Insurance Post

Trade credit row could turn nasty for insurers

The trouble with the sort of help the government announced in the Budget to help ease the pressures in the domestic trade credit market is that it suddenly alters people's expectations. With many businesses, especially in the retail sector, going under in the first few months of this year, stories about the problems some firms have faced in getting adequate had a "so what do you expect?" feel about them. Now, the tone has changed.
People are looking at the £5bn top-up scheme announced by Alistair Darling and thinking that this sort of subsidy should be making the problems go away. At the very least, they will say, it should be helping soften the tough stance trade credit insurers have been taking. When this doesn't happen, things can turn nasty.
The Association of British Insurers was long on fine words in the run-up to the Budget; now people will expect action to deliver the promises it suggests in its code of practice but, as we know, it has no powers, beyond persuasion, over its members. It will take a concerted effort on the part of the ABI to make sure that political and public opinion doesn't turn against the insurance industry on this issue. So far, the insurance market has managed to avoid attracting the opprobrium directed at the banking sector. Now it has been offered a public subsidy there is a danger that many people will see it as fair game.

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