More SMEs reducing level of cover as costs soar

Small and medium sized enterprises (SMEs) are increasingly reducing the level of cover they have across a range of policies.

That was according to Premium Credit’s index, which found that 27% of such firms had cut cover in the past year, slightly up on the 25% reported in last year’s research.

The reduced insurance coverage came as around 50% of SMEs said the cost of their business insurance increased in the past 12 months, with 12% reporting dramatic increases. 

Premium Credit said SMEs were most likely to cut the level of cover for vehicle and property insurance, as well as employers liability and public and product liability.

Adam Morghem, Premium Credit’s strategy, marketing and communications director, said: “Underinsurance is a growing issue for SMEs, with firms increasingly 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.”

Credit

However, up to 11% said they plan to increase the level of cover in the year ahead, slightly up on the 10% recorded last year.

This comes as more SMEs rely on credit to cover insurance costs.

Premium Credit said that 55% of smaller firms were using credit to borrow an average of £1,080 to pay for cover – 15% of them said they have borrowed more than £3,000.

That compares to 51% of SMEs using credit to pay for their insurance last year, with borrowing back then averaging £1,130.

Around 45% who are using credit borrowed on cards, while 34% used finance from insurance and premium finance companies.

And around 22% took out personal or business loans to pay for insurance.

“Credit is essential to ensuring that SMEs have the correct types and level of insurance they need across their operations and that is highlighted by the growth in the number of firms using credit to do so,” Morghem said.