Rising cost and increased personal risk of credit insurance?
Rising cost and increased personal risk of credit insurance? Pulse Cashflow confirms both the cost and risk profile of their Bad Debt Protection to remain unaltered for the foreseeable future.
The credit insurance industry is coming under increasing pressure from the FCA as the impact of Covid-19 is felt across the world’s supply chain.
Business Closures, downturn in trading along with ongoing lockdown measures, will ultimately result in businesses becoming even more reliant upon financial support. The need and demand for credit insurance will therefore grow, as indeed will the pressure upon the insurers themselves to provide adequate cover at an affordable price. History, such as the banking crisis of 2007, shows how credit insurance cover will tighten and premiums rise. In recent days we have seen criticism and concerns raised by the FCA, with trade credit insurance, potentially a major issue.
With the unknown long-term effects of these unprecedented circumstances globally, the need for protection through insurance will be vital. Business failures, bad debts, not to mention late payments, will all have a potentially damaging impact on the economy for years to come. There is, therefore, some credence behind the rumours that Insurance companies are becoming increasingly concerned the industry does not have enough money to cover all potential losses that may emerge as a result of the crisis and prices will inevitably rise.
For the foreseeable future, any increase in premiums will not be welcomed by the business community when cashflow is being severely impacted. Another option will no doubt be to retain premiums at current levels, but limit risk. Already the market has seen credit insurance quotes with substantial aggregate first lost increases written into new policy quotes. Yes, this may well keep premiums seemingly unchanged, but in doing so, will place even more financial risk upon business owners, directors and inevitably, their subsequent Personal Guarantees. This in turn will potentially give rise to a knock-on effect, restricting the economy of vital cash injection levels provided by alternative funding solutions, such as invoice finance.
In response to this, Pulse Cashflow are committing to holding their Bad Debt Protection costs and risk profile to pre Covid-19 levels for the foreseeable future. Our funding solutions not only improve cashflow by releasing funds tied up in unpaid invoices but also include Bad Debt Protection to give our clients peace of mind knowing they are protected should they fall victim to a customers’ business failure or inability to pay. We operate a single fixed fee which includes, the cost of finance, full credit control and the ever increasingly important, Bad Debt Protection. This ensures our clients have certainty and greater control over costs to help them manage their cash flow forecasts through these unprecedented times.
As Toni Dare, MD of Pulse Cashflow comments: “Businesses are really concerned about the future and it is impossible to say how things are going to pan out over the next 6 months. UK businesses are critical to our economy and they need as much support as possible to get back up and running. Trade credit insurance becomes vital during unpredictable times to protect businesses and we are committed to helping these businesses get, not only the funding they need, but protection also. Holding our trade credit insurance costs and risk profile to pre-covid-19 levels for the foreseeable future is our way of offering additional support to our clients.”
The insurance industry has a challenge to respond in order to ensure UK businesses get the insurance cover they need and at an affordable cost. It would seem talks have started with confirmation the Association of British Insurers (ABI) are speaking with the Government to explore a Trade Credit Insurance Guarantee Scheme, not just in the short term, but to support the business community through to economic recovery, however long that may take.
There is a long road ahead of us and it needs everyone to work together to ensure a successful journey and outcome for all.