Business Insurance Scheme Has Not Been Taken Up By Many Companies
A flagship government programme that offered up to £5bn to protect suppliers from collapse of their customers has only provided just £7m of assistance to 52 companies since it launched.
The scheme which was announced in the Budget was the government’s idea to help shore up the market as nervous private sector insurers cut their exposure during the credit crisis.
The low take-up has been blamed on the scheme’s restrictions and relatively high charges. These amounted to 2 per cent of turnover which is more than four times the cost of typical private sector insurance.
Since yesterday, the business department has said that it is widening its criteria and cutting charges in order to make the scheme more successful and to encourage more businesses to take up the initiative. The low take-up rate has embarrassed the government as they have already been forced to reduce restrictions previously.
“The scheme is £5bn, but we have never assumed that it would get to that level. That’s the amount in the programme should there ever be sufficient demand,” the business department said.
The scheme allows suppliers to buy six months of government-backed insurance to restore cover to its original level or double the amount they can get from the private sector.The four largest credit insurers have all signed up to the initiative: Euler Hermes, Atradius, Coface and HCC.
The private sector currently provides around £300bn of trade credit insurance a year. This covers transactions by around 250,000 companies in the UK.
