2016-05-09

According to figures released by the Association of British Insurers (ABI) this week, nearly £150 million was paid out last year to businesses who were claiming due to customer insolvency or late payments. That's a 42% year-on-year increase.

Here we examine the ABI's research, discover the reasons for this hike and what the future holds for business insurance.

More Businesses Are Claiming on their Insurance

Recent research by the ABI has found that:

• There were 11,000 trade credit insurance claims in the last year
• More than 11,900 were taken out during this time period
• 74% of all policies cover domestic trading
• 22% of policies cover exporting goods abroad
• £3 million a week was paid out to businesses in order to give support when money-owed was not received (£149 million annually)

The number of claims made by businesses (11,000) in 2015 has increased 19% since 2014, despite the total number of company insolvencies in the UK being at its lowest level since 1989.

These results seem to back up research results found by trade credit insurer Euler Hermes that the number of overdue payments for UK businesses was at its highest in two years during the final quarter of 2015.

The Euler Hermes Quarterly Overdue Payments Report analysed 17 major industries and found that construction companies in particular were suffering from damaging payment delays. On the whole, the study found that overdue payments were common among business sectors where disputes could contribute to delayed payment.

Why the Hike in Trade Insurance Claims?

Some experts claim these figures are a reflection of growing economic uncertainty and are similar to claim levels seen back in 2007 before the boom and bust.

Unresponsive markets and restrained growth in industries, such as manufacturing, construction and services, have business owners being extra cautious with their finances. However, with many organisations realising the benefits of exporting, the insurance policies are helping to facilitate international trade and keep companies afloat.

Mark Shepherd, ABI General Insurance Policy Manager, has commented on the changing figures. He said:

"Economic uncertainty appears to be causing firms to claim on their insurance if one of their customers pays late, or not at all. Trade credit insurance provides vital support to help businesses trade with peace of mind. Last year, insurers paid out £149m to businesses owed money by their customers, allowing them to continue to operate in uncertain times.

"Trade credit insurance is crucial for all types of businesses, both large and small, and to the UK economy has a whole."

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