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More UK SMEs pay insurance premiums on credit cards

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Small businesses in the UK are borrowing more to pay for business insurance, premium funding company Premium Credit says.

Premium says its net finance advances for commercial insurance rose 11% in 2020 on roughly the same number of policies.

A study by Premium found almost a quarter of those who use credit to pay for insurance premiums upped the amount they borrowed in the past year, with average additional credit coming to nearly £1300 ($2377). It found 60% of this went on credit cards while 40% involved finance from insurers or other lenders. Almost a quarter used personal or business loans.

The increased borrowing was blamed on higher insurance premiums by 36% of firms.

“It is worrying that so many are relying on credit cards which can be an expensive way to pay for insurance if you only make the minimum monthly payment,” Premium Chief Sales & Marketing Officer Owen Thomas said.

Premium Credit’s Insurance Index shows cash reserves fell during the COVID-19 crisis at a third of firms, and 7% had no cash reserves.

Of SMEs who used credit to pay for insurance, three quarters bought vehicle cover, just over half bought property cover, almost a third bought employer liability insurance, a quarter bought business interruption insurance and just over a fifth bought cyber cover.

British Insurance Brokers’ Association CEO Steve White says the research underlines the importance of credit in ensuring companies can continue to afford business-critical cover.

“Insurance brokers can advise on suitable insurance and discuss premium finance should they want to spread the cost of their policies,” Mr White said.