The ‘3S’ credit insurance concept
Insurance companies always try to make it simple for customers buying insurance products and nowadays it must also be digital. We often hear “marketing mojo” such as “improving the digital customer experience“ and in addition to that communication agencies generally find fancy names for such products that should sum up in one word two concepts: digitizing and simplification.
Why not? It is always great to make it more understandable and user friendly for customers and we should take advantage of the digital revolution to enhance insurance products, 100% agree.
There are insurance products and especially those dedicated to individuals that cope perfectly with this evolution. Car insurance for instance is the perfect example; you can easily buy it online, get the best price and the insurance terms are straightforward (value of car, deductible, premium rate and standardized options if needed). Furthermore, the claim settlement works smoothly; you have an accident, you talk to a call center, you bring your vehicle to a garage and a few days later it is done. It works well when the product can be easily standardized and when you do not need to add clauses specially designed for a particular customer.
Indeed, there are insurance products which are much more difficult to simplify because by doing that customers end up losing some benefits of the product . This is the case for credit Insurance where general conditions are much more complicated and less straightforward, where you need to add specific conditions to fit with the organization and practices of the business.
You can market the product well, make it digital and so on, but at the end of the day, you will not change the fact that it is a complicated product for clients and if it is not structured, explained and managed properly, it can lead to customer misunderstanding and disappointment when filing for a claim.
A credit insurance product protects businesses against the risk of non-payment by their clients. It is a very powerful tool for companies to grow their businesses and explore new markets especially in the global business environment we operate in today which is less stable and predictable than before.
However, it is key to structure this product properly and as is often the case, the devil is in the detail. In my view a credit insurance broker should follow three basic credit insurance rules to get the right tailored made solution for his customer’s business.
The ‘3S’ Credit Insurance rules: Studying, Structuring and Supporting
Firstly, you need to study how the business operates and each company has his own specificities, especially in emerging markets where invoicing practices are not standard all the time. For instance, credit insurers look at invoicing documentation when they receive a claim from a customer and depending on the terms of the insurance contract they expect the policyholder to comply with them. Therefore, the first thing to do for a credit insurance broker is to understand how the business works, how does it onboard a new customer, what is their due diligence and of course how do they invoice them?
Secondly, after studying the organization of the business, you need to structure the insurance policy properly by putting in the right specific clauses that will protect the clients when filing for a claim. Unfortunately, all too often the client does not understand the terms of the insurance contract well or the terms do not fit with his business. I believe that it is not the client that should change the way it operates, but the insurance contract that should match its organization.
Finally, even after structuring the insurance contract correctly, a credit insurance broker should support his client on a daily basis. Credit departments should be trained properly and regularly to make sure that the business is in compliance with the terms of the contract. Furthermore, regular meetings with risk-underwriters is required to enhance the level of guarantees and finally a client should never file up a claim without it first being reviewed by his broker.
It has never been so important for a business to use credit insurance; the economic environment is changing at an incredible pace. Disruptive technologies change the rules of the game all the time and so corporate and political risk are on the rise, but it is important to get the right advice before taking out a credit insurance contract otherwise you could be disappointed.