by Tony Hannigan
There has been a considerable change in risk appetite and flexibility during the last 12 months. Anecdotally at least, 2009 was the most difficult trading year the credit insurance market has ever experienced, if in reality it was worse than the recessions of the 70’s, 80’s and 90’s when comparing claims costs on a like for like basis is questionable.
However, what cannot be argued with is the dangerous combination of increased claims activity in both number and value of claims submitted, very low premium spends and a general exodus of policyholders deciding to self insure which the market sustained in 2009.
This combination left the market with an imbalance between revenue income and potential liability. This could only be controlled by implementing a programme of reduced credit limit coverage on buyers and in many cases withdrawing cover completely. At policy renewal, increasing premium rates and restricting policy flexibility was the norm. This renewal philosophy across the entire Market made any attempts at innovation and flexibility extremely difficult.
Coming into 2010 the market has contracted considerably. Individual insurers have not formally publicised the true impact of lost business due to their underwriting approach, but is fair to say it has been significant. Claims numbers across the market during 2010 have been considerably lower than expected. Indeed the performance to date of the major credit insurance underwriters all re-affirms this.
Whether this is due to an actual upturn in the economy, or the result of a reduced policyholder base producing less over all claims numbers and avoidance of claims due to credit limit reductions and cancellations, is difficult to gauge at this time. What is far easier to gauge is the considerable upturn in the market’s appetite for retaining existing policyholders and to win new business. This is reflected in both buyer risk underwriting, premium costs and policy structure flexibility. There is experience of clients being offered up to 8 separate insurers, all vying to win their business at this renewal, whilst only the incumbent underwriter was prepared to offer any terms at all in 2009.
Furthermore cover appetite on some well known buyers has returned too. In 2009 there would have been no or very little cover available on the likes of Ford Motor Company, Jaguar Land Rover or Clinton Cards, cover has now returned, subject to the overall attractiveness of the specific case to underwriters.
This shift change can only benefit existing credit insurance purchasers and new entrants to this type of cover. There are also some signs of innovation returning to meet prospective clients needs. In particular, Towergate Credit has recently launched a new credit insurance product aimed at the sub £350,000 SME market. A sector that now has to all intents and purposes been unable to purchase cover due to the relatively high entry premium costs (c£3,000) and excess deductibles of £500 - £1,000 per claim that reduce considerably the benefits of cover. Towergate’s new product branded InvoiceProtect has a fixed £1,870 premium, £250 excess deductible and simple administration requirements.
For more information, please contact Tony Hannigan,
Senior Account Handler Complete Commercial
on Direct Dial - 01908 693210
