| Link(s): | Premium Credit Insurance Index (biba.org.uk) The-Premium-Credit-Insurance-Index-May-2021-–-SME-and-Corporate-key-findings.pdf |
Context
The British Insurance Brokers Association (BIBA) has published findings, statistical analysis and insights from Premium Credit Limited in relation to the use of premium finance by SMEs to pay for their business insurances.
Key points to note
The BIBA article points out that Premium Credit’s research shows that that many SMEs and corporates are borrowing more to fund business insurance with owners most likely to rely on credit cards.
- Of those businesses which use credit to pay for insurance premiums, nearly one in four increased the amount they borrowed in the past year, with average additional credit coming to nearly £1,300.
- (73%) of SME bosses interviewed who use credit to pay for insurance premiums say the impact of COVID-19 is the main reason for increased borrowing
- premium rises from insurers were also blamed by 36% of firms.
- Premium Credit’s own data reveals its premium finance net advances for commercial insurance increased by 11% in 2020 compared with the previous year, even though the number of policies only rose marginally.
The table below shows the percentage of SMEs who use credit to buy insurance and which products they use it for.
| TYPE OF INSURANCE | OVERALL PERCENTAGE OF SMEs WHO USE CREDIT TO PAY FOR INSURANCE WHO USED IT TO PAY FOR THIS TYPE OF COVER |
|---|---|
| Vehicle insurance | 75% |
| Property insurance | 52% |
| Employer liability insurance | 30% |
| Business interruption insurance | 26% |
| Cyber insurance | 22% |
| Key man insurance | 17% |
| Directors and Officers insurance | 10% |
Next actions
Provided for information, but firms should reasonably keep in mind these insights when considering their actions in relation to the FCA insurance pricing remedies (in particular, the pricing remedy itself and the product oversight requirements that will impact the provision of premium finance.