Dedicated Credit Insurance for Small Business
Business owners struggling to afford credit insurance could benefit from low–cost cover dedicated to small firms, following the launch of a new ‘self–policing’ insurance scheme.
Towergate Risk Solutions offers insurance against non-paying customers that they claim is half the price of typical products. Annual premiums average £1,870 and excess charges around £250 under the scheme.
Unlike most cover, the insurance doesn’t require businesses to provide details about their customers’ trading histories up front. Instead, businesses monitor or ‘self–police’ their customers, and cover is only withdrawn if there is direct evidence that a customer has paid later than 30 days beyond contract terms in the past six months.
“We give the responsibility for the credit rating back to the client, so if the client has good trading experience, they’re fully covered,”
said Gavin McLaren, divisional director of credit at Towergate.
“I would like to think this kind of scheme will become more common. We think this is the first step towards an overall change in the credit industry, and in the future most insurance policies will look like this.”
During the recession, many small businesses found that some insurers withdrew cover without notice. Traditional credit insurance policies ask the policy holder to provide details of their customers at the outset, so that the insurer can assess risks of non-payment for themselves.
However, if bad news about customers emerges at a later date, most insurers have the right to withdraw cover without notice. This can leave policy holders without protection if a customer defaults, but still paying their annual premium.
Federation of Small Businesses chief spokesman, Stephen Alambritis, said the new insurance product would set a precedent for similar schemes.
“Traditional trade credit insurance schemes tend to pull back when there are difficulties in the economy.”
“All sectors should consider trade credit insurance, but firms at particular risk include exporters or where a lot of work is done prior to payment.”
British Insurance Brokers’ Association (BIBA) head of technical services, Peter Staddon, said all small business could benefit from trade credit insurance.
“It gives them certainty [of payment] at a small cost.”
For more information on the scheme, visit the Towergate Risk Solutions website.