Officials from the Department of Business, Enterprise and Regulatory Reform (BERR) faced a critical audience when they explained the thinking underpinning the Government’s trade credit insurance top-up scheme at a briefing organised by the Construction Products Association.
The Government’s view was that its role was to support the insurance market, not to replace it, arguing that it was not an insurance underwriter, and so had to use the insurance industry as its guide as to where it was appropriate to providing matching cover. This inevitably meant that the top-up scheme would not offer cover where the insurers had already refused it. In the eyes of the construction sector, this meant that the scheme compounded the problem, rather than relieving it.
The general sense of the audience was that, contrary to some reports, the credit insurance market showed little sign of returning, and most felt that it was unlikely that the situation would be resolved when the scheme expired in December. There was a particular concern that much of the cover that was now available was absorbed by the larger companies, leaving smaller businesses still struggling.
Part of the frustration of this issue is that there is every sign that the Government understands there is a problem and genuinely wants to help. But it is hamstrung by the fact that (now more than ever) it cannot be seen to take risks with taxpayers’ money, and so has to rely on the advice and judgement of the credit insurers who many blame for the crisis in the first place. There is also the suspicion, reading between the lines of what was said, that it in the back of its mind, it thinks that credit insurance has been used as a substitute for obtaining financial information about customers or managing credit. Certainly, those BWF members who have told us they did not used credit insurance said that they preferred vigilant management of their customers and debtors.
The Department would be interested to hear of people’s experience of using the top-up scheme and of general industry experience with the credit insurance market. It intends to keep things under review, and will adapt or extend the scheme if it feels this would be worthwhile in the future.
The BWF has been looking at how it can help its members with some of these credit problems. There is the potential for setting up a credit insurance scheme of our own, but this involves a degree of financial risk to the Federation and would require us to obtain the details of members’ claims histories. We are exploring the possibility of setting up an electronic credit circle, using a facility provided by an independent agency, accessed through the BWF website; if you are interested in receiving further details, please let us know. We will also launch a credit-checking service later this month.