Credit Insurance – An Evolving Product

Many businesses buy different types of insurance to protect themselves against the numerous risks their companies might face. Most of those policies are purchased, put in a drawer and hopefully not looked at again until the next renewal. However, trade credit insurance which is purchased to protect a business against domestic and export trade risks beyond their control is different.

A credit insurance policy must align with your business and therefore needs to evolve as your company continues its journey forward. This may be as simple as applying for credit limits on new buyers as sales opportunities arise, thereby ensuring that cover is  in place in the event of a default situation down the line. However it is also important to take note of any changes occurring within your business and make sure these are aligned or endorsed to the current policy in place too. Such attention to detail is critical.

For example, occasionally a buyer will request longer payment terms than those which are endorsed to the policy. In order to be covered by the policy, these would need to be pre-agreed by the insurer.

Sometimes companies will begin sales on a consignment basis with certain buyers without thinking about whether this is covered by their current policy. Most insurers will cover consignment sales but specific approval is required and an endorsement to the policy.

Or perhaps you are selling to export markets and one of your buyers would like you to ship goods to a different country to which you are sending the invoices. Only a slight variation to the way you are currently doing business, but that one that needs to be discussed with your broker and insurer to make sure that it can be included into the policy cover.

An open dialogue with your broker and insurer is very important for everybody to understand the way your business works and to make sure that any business changes made along the way are adequately reflected in your credit insurance policy in order to obtain the best value from the product in place.