• 43% value the ability to pay insurance bills monthly compared with 32% who prefer paying in a lump sum
• More than half have seen insurance costs rise in the past year with 12% experiencing dramatic increases

SMEs are switching to monthly payments for insurance bills as premium increases put pressure on their businesses, new research* 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, shows 43% value the ability to pay for insurance monthly through premium finance or finance offered by insurers compared with 32% who prefer to pay in a lump sum.

Around 15% say they pay all insurance bills monthly while 18% use monthly payments for many major insurance bills and 10% say they have used monthly payments for major bills in the past. Around 25% are undecided between monthly payments and lump sums.

The index found SMEs are under increasing pressure from rising insurance bills – more than half (51%) say total insurance costs have increased in the past 12 months with 12% reporting dramatic increases in their insurance bills. Just 2% reported a drop in the cost of their insurance bills.

Nearly one in six SMEs (16%) say they have made cuts in their business to reduce costs so they can continue to pay for insurance in response to increases while 14% have cut cover and 13% have increased the excess on their insurance policies. Around 11% have cut back on investment.

That could continue in the year ahead – around 17% say they will make cuts to their business to help meet rising bills while 14% say they will reduce the level of cover they have and 10% will cancel policies. Around 8% say they could cut jobs.

The key reason why SMEs value being able to pay monthly for insurance via premium finance or finance from insurers is that it helps with budgeting. Around two-thirds (65%) who value paying monthly pointed to budgeting while nearly half (48%) say monthly payments improve cashflow.

However, two out of five (40%) say that monthly payments for insurance simply make sense as they already pay for a range of items such as utilities and mobile phones on a monthly basis. Around 37% say monthly payments ease any issues around paying bills and 28% say it is more cost effective than other forms of borrowing.

The research found around a third of firms (32%) have increased the amount of cash they have in savings in the past year while 16% say their savings have fallen. In the year ahead 35% expect to increase their level of savings but 11% expect savings to fall in value.

Adam Morghem, Premium Credit’s Strategy, Marketing & Communications Director said: “SMEs are generally facing rising insurance costs and our study shows many have seen dramatic increases in their insurance bills.

“Paying for insurance monthly makes sense against this background but the research shows firms see a wide range of benefits from paying monthly which apply even when bills are not increasing.

Many SMEs say they already pay for a range of items monthly so it makes sense to do the same with insurance.

“Premium finance is creating opportunities for businesses through convenient payments as they buy their insurance, helping firms spread payments to better manage their finances and cashflow.”

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.

Notes:
(*) Independent research conducted by Viewsbank online among 1,156 SME owners and managers between September 13th and 16th 2024
(**) Independent research conducted by Viewsbank online among 1,107 SME owners and managers between October 13th and 16th 2023
(***) Independent research conducted by Viewsbank online among 681 SME owners and managers between September 16th and September 2022