BrokerFest 2023: Cost of living crisis boosts premium finance popularity

BrokerFest 2023: The cost of living crisis has prompted increasing numbers of businesses to turn to premium financing in an effort to lessen pressure on finances.

Vinnie Vasudevan, senior account manager at Premium Credit, told delegates at Insurance Times’ BrokerFest 2023 event last week (23 February 2023) that the use of deferred and staggered payments may well have a key role to play in the insurance industry’s efforts to solve the underinsurance crisis.

“Post the Covid pandemic we have now entered a cost of living crisis which is seeing rising energy costs, coupled with a hardening insurance market,” he explained.

“Premiums are rising as we see the increased cost of materials, a shortage of workers and delays in the import and movement of goods. This has not only affected premiums but is also impacting the approach to business interruption cover.”

Vasudevan revealed that a recent Premium Finance survey had found 98% of UK consumers were extremely worried about the affordability of energy with 95% concerned over the ability to meet their mortgage or rent repayments.

In the business world 66% of SMEs said they remained concerned they would not be able to generate the level of revenue to keep trading, added Vasudevan.

However, the same percentage said they were not concerned over the risk of underinsurance.

Troubling figure

“The statistic that 66% of SMEs do not feel concerned about underinsurance is a troubling figure for the industry,” noted Vasuvedan.

“However, while the biggest issue for brokers when it comes to the increase in asset values is the rise in premiums that come with the provision of cover, for those higher values, premium finance can provide the solution.

“It provides the ability to stagger payments and spread the costs, enabling clients to use the money elsewhere including investing in their business.”

Vasudevan said the past year had seen a 20% increase in the number of businesses that had utilised premium finance to pay for their insurance covers.

While there would always be those who were determined to fund their premiums in a single payment there were also businesses who may well not have considered the benefits of premium finance on cash flow.

He added: “As brokers you need to provide the client with every available option and choice and that includes the ability to pay for the premiums in a number of ways.”