Australian businesses are facing tough times. Since May 2022, the Reserve Bank of Australia (RBA) has tightened financial conditions significantly, hiking rates by 4.25 basis points. This, combined with the lingering impacts of the pandemic, has spurred a rise in insolvencies, now surpassing pre-pandemic levels. The construction industry has been particularly hard-hit, with an alarming 28% insolvency rate, while the accommodation and food services industry is grappling with a 15% rate.
As financial pressures mount, insurance premiums have also surged, rising by an average of 16% in the past year. According to the Vero SME Insurance Index 2024, 83% of businesses are thinking about changing their insurance policies, with many considering increasing their excess or even cancelling coverage to save costs.
During these uncertain times, businesses need support that helps ease financial strain without sacrificing essential insurance protections. This is where premium funding comes in – a strategy that allows businesses to protect their interests without the burden of large upfront costs.
What is premium funding?
Premium funding is a short-term loan that lets businesses spread the cost of their insurance premiums over equal monthly instalments throughout the year. Instead of making a large lump-sum payment, businesses can manage their cash flow more effectively, directing funds where they’re needed most.
Benefits of premium funding
- Reduces the risk of underinsurance: Makes it easier for businesses under financial pressure to afford the appropriate level of coverage.
- Improved cash flow: Spreading payments over time helps businesses manage their finances better.
- Simplifies payments: Consolidates multiple policy payments into a single, recurring instalment, simplifying the process.
- Provides flexibility: Businesses can choose repayment schedules that fit their cash flow, such as fortnightly, monthly or quarterly instalments.
- Cost-effective: Interest costs associated with premium funding are often tax deductible.
- Low risk: No additional security is required as the policy itself secures the loan.
- Easy to set up: A premium funding quote can be arranged online in a matter of minutes, or automatically generated with every insurance quote.
How brokers can help
For brokers, premium funding is an opportunity to support clients during these challenging times. By offering expert advice on insurance options and premium funding, brokers can help businesses navigate risk management with confidence.
In summary
Premium funding is more than just a financial tool; it’s a lifeline for businesses struggling in today’s economy. By using premium funding, businesses can avoid financial hardships and ensure their resilience and continuity. Free your clients from upfront insurance costs – offer them a premium funding quote today and help them secure a brighter, more protected future.
Contact your Arteva Business Development Manager to learn more about how easy it is to support your clients with premium funding.
