SMEs use plastic to pay premiums

Some UK SMEs are borrowing to fund business insurance with owners most likely to rely on credit cards, new research from Premium Credit shows.

The nationwide study among SME owners and managers found that of those that use credit to pay for insurance premiums, nearly one in four increased the amount they borrowed in the past year, with average additional credit reaching around £1,300. Around three out of four (73%) SME bosses interviewed who use credit to pay for insurance premiums say the impact of COVID-19 is the main reason for increased borrowing but premium rises from insurers were also blamed by 36% of firms.

Premium Credit’s Insurance Index shows cash balances are being squeezed, with one in three saying cash reserves have fallen during the COVID-19 crisis, while 7% say their firm has no cash reserves. Just 13% say they have seen a rise in cash reserves.

Most of the additional borrowing is going on credit cards with 60% of SME bosses putting it on plastic, while 40% are taking finance from insurers and/or are using premium finance. Some 24% are turning to personal or business loans.

Percentage of SMEs using credit to pay for insurance:

Vehicle insurance 75%
Property insurance 52%
Employer liability insurance 30%
Business interruption insurance 26%
Cyber insurance 22%
Key man insurance 17%

Premium Credit’s research shows the impact of not having insurance or being underinsured – nearly one in ten have suffered damage to property or belongings over the past five years and were unable to claim for this because they didn’t have insurance or because they were underinsured. Average losses as a result were around £2,000.

Commenting on the findings of the report, Steve White, CEO of the British Insurance Brokers’ Association said: “Premium Credit’s research underlines how important credit is in ensuring companies can continue to afford business- critical cover and the role of brokers in supporting firms. Insurance brokers can advise on suitable insurance and discuss premium finance should they want to spread the cost of their policies.”

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