More SMEs rely on credit to pay insurance as premiums rise


42% of firms say insurance costs have increased with 8% saying premiums have increased dramatically

24% who have had premium increases have raised their excess and 17% have cancelled policies compared with 10% increasing excesses and 9% cancelling cover a year ago

The number of SMEs using credit to fund insurance has risen as they battle to keep on top of increasing business costs, new research1 from the UK’s leading insurance premium finance company, Premium Credit, shows.

Premium Credit’s Insurance Index, which monitors insurance buying and how it is financed, found 52% of firms now use credit to pay for insurance compared with 50% when it reported last year2. The average amount borrowed is nearly £1,100.

Premium increases are a major reason for more SMEs using credit – 42% of SMEs say their insurance costs have risen. Around a quarter (24%) of those firms say they have increased their excess as a result of higher insurance costs in the past two years while 17% say they have cancelled one or more policies. That is substantially higher than the 10% of SMEs who increased excesses on one or more policies and the 9% who said they had cancelled cover as a result of insurance cost rises when Premium Credit reported last year.

But premium increases are not the only reason as SMEs face a range of rising costs. Around half (50%) blame higher energy bills for having to borrow more while 39% say costs of materials have increased and 36% say higher pay for staff has meant more borrowing. Around a third (34%) attributed increased borrowing to higher premiums.

Around a fifth (20%) of SMEs questioned say they are borrowing more than a year ago while 37% say they are borrowing the same amount and 21% say they are borrowing less. That is lower than the 24% who said they were borrowing more when the index reported last year which also saw 35% borrowing the same amount and 23% borrowing less.

Nearly six out of 10 (59%) say they have increased borrowing to pay for insurance by £1,000 a year or more with 13% saying the amount of credit they use has increased by £5,000 or more. Keeping up repayments is an issue with 13% saying their firm has defaulted on repayments in the past year and 12% worrying their firm might miss payments in the year ahead.

In terms of the credit being used, around 41% rely on credit cards while 33% are using premium finance and/or finance provided by insurers. Around 20% are using personal or business loans and 9% are borrowing from friends or family.

The table below shows the percentage of SMEs who use credit to buy insurance and which products they use it for with vehicle insurance seeing a 3% increase in use of credit for payment year on year.

Premium Credit’s research shows the cost of not having insurance for SMEs – around one in eight (12%) say they were unable to claim for damage to property or belongings in the past five years because they did not have insurance or their cover was not good enough. That compares to 11% recorded in last year’s index.

Owen Thomas, Chief Sales Officer at Premium Credit commented: “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.

“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.

“That said it is worrying that firms are cutting back on cover by either cancelling policies or increasing excesses. Our existing support for vulnerable customers is tried and tested, and we are reviewing what additional support is appropriate during this time of uncertainty.”

Premium Credit is advising SMEs to consider premium finance which enables them to pay monthly for cover instead of in a lump sum. Spreading payments in such a way can help ease cash flow challenges and make paying for vital insurance simpler. Premium finance provides businesses with the ability to use a loan to pay for their insurance.

Authored by Premium Credit


About Premium Credit

We are the leading provider of premium finance in the UK and Ireland, and the only company endorsed by BIBA. 

We are authorised and regulated by the Financial Conduct Authority, and work with over 3,000 producers of all sizes.  We serve over 2.1 million customers, process 24 million direct debits and receive advances of £3.5 billion.

For over 30 years, we’ve led the market through thought leadership, innovation and technology and have helped our partners offer finance compliantly to their customers through face-to-face, telephony and online channels.

We continue to invest to ensure we provide a quality service and support that helps you grow your business and commission.  From the delivery of a seamless customer journey, which includes real time decisioning for financing and 24/7 account servicing, to consultation that improves the offer of finance to customers, we are committed to growing the premium finance market.

Our Specialist Lending division also provides finance to pay other annual costs, such as professional fees, membership subscriptions, commercial service charges, golf clubs and school fees.