Credit insurance premiums soar

Weak IT market prompts 'dramatic' rise

Credit insurers have admitted to raising insurance premiums "dramatically" to cope with the weak state of the IT market, but industry figures have warned that resellers should concentrate on sorting out their own business affairs before complaining about cover being withdrawn.

Nitin Joshi, a partner at insolvency specialist PKF, said: "A lot of channel businesses have unfairly criticised credit insurers. Before they do that they need to get their own ships in order."

Joshi maintained that resellers should sort out information management systems, concentrate on profit rather than turnover, provide frequent management accounts, work closely with distributors and talk regularly to suppliers.

Gary Hicks, a representative at credit insurance group Gerling Namur, said: "Creditors like ourselves have been increasing rates dramatically because the risk environment is getting quite difficult.

"It has been a challenging time for credit insurers over the past nine months and we still have a very volatile risk environment."

Paul Flanagan, director of risk at Euler Trade Indemnity, added: "The outlook for the IT industry has not been good for a while.

"However, we still write significant cover in this sector. There has been a high number of insolvencies throughout the industry and we have managed the risk accordingly."

But Alan Norton, head of intelligence at credit management firm Graydon, said: "Resellers must remember that credit insurers are businesses, and are facing adverse market conditions.

"The more up-to-date information resellers can give, the better. If no information is supplied when requested, the cover is likely to be removed. Insurers cannot be blamed for that."

David Atherton, managing director at online reseller dabs.com, agreed that the channel should look closer to home.

"Many resellers started from a technical rather than business background, so they are badly equipped when it comes to financing and credit," he explained.

"Credit insurance companies are often blamed when things go wrong. However, any reseller with more than 20 staff should have a qualified accountant as finance director and should look at producing monthly management accounts to keep its business on track."

However, Andy Bugden, head of sales at distributor Poso International, claimed that credit insurers should be more open with the channel.

"I agree that insurance firms and the channel should work closely together but, at the same time, insurance companies should be more open and tell the industry if they feel over-exposed and wish to reduce their exposure," he said.