More SMEs turn to credit to pay for cover as premiums rise

More small and medium sized enterprises (SMEs) are using credit to pay for insurance as premiums rise, new figures have revealed.

Premium Credit’s latest Insurance Index, published yesterday (29 November 2023), found the number of firms now using credit to pay for insurance rose from 50% to 52% year-on-year, with the average amount borrowed equating to nearly £1,100.

Some 42% of SMEs attributed increased borrowing due to rising insurance costs, with around a quarter (24%) of those firms having had to raise their excess to battle prices hikes.

And 17% revealed they have cancelled one or more policies due to cost increases.

For the research, Viewsbank surveyed 1,107 SME owners and managers on behalf of Premium Credit between 13 and 16 October 2023.

“Credit is playing a bigger role with more firms turning to borrowing to help ensure they can fund insurance which can be vital to the continuing success of their businesses,” Premium Credit’s chief sales officer Owen Thomas said.

“That said it is worrying that firms are cutting back on cover by either cancelling policies or increasing excesses.”

Credit use

Premium Credit also revealed which products have seen more credit use – vehicle insurance saw a three-percentage point increase year-on-year, while business interruption (BI) insurance also rose by one percentage point to 14% this year.

Credit usage to pay for public and product liability insurance, however, dropped by two percentage points to 22% compared to 24% last year.

Meanwhile, a total of 12% of SMEs revealed they were worried they might miss payments in the year ahead, while 13% said they had defaulted on payments in the past year.

Thomas said Premium Credit is “reviewing what additional support is appropriate during this time of uncertainty”.

“SMEs are facing rising costs across the board with energy bills, the rising cost of materials and pay rises for staff piling on the financial pressure along with rising insurance premiums,” he added.