Insurance brokers are used to making sure their clients understand the risks their businesses face and helping them choose the right policies to protect against those risks.
Most business decision-makers understand the need for insurance, including business interruption, professional indemnity, business vehicle, and commercial buildings and content insurance.
However, there is another form of insurance which can significantly help reduce risk and many businesses either aren’t aware it exists or don’t know how it can help them.
Educating businesses on the benefits of trade credit insurance, and offering this form of insurance can help insurance brokers stand out from the crowd, and offer clients a more comprehensive risk-mitigation service, according to Atradius, a global leader in risk management.
“Trade credit insurance or accounts receivable insurance covers businesses against non-payment by customers,” said Mark Hoppe, managing director, Oceania, Atradius.
“A payment of up to 90 per cent of the invoice value is made if a customer goes bankrupt or fails to pay for any other reason, as long as it’s covered by the policy wording.
“Having trade credit insurance can help businesses secure finance, attract new customers, and minimise risk when entering new markets. Available to businesses of all sizes, trade credit insurance can help clients understand which customers to extend credit to (and which ones to avoid), chase unpaid debts, and protect their bottom line.
For some businesses, usually smaller operations, the benefits of trade credit insurance aren’t immediately clear. After all, if customers generally pay on time and outstanding debts aren’t likely to cause a significant shortfall, they may not see the value. However, there can be huge benefits to trade credit insurance that aren’t immediately apparent.
These can include:
Ability to expand trade
Companies looking to expand can often be discouraged due to the risks involved. After all, if a customer doesn’t pay, it could wipe out the value of the investment the organisation has made. But, with credit insurance, clients know they’ll get paid, which lets them take advantage of new opportunities, customers, and markets with more confidence.
Insights for better decision-making
Trade credit insurers collect data on businesses globally, knowing their creditworthiness, reputation, and how financially stable they are. Sharing those insights with clients lets them make smarter decisions that avoid losses and could even stop them from going out of business.
Chasing recalcitrant customers for payment is time consuming and stressful. When clients take out trade credit insurance, the insurer can take on that burden for them, chasing down unpaid debts so the client can focus on running their business.
Protection of a key asset
For clients, their accounts receivable is the number one thing keeping them in business. It is a key asset just like the company warehouse, staff, plant and equipment. So, it’s just as important to protect it. By taking out a trade credit insurance policy, clients are securing the value of a critical asset that can drive their working capital and profitability.