Credit Insurers Fail to Cover;

Largo Explores Alternatives.

2009 saw credit insurers pay an estimated total of £320m in claims; the second full year after the start of the recession. This figure represents a 95% increase on 2008 figures that stood at £164m. The sudden increase is due to the liquidity crisis and recession that is affecting global businesses.

The above figures have lead to credit insurers having to review clients’ premiums and for the first time restrict or in certain cases revoke insurance altogether. A number of the UK’s top credit insurers have admitted that their premiums before the recession did not reflect the risk of non payment. Industries that have previously been insured as ‘risky’ are no longer able to gain cover, while markets that have been affected by the recession have been labelled ‘risky’. This has left UK businesses facing no cover, reduced cover or highly inflated premiums.

How can Largo help clients with reduced or no credit insurance?

Internal credit control is key to limiting risk; improving existing processes and implementing new procedures instead of relying on credit insurance. The first place to tighten the belt is with credit limits. Using a good quality credit referencing system like Largo Web Check can prove to be a key decision making tool (remember these are only a guide). A combined look at Web Check’s recommended limit, company’s accounts and recent activity; should prove invaluable when making this decision.

What happens when an account turns into bad debt?

Once an account becomes overdue and falls into the category of bad debt businesses must have a clear procedure in place. At this stage Largo’s debt recovery services becomes key to successful recovery. The earlier the account is passed out for recovery the, higher the chance of success. Largo’s recovery services means that UK businesses can still afford to operate in markets where businesses no longer can receive credit insurance.

Article by Gareth Fawke, 02/06/10