CCR Magazine

Less than one in ten UK businesses that use credit insurance have stopped using the service as a means of safeguarding their cashflow amidst the economic downturn, despite an increase of up to 40 per cent in premiums during the last twelve months, according to new research from commercial credit agency,  Graydon UK.

Over half (51 per cent) of companies surveyed confirmed that at least part of their business was credit insured. Only 7.2% of these companies then confirmed they had recently ceased to use credit insurance. Meanwhile, nearly half (43 per cent) of companies questioned also revealed that over half of their annual turnover remains fully credit insured.

The survey findings also suggest that the rising fear of commercial fraud as the economy contracts may be to some degree unwarranted. Of the companies questioned, over half (51 per cent) stated that they believed commercially fraudulent activity to be on the increase in the UK. Despite this, more than four in five (84 per cent) of the same sample stated that they had not witnessed any rise in fraudulent credit applications themselves during the course of the last year, with just two per cent reporting a big increase.

The credit insurance findings come despite recent criticism, including from Government, of the credit insurance industry, amidst claims from unhappy customers of widespread withdrawals of credit insurance protection on buyer risks and suggestions that the credit insurance industry has seized up against the ongoing background of global economic uncertainty.

However, Martin Williams, Managing Director, Graydon UK, said: “Unfortunately, the fact that credit insurers have thus far only reduced their global risk liabilities by an estimated five per cent seems to have been choked in a thick fog of recessionary talk.

“There’s no denying that the UK and indeed global economy is struggling and credit insurance premiums have radically increased but suggestions that the credit insurance market has seized up are definitely premature. These findings show that despite the increase in cost, cover is still available on the large majority of commercial debtors for the many firms which want to protect their financial position.

Martin Williams added: “There are other options for business owners to consider when they can’t obtain cover from insurers on perceived “higher risk” businesses. These include self-insurance, whereby companies make calculated provisions for bad debt assessed on the likelihood of a client defaulting on payment, creating their own emergency fund to be accessed in the event that a company should fail.”

 “Meanwhile, it seems that the fear factor is coming into play here with fraudsters emerging in the mind of the business community as the economic bogeyman. While it is essential that companies remain on their guard against the threat of fraud, it is also important to maintain a degree of perspective and not allow fear to get in the way of ongoing operational activities.”
(Source - Graydon News Release)