Six out of 10 SMEs rely on credit to pay for insurance – Premium Credit

Brokers’ roles have ”never been more critical” as 59% of SMEs rely on credit to pay for their insurance, borrowing £1,832 on average, according to research by premium finance firm Premium Credit.

Its latest Insurance Index, published today (15 November 2021), also found that 16% of SMEs claim to be using over £3,000 of credit a year.

The index, which monitors insurance buying and how it is financed, was conducted by Consumer Intelligence - it surveyed 737 SME owners and managers between 1 and 5 October 2021.

The findings showed that 20% of companies using credit to pay for their insurance have borrowed more money over the past year. In comparison, 30% of these respondents reported borrowing less over the same time frame.

Around 44% of respondents are using credit cards to buy cover, while 34% are using premium finance or finance provided by insurers. Exactly 15% of SMEs have used government funding, however 10% have turned to family and friends for financial support.

Half (50%) of SMEs said using more credit was because of the impact of the Covid-19 pandemic, while 31% blamed rising insurance premiums.

The majority of respondents bought vehicle insurance using credit (46%). Other popular covers bought using credit include property insurance (40%), cyber insurance (15%) and key man insurance (12%).

Premium Credit chief sales officer Owen Thomas said: “Our findings not only highlight the importance of having insurance, but also the role credit plays in ensuring that businesses have adequate cover.

“The role played by brokers – especially because of the financial impact [the] coronavirus crisis has had on businesses up and down the country - has never been more critical.”

Credit seeking shift

In terms of the steps taken by SMEs to combat premium price increases, 24% have made cuts to their business to reduce costs, 20% have increased their claims excess and 20% have reduced their level of investment operations.

Furthermore, 18% have reduced their level of insurance cover, 14% have cut salaries and 13% have closed parts of their business.

Around a third (36%) have taken no action.

Exactly 14% of firms said they have suffered damage to their property or belongings over the past five years and were unable to claim because they were uninsured.

Premium Credit’s latest statistics show a slight shift in comparison to its previous index published in June 2021.

This highlighted key man insurance (17%) alongside directors’ and officers’ insurance (10%) as the least popular covers to be purchased by SMEs and corporates using credit. Vehicle insurance remained the most likely insurance to be bought using credit at 75%.