CCR Magazine

The latest research from npower reveals that access to credit insurance continues to be a problem for businesses and a possible threat to economic recovery.  

This type of insurance is crucial for the operation of large businesses as it usually needs to be in place before they can secure access to finance and essential supplies like energy.

npower’s research shows that nearly two thirds (63 per cent) of credit insurance applications for its customers were refused last year, peaking at 78% in June 2009. And while this rate has dropped off in 2010, refusals are still commonplace with an average of 60% of applications denied in January and February.

The figures also show that companies who have already secured credit insurance are not immune. More than £115m worth of insurance was withdrawn for npower customers mid-contract in 2009, with a spike of £40m withdrawn in June 2009. While this rate has eased, £5.7m worth of insurance was withdrawn from npower customers in January and February 2010 alone.

The Prime Minister asserted recently that although the UK is through the worst of the financial crisis, there are still substantial risks ahead. Senior economists have also warned that growth could easily falter, even allowing for February’s revised figures which showed the UK emerged more strongly from recession than had previously been thought.

npower believes its data points to credit insurance as one such risk for businesses, which in a fragile economy could compromise recovery if left unchecked.

Wayne Mitchell, head of corporate sales at npower, said: “We believe access to credit insurance will remain a concern for businesses in 2010. Refusals have plateaued rather than continued to drop, signalling that despite a better economic outlook, insurers remain risk averse.

“Indeed, anecdotal reports even suggest that credit access might worsen before it gets better as companies seek to purchase raw materials and increase production, buoyed by the official end of the recession. In this scenario, insurers have to manage the risk of materials suppliers, as well as energy suppliers, increasing the risk exposure of a given company and affecting their risk profile.

“Action needs to be taken to ensure that credit insurance does not become one of Gordon Brown’s predicted “bumps” in the road to economic recovery. That is why we are calling on businesses, energy suppliers and credit insurers to work together to avoid a second ‘credit crisis’. It’s important that we collaborate to find the best solution to benefit all parties.

“We have already found this approach very useful in helping some of our customers when they could not get credit insurance.”

(Source - npower Press Release)