April 2009 - Credit Crunch

April 2009

Credit Crunch: Don't reduce your Insurance Premiums!

The credit crunch is having a serious impact on all business, and small businesses in particular are feeling the strain more than most. Understandably, companies are looking at every way to reduce their overheads, and it's a real concern that many may be cutting back on their insurance as part of this cost-cutting exercise.

The SME sector is a key driver for the UK economy, and these companies are experiencing extreme pressures in this current economic upheaval.A recent survey carried out on behalf of RSA has highlighted the increased range of problems that small businesses now have to face, identifying some worrying trends:

Mark Skinner, small business director at RSA, outlined the problem: "Increasing costs, a decline in consumer confidence and a lack of credit all add to the difficulties SMEs are facing. It is only natural they should look to reduce costs where possible. But they should not cut corners by doing without insurance. It is at times like these that businesses are most at risk though, with increased instances of recessionary related events such as theft and criminal damage."

It's understandable therefore that some companies may adopt a ‘knee-jerk' reaction to the economic situation and look at saving money by cutting their cover, thereby putting themselves at greater financial risk. Brokers may see this situation as an opportunity to advise their clients on the best way to operate in this current economic climate; suggesting more suitable financial arrangements, monthly payments, and also alternative cover options.

• 11% of small businesses can no longer afford to operate due to the effects of the credit crunch
• 16% of businesses in the north stated that they can no longer operate, compared to only 1% in the south-west
• 11% of employers identified increased business rents as a key factor in their reduced margins
• the high cost of fuel is also having a severe effect with 30% reporting this as having a significant impact on their business
• only 47% of small business owners in Greater London have been seriously affected by the increase in fuel prices, compared to 95% of those in the West Midlands
• 7% of SMEs would risk reducing their insurance cover to save money