TCI: not for me? - AU Group

Well – because the digital revolution unfolds rapidly, you might soon change your mind! Although Trade Credit Insurance (TCI) is a €6 billion premium global business, it remains small when compared to the total “insurable” market it seeks to address. Even in traditional and mature credit insurance markets like Europe, the proportion of businesses which use credit insurance remains low; in the US it is used by less than 10% of all businesses.

Most businesses still tend to manage their risk themselves – buying some credit information and remaining exposed to 100% of their buyers’ defaults and insolvencies. They believe, right or wrong, that credit insurance is expensive, only covers part or their risk, is an administrative burden and is antiquated…

Well, we are not living in the 90s anymore!

Now that the digital revolution is embraced by all industry players, TCI will become attractive for many more businesses than before. We will experience an unprecedented number of improvements which address many of the criticisms faced by the industry to date: better coverage rates, seamless processes, improved integration, reduced overall costs.

As a result, TCI will deepen its reach, create innovative ways of managing risk and enable companies to obtain financing at an attractive cost to all participants.

The chances for a new credit insurance era are indeed good this time:
Insurers are integrating / interconnecting their vast data sources. Simultaneously they create the conditions to connect all transactional partners of the “order to cash” process via APIs (suppliers, logistics, banks, buyers,…). Fraud prevention tools are getting better by the day. Artificial intelligence and machine learning decision tools increasingly integrate social media data / open data sources. Traditional balance sheet based risk models are being replaced by new ones. As a result:

The quality of underwriting / coverage rate is improving
To prevent a single and significant loss, the number of collateral credit lines cancelled has been dramatically reduced
Risk adjusted pricing is improving
Realtime credit decision and pricing will be possible
Businesses are now able to choose from anything in between a single risk, single invoice to a global whole turnover insurance.
The same will be true for invoice funding
Pay as you use models is emerging
Last but not least, trade finance options will become ever more flexible for seamless “order to cash” solutions at an excellent price for all business, from small to large.

At the end of the day, no business has a vested interest to keep receivables risk on its books or fund their buyers…so forget about the past and test the new TCI digital world.