Pandemic sees growth in lending to better manage insurance costs – Premium Credit

There has been a growing reliance on premium finance from SMEs and corporate customers to better manage insurance as a result of rising premiums in the current pandemic climate, according to Premium Credit’s latest Insurance Index. 

Nearly two out of five firms (37%) said that they borrowed money to fund insurance, and Premium Credit believes that more and more businesses are discovering the benefits of premium finance, it revealed that regionally it had leant the most money to the South East in 2019 which made up 14% of its total lending, the West Midlands was second at 13%. 

It follows more than half of SME and Corporate customers (51%) have cut back on important insurance to reduce costs due to the ongoing coronavirus pandemic hitting firms balance sheets. 

Over a quarter (26%) of SMEs have stopped buying employers liability cover.

Nearly a quarter (23%) stopped paying for business property insurance, 19% have stopped paying for business interruption cover and 17% stopped buying cyber insurance. 

Broker vs insurer 

Meanwhile, only 38% of personal, SME and corporate customers said that they typically bought insurance through a broker.

More than half (59%) of customers bought insurance via an aggregator, whereas only 4% went directly through an insurer.

Owen Thomas, chief sales and marketing Officer at Premium Credit said: “It is worrying that so many SMEs and corporates are relying on personal credit cards or their business cards to pay for insurance.

“We would advise SME owners to speak to their insurance brokers for advice on how best to fund the appropriate level of cover for their business.

“The costs of insurance are rising, and businesses need to manage these costs more effectively.”

Reaction 

Speaking about the premium finance provider’s research, Ben Rose, chief underwriting officer at Superscripts told Insurance Times:  

“The current pandemic has hit small businesses a lot harder than their larger, established counterparts. Not only are SMEs struggling with cashflow and profitability, but the hard insurance market (in part driven by the pandemic) is also causing insurance premiums to rise. It’s unfortunately a perfect storm.

”For SMEs that are struggling to pay for crucial business insurance, rather than turning to premium finance they should consider flexible options which might be more accessible for them right now. Superscript’s business insurance, for example, is bespoke, flexible and offered on a monthly subscription without any additional interest payable.

”Businesses can add to, change, or even cancel their cover as and when they need to. This style of insurance means businesses only need pay for the insurance they need right now. Holding back much needed capital to help them weather this storm.”

Read more…Tara Waite on why being Premium Credit’s chief exec is a ‘natural fit’

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