Much has been written about the stance adopted by credit insurers recently. In a climate of mounting claims and general insurance losses and declining premium income, the accusation that insurers are pulling out may carry some weight.
But they are in business to make money. In one instance, an insurer's ratio of claims paid to premium income rose from 63 per cent to almost 89 per cent over the four years to 2001, and this was before other costs came into the equation.
Credit insurers have responded in the only way they can. They have increased premiums and adopted a more clinical approach when reviewing new contracts with insured buyers that have not yielded the required return.
They are also far more critical of companies filing poor results, so it is not surprising that insured levels have declined.
Uninsured risk in distribution has risen enormously since 2000 and, worryingly, many now talk of going without insurance because of renewal costs.
We insure anything of value: our cars, premises and people. It remains crucial for businesses to insure trade receivables.
It is the biggest and most valuable asset on the balance sheet, and banks and other lenders will generally advance against this asset only if it is insured and managed well.
A credit squeeze? Yes, but the perception that this has arisen only in the past few months is wrong. It began as early as the fourth quarter of 1999 and has progressively worsened, but to blame insurers totally for this is naive.
Businesses that perform badly suffer the consequence of reduced or declined credit. It's all down to risk management processes.
An interesting by-product has been the range of offerings to the channel. Agency-model selling - dealing direct with the end-user and paying commission to the reseller - along with leasing and finance online have been around for a long time.
In today's climate, however, they are pushed into the fray more readily. Insurers will stick with the channel, and those that manage risk well will feel the pain much less when renewal comes around.
The galling fact to many is that claims in the current year actually may be the lowest since 1994. However, risk has shifted towards the medium-sized to large business, and with convergence, suppressed activity, margin pressure and mergers, a resurgence of fatalities at the top end will remain a concern.
Eddie Pacey is group credit services manager at Bell Microproducts.
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