59% of SMEs rely on credit to pay for their insurance
Premium Credit, one of the UK's leading insurance premium finance companies, has released new research which revealed that 59% of SMEs are relying on credit to pay for their insurance, borrowing on average around £1,105.
Nearly one in ten (9%) SMEs who use credit to pay for their insurance, claim to have borrowed over £3,000 to fund their cover.
Premium Credit is a leading provider of insurance premium finance and a range of annually charged services, including tax, regulatory and accountancy fees, sports season tickets, memberships and school fees in the UK and Ireland.
Each year, it lends more than £3.8bn to over two million customers through a network of almost three thousand partners and process almost 24 million direct debits.
Ensuring companies have the right level of insurance
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, 21% say they have taken on more credit over the past year for this purpose, but 24% say they have borrowed less while 37% are borrowing the same amount.
In terms of the credit being used, 41% are using credit cards, and 34% are using premium finance and/or finance provided by insurers. More than one in five (22%) have taken out personal or business loans to fund insurance while 10% have turned to friends and family for finance to pay for insurance.
Among those businesses using more credit, 43% said it is because of the ongoing impact of the COVID-19 crisis followed by 30% who said it was because their firm had taken on more credit for other reasons and did not have the cash to pay for insurance.
Owen Thomas, Chief Sales Officer at Premium Credit commented: “Credit plays a vital role in ensuring that businesses continue to have the right type and level of insurance that they need across their operations. The 100% offer of a finance option by brokers – especially because of the continuing impact of the COVID-19 pandemic on businesses up and down the country - has never been more critical.”
How are businesses tackling the issue?
The study reveals around one in twelve (8%) who use credit to pay for their insurance have seen their premiums rise dramatically in the past year while 47% report slight increases. Just 4% have seen premiums fall. The corresponding figures from October last year are 9% reporting a dramatic increase and 47% a slight increase. Just 4% reported a drop.
In terms of the steps taken by these businesses to combat this, 20% have made cuts to their business to reduce costs, 14% say they have increased their claims excess, and 15% have reduced their level of investment in operations. Some 14% have reduced their level of insurance cover, 11% have cut salaries, and 8% have also closed parts of their business. Only one in three (32%) say they have taken no action.
