Towergate is offering trade credit cover aimed at small businesses and is letting them self-police customers over late payment
Cut price trade credit insurance designed specially for small businesses has been launched by a leading insurance broker.
The product costs almost half the typical annual premium and covers up to £350,000 of turnover from the risk that a customer becomes insolvent and cannot pay.
Towergate, run by entrepreneur Peter Cullum, estimates that up to one million small businesses could benefit.
The cover is underwritten by credit insurance giant Atradius and to start with will be available to all sectors apart from construction and clothing.
Gavin McClaren, Towergate's divisional director of credit, said: "At the moment a traditional credit insurance policy premium would start at £3,000 and go upwards, which for a small business is too high a cost. Normally that's allied with a high excess per claim of £500 to £1,000."
"Our product has a premium of £1,870 a year and an excess of £250. That opens a far larger part of the ledger to cover."
Towergate's policy tackles business concerns that credit insurers withdrew cover on a large customer during the recession without any notice or evidence of a change in payment behaviour with particular suppliers,
It is letting companies self-police their policies and cannot withdraw cover on a particular company without any direct evidence that there has been a change of payment behaviour affecting the policy holder directly.
Small businesses have to notify Towergate if a customer pays later than 30 days beyond agreed contract terms during the last six months or risk the cover being invalidated.
Mr McClaren said: "This is a big step for the insurance industry. They are giving up the monitoring to the policy holder. They have no control over what they are covering and what they are not."
The policy does not have any insurer approved credit limits but does come with a maximum liability of £20,000 a year and maximum individual claim of £10,000.
Mr McClaren said: "The impact of a bad debt on a small business can be massive. If you have a 10pc profit margin and sustain a £10,000 bad debt that means you would have to achieve another £100,000 of sales just to standstill."
