In March 2023, the RBA raised its cash rate by another 0.25%, taking it to 3.6%. This is the tenth consecutive rate hike since last May, totaling 350 basis points, making it the biggest tightening cycle since the 1980s.
ANZ have forecast the RBA cash rate to peak at 4.1% in May 2023, up 25bp from their previous forecast of 3.85%.
So, what does the rising interest rates and inflation mean for Australian businesses?
As impact starts to take effect, many businesses may:
- Reduce investment in projects and expansion plans;
- Save costs by reducing staff headcount, close site/offices and/or reduce insurance cover;
- Utilise finance products where possible instead of cash reserves; and/or
- Worst case scenario – face tough decisions around survival.
Relevance for insurance brokers
An increase in insurance premiums is only compounding the impact that rising interest rates and inflation are having on Australian businesses. The following are potential areas of concern for Insurance Brokers.
How a premium funding solution can assist:
- By breaking down an annual lump sum insurance payment into more manageable monthly repayments, your clients can free up their cash flow to use in other areas of their business, relieve some financial pressure and reduce the risk of underinsurance due to affordability.
- Premium funding solutions are a fixed rate loan, which means clients are protected from interest rate fluctuations over the course of a premium funding contract.
- Interest repayments may be tax deductible for the client. They should speak to their Accountant.
- A premium funding solution will not impact any finance or banking facilities your client may already have in place due to the insurance policies acting as security for the loan.
- You as the broker benefit from the certainty of cover for your client and a reduction in debtors administration and commission payment delays.
We encourage our brokers to discuss an Arteva premium funding solution with all of their clients so that they can benefit from the assistance it can offer.