A new study revealed that 51% of small and medium enterprises (SMEs) rely on credit to pay for their insurance coverage, borrowing on average around £1,130. Furthermore, it also found that 13% of these SMEs have borrowed more than £3,000 to fund their coverage.
Conducted and insurance financer Premium Credit, the study found that 25% of companies using credit to pay for their insurance have taken on more credit over the past year. Twenty-two per cent borrowed less, while 35% said that they are borrowing the same amount.
As for the type of credit used, the research found that 47% financed their insurance through credit cards, while 40% used financing from insurance and premium finance companies. These figures are up from last year’s index which indicated 41% for cards and 34% for companies.
Despite the rise of financing through credit, the study reported that a quarter of SMEs have reduced their level of insurance coverage. Lines most likely to see reductions include vehicle, property, and public and product liability. For those that have reduced their level of cover, more than a third (32%) cancelled one policy entirely, while only one in 10 plan to increase their coverage in the year ahead.
Increased pricing remained a concern for SMEs, with more than four in 10 saying that the cost of their insurance premiums rose in the past year. Nearly one in 10 also said that it increased dramatically. That said, there are other factors to consider for the rise in the use of credit for insurance purposes. More than half of those with insurance on credit said that they are borrowing more because of rising energy bills, while 41% said that it was due to a rise in the cost of materials.
Premium Credit strategy, marketing and communications director Adam Morghem said that the reductions in level of coverage is a cause for concern, especially as the world at large faces more risks every day.
“Credit plays a major role in ensuring that SMEs have the correct types and level of insurance they need across their operations. It is worrying however to see firms cutting back on cover and in some cases cancelling policies entirely. The numbers of firms unable to claim for damage shows the risks involved in doing so,” Morghem said.
Another recent study conducted by the firm found that SMEs are optimistic about their growth prospects, despite the reductions in the level of insurance coverage.
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