Government relaxes rules on business insurance plan

Date: 21st August 2009

Small business accountants are likely to welcome a new move from the Department for Business Innovation and Skills (BIS) to change its trade credit insurance top-up scheme.

The new plans involve cutting the price of the six-month top-ups from two per cent to one per cent of the insurance being provided and relaxing the upper and lower limits on the cover itself.

From now, there will be no lower threshold and a £2 million upper threshold - a significant change from the current regime, where these totals stood at £20,000 and £1 million.

Trade credit insurance is a type of cover held by corporate policyholders who want to protect their assets against potential defaults among the clients they provide goods and services to.

As such, it forms a part of the bookkeeping process for many firms.

BIS' plan was originally introduced in May - and the changes have come about partly through lobbying from business groups.

"Evidence indicates that businesses are adapting to reductions in their insurance by managing their credit risks more actively, thereby reducing their dependence on the product," BIS said in a statement.

"However businesses that have not been eligible for this scheme also need the opportunity to adjust to reductions in their trade credit insurance cover. Today's changes will allow more businesses to benefit from this extra breathing space so that they can adapt to their new circumstances in the longer term."

Currently, the scheme is scheduled to cease at the end of 2009.