising energy bills while 45% blamed rising premiums and 41% pointed to a rise in the cost of materials.
The table below shows the percentage of SMEs who use credit to buy insurance and which products they use it for and how numbers have changed in the past year.
Around one in seven (14%) firms questioned said they had been unable to claim for damage to property or belongings in the past five years because they had no insurance or were underinsured. That compares to 12% in last year’s index.
Adam Morghem, Premium Credit’s Strategy, Marketing & Communications Director commented: “Credit plays a major role in ensuring that SMEs have the correct types and level of insurance they need across their operations. It is worrying however to see firms cutting back on cover and in some cases cancelling policies entirely. The numbers of firms unable to claim for damage shows the risks involved in doing so.”
Premium finance companies like Premium Credit provide businesses and consumers with the ability to use a loan to pay for their insurance in monthly instalments. By managing insurance payments in this way, businesses and consumers can spread the cost of their insurance, rather than pay their premiums in one lump sum.
Authored by Premium Credit
