New research from Premium Credit, a UK provider of insurance for businesses, reveals that 51% of small and medium enterprises (SMEs) depend on credit to pay for their insurance, borrowing an average of around £1,130. The study found that approximately 13% of SMEs using credit for insurance claimed to have borrowed over £3,000 to fund their coverage.
Premium Credit’s Insurance Index, which tracks insurance purchasing and financing trends, discovered that among companies using credit for insurance payments, 25% reported taking on more credit over the past year, while 22% borrowed less, and 35% maintained the same borrowing level. This marks a shift from last year’s findings, where 21% reported taking on more credit, 24% borrowed less, and 37% maintained the same borrowing level.
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This year’s index also revealed changes in the sources of credit used for insurance payments. Forty-seven per cent of SMEs relied on credit cards, while 40% used finance from insurance and premium finance companies. This represents an increase from last year’s index, which found that 41% used credit cards and 34% used finance from insurance and premium finance companies.
However, the index also identified a concerning trend of reduced insurance coverage among SMEs, with 25% reporting a decrease in coverage levels across various insurance types, including vehicle, property, and public and product liability. Additionally, around a third (32%) of SMEs that reduced coverage levels cancelled at least one policy, while 10% planned to increase coverage in the coming year.
Among the reasons cited for increased borrowing for insurance payments, rising energy bills (53%), rising premiums (45%), and increased material costs (41%) were the most common factors. Furthermore, the research revealed that 45% of SMEs experienced an increase in insurance premiums over the past year, with 9% reporting a significant increase.
Adam Morghem, Premium Credit‘s Strategy, Marketing & Communications Director, expressed concern over the trend of businesses cutting back on coverage, noting the associated risks, such as firms being unable to claim for damage due to underinsurance.
