May 17, 2009
Effects of credit insurance withdraw on retail industry
Below is a discussion on Linkedin between Igor Zax (Tenzor Ltd.) and Tony Heywood (Gilcrest Services Ltd) on effect of credit insurance withdraw and latest government support initiatives on retail industry.
Withdrawal of credit insurance has a devastating effect on the fashion retail industry and is holding back recovery. Has anyone yet received or requested help under the Budget insurance scheme yet?
Just a small note- to the best of my knowledge the particular scheme is only covering reduction of cover through providing top up, not complete withdraw. My guess is most of the cases you refer to the cover is completely withdrawned, so the scheme would not help…
You are correct – it only covers reduction after 1st April and then only tops up to a max of the existing cover. So if cover is reduced to 30% it will only bring it up to 60%.
My feeling is, that it is likely to be of little help to the industry and is another Government initiative which is big on headlines but of little actual help.
I was hoping that I may be wrong but the lack of replies from here and other requests re-enforces my belief.
A little more about it in my blog
I guess one shall question the relevancy of the scheme for your sector. Firstly, it is for sellers based in UK- so unless the retailer buys from UK company (manufacturer if these still exist or distributor) it is not relevant at all.
Secondly, it only applies to whole turnover policy. What it is likely to mean is that there may be an incentive for insurer to actually reduce the cover, as they are still being paid on all sales, get less exposure and plus might charge a commission for administrating government policy on top of the 2% cost. This may also substantially increase cost to supplier, that is likely to be passed to retailer.
Could not agree more with the point in your blog about importance of communication with insurers. This would focus on three areas- complete and timely information (obvious point), getting the right interpretation (often the underwriter do not understand enough about the industry or company specific factors) and getting to the right level (somebody who can make an exception to general mechanical approach based on additional facts). Two latter points require a lot of credibility that one needs to build.
Lastly, do not assume supplier cannot take uninsured risk. Unless the insurance is tight to their own financing (such as invoice discounting or factoring), there is no reason they cannot take uninsured risk. The credit controller may think they cannot- CEO might have a different view if you are a very important customer AND you can provide reasonable comfort that you will be able to pay.
Excellent points Igor