Almost £36m was paid in insurance claims to small businesses last year, due to customer insolvency or late payment, according to the Association of British Insurers (ABI).
The insurance trade body said that, with the Bank of England recently cutting its outlook for UK growth amid growing economic turbulence, trade credit insurance continues to provide cover and reduce the risk to small businesses if customers that owe them money do not pay their debts or pay them late.
The ABI said that its figures it released earlier this month show that trade credit insurance continues to represent “good value” for small businesses, who receive 25% of the total value of claims paid, but pay just 15% of the total premium.
In 2015, small and medium-sized enterprises (SMEs) made almost 4,400 claims on their credit insurance policies, an increase of 25% on the previous year. This is above the market average of a 19% rise, reflecting how SMEs are particularly impacted during this period of economic uncertainty, and despite overall company insolvencies being near a record low.
Mark Shepherd, the ABI’s manager for general insurance, said: “Small businesses are central to the UK’s economy, innovating in the market and contributing to the country’s productivity. However, they can also be more vulnerable to financial setbacks, and customer insolvency or late payment can have a greater impact than it does for larger businesses. Trade credit insurers can play a vital role in helping small businesses through these challenging circumstances.
“Trade credit insurance is crucial for all businesses to help them navigate potential risks. In particular, SMEs looking to grow can have confidence that a trade credit insurance policy will help them to do this whilst guarding against the unexpected.”