Paying for insurance at a time of significant economic disruption

Published on Tue, 08/12/2020 - 16:24
Owen Thomas, Chief Sales & Marketing Officer at Premium Credit
Owen Thomas, Chief Sales & Marketing Officer at Premium Credit

Premium Credit, one of the UK and Ireland’s principal premium finance providers and a newly appointed Airmic Marketplace member, has undertaken a series of studies and unique market analysis during 2020 to gauge sentiment towards buying insurance and the use of credit.

In this article Owen Thomas, Chief Sales & Marketing Officer at Premium Credit, takes us through some key data relating to SMEs, outlining some worrying insurance buying trends, a lack of cover in some instances and the opportunity it creates for those supplying insurance.

2020 has been a challenging year for many SMEs with increasing pressure on cash flow and often less money available to pay for vital insurance covers. Research and analysis from the Premium Credit Insurance Index provides some interesting findings outlining the impact of COVID-19 and how SME and corporate customers have changed insurance buying habits and shifted priorities in the wake of the pandemic.

SMEs have cut insurance spending as Covid hits

According to the Index more than half of SMEs have cut back on important insurance to reduce costs as the ongoing coronavirus crisis hits their balance sheets1. Our study found 51% of small and medium-sized firms have stopped paying for a range of business insurance policies with employers’ liability insurance the most downsized or cut from a list including business property cover, professional indemnity and cyber.

Nearly one in five (19%) of SMEs have stopped paying for business interruption insurance which has been the subject of disputes about claims being refused when firms were forced to shut by the UK’s national lockdown.

The Index, which monitors insurance buying and how it is financed, found a growing reliance on credit to fund insurance with nearly two out of five firms (37%) borrowing to fund insurance premiums as a direct result of the pandemic. Most firms taking out extra credit are relying on credit cards with 64% using business cards and more than half (52%) of business owners using their personal cards to fund business insurance.

Premium Credit’s research found that SMEs and corporates that have used credit to pay for insurance are, on average, paying £1,670 more than 12 months previously.

Off the back of this research we’re advising SMEs to consider premium finance which for a small charge enables them to pay monthly for cover instead of in a lump sum. The research shows SMEs using credit have suffered financially with 46% defaulting on interest or capital repayments in the past year while 54% worry they may default in the year ahead.

SMEs have had to battle to stay afloat during the pandemic which makes it understandable that they have cut back on insurance and taken out more credit. Necessary, often legal cover such as employer’s liability is likely being cut as firms reduce numbers of staff and wage rolls as a result of COVID-19. Cutting back on critical insurance can however be a mistake as not having the appropriate cover or being underinsured can be a serious risk for SMEs.

It is also worrying that so many SMEs are relying on their own 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.

Additional research2 carried out by Premium Credit in March this year before the pandemic, found 63% of firms said paying for insurance is a high priority for them – that has now dropped to 59% in the most recent research conducted in August and September.

The SME research shows there are risks from being underinsured – 42% of SMEs say they have in the past five years suffered damage or losses they couldn’t claim for because of not being insured or being underinsured. Around 24% say they were underinsured while 18% say they didn’t have the appropriate insurance.

The table below shows the insurance that SMEs have stopped paying for since the onset of COVID-19.


How many have stopped paying

Employers’ liability


Business property


Professional indemnity


Public liability


Business interruption


Product liability




Payment options

In a hardening market many SMEs could benefit from wider payment options to help finance cover and combat the financial strain created by COVD-19. Insurance premium finance is a strong alternative on offer.

Having a credit facility to spread the cost of insurance premiums in convenient monthly instalments can make all the difference to a business, freeing up liquidity to spend in other key areas. The insurance renewal becomes a more accessible opportunity once again, even in tough economic times like these, allowing the right cover to be secured when it’s needed.

The full Index report can be found here.

  1. Independent research conducted by Consumer Intelligence online among 156 SME owners and managers between August 20th and September 3rd 2020
  2. Independent research conducted by Consumer Intelligence online among 179 SME owners and managers between March 12th and 16th 2020