New research from the UK’s insurance premium finance company, Premium Credit, shows the number of SMEs using credit to pay for their insurance has increased in the past year with nearly one in five of them increasing the amount they borrow.
Premium Credit’s Insurance Index, which monitors insurance buying and how it is financed, shows 55% of SMEs now use some form of credit to pay for insurance borrowing an average £1080. Around 15% of them say they have borrowed more than £3000.
That compares to 51% of SMEs using credit to pay for their insurance borrowing an average £1130 in last year’s Premium Credit Insurance Index which found 13% of SMEs using credit had borrowed more than £3000.
This year’s Index found that of those companies using credit to pay for their insurance 18% said they had taken on more credit in the past year while 25% had borrowed less and 37% had borrowed the same. Last year’s index found 25% had taken on more credit while 22% had borrowed less and 35% were borrowing the same amount.
Around 45% who are using credit borrowed on cards while 34% used finance from insurance and premium finance companies. Around 22% took out personal or business loans to pay for insurance.
SMEs are increasingly reducing the level of cover they have across a range of policies – the index found 27% of firms had reduced their level of cover in the past year, slightly up on the 25% cutting cover as reported by last year’s index.
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By GlobalDataSMEs this year were most likely to have cut the level of cover for vehicle and property insurance as well as Employers Liability and Public and Product Liability. Around 25% of SMEs which reduced the level of cover cancelled at least one policy which is lower than last year’s 32% cancelling at least one policy. Up to 11% said they plan to increase the level of cover in the year ahead slightly up on the 10% recorded last year.
Around 50% of SMEs say the cost of their business insurance has increased in the past 12 months with 12% reporting dramatic increases. Last year’s index found 45% saying the cost of their insurance has increased with 9% saying it had increased dramatically. Around 17% of firms questioned say they have costs in their business as a result of insurance premium increases in the past two years.
Around one in five (18%) SMEs say their firm’s level of underinsurance has increased in the past year with 18% expecting it to rise in the next 12 months. Premium Credit’s research shows the consequences of underinsurance. Around one in eight (12%) firms questioned this year said they had missed out on claims in the past five years compared with 14% in the previous index and 12% in the 2022 index.
Commenting on this, Premium Credit director of strategy, marketing, and communications, Adam Morghem, said: “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.
“Underinsurance is however 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.”
