Broker boss slates “inadequate credit limits” of insurers
Aon’s trade credit director Susan Ross has, in a letter to The Times, called government action to stop insurers suddenly pulling credit cover and writing “inadequate credit limits” and to provide extra insurance for suppliers.
Her letter says:
Sir, Martin Jourdan (letter, April 8) raises the issue of the need for government support for credit insurance. This is a very real issue for many companies that have purchased bad debt protection but find that credit insurers have reduced or cancelled cover on key customers because the overall risk environment has deteriorated.
This Government would do well to copy the benefits of the French government support for domestic credit insurance which is helping, albeit expensively, French companies to carry on trading on normal end-of-month payment terms.
“Le CAP” has been distributed widely by credit insurance brokers and allows trading companies to buy extra capacity at 1.5 per cent pa on the limit on customers who are solvent and continue to pay on time.
The UK should learn from “Le CAP” and include a premium penalty if the insurer writes inadequate credit limits in the first place (ie, to discourage Mr Jourdan’s “economic timidity”. Further, it should allow companies to buy this extra cover for a fixed period to enable managers to plan next week or next month’s production without worrying about a credit limit being cut.
There is a democratic element to support for credit insurance: it will help companies of all sizes in a huge range of business sectors rather than trying to justify the benefits of one business size, sector or geographic location over another. Furthermore, once established for domestic sales, it could easily be extended to encourage UK exports.
Susan Ross, Aon Trade Credit