Two thousand twenty will not only be the year of the Rat according to the Chinese zodiac, but according to the Credit Insurer zodiac it will also be the year of the Claims.
Unlike the curve of the Covid-19 where we have reached the peak, we are just at the beginning of the curve of the claims. This crisis is very different from previous economic crises as business activity has almost stopped across most sectors producing simultaneous supply and demand shocks. The consequences on the economic activity will translate into a dramatic increase in business insolvencies ranging from 15% to 20% for 2020, according to studies from the main credit insurers.
Put differently, the cashflows of many businesses will soon be exhausted which will inevitably lead to payment defaults. Unfortunately, it is very difficult today to buy a credit insurance contract to protect your business if you were not already an existing client, as credit insurers are currently managing their existing exposure and are very reluctant to add new risk into their balance sheets.
We have already seen delays in payment from customers which is not a surprise as business activities across many sectors have been interrupted because of the lockdown of nearly three billion people. Credit insurers have understood the very special nature of this crisis and have offered extensions of between one and two months to report overdues, but it will unfortunately not prevent the increase in claims that should come at the end of May, beginning of June. Paradoxically, it will coincide with the progressive restarting of the economy after the period of lockdown.
This being said: are you ready to handle your credit insurance claims?
Credit insurance is a much more complicated product compared to car, marine or health insurance where the claims process is quite straight forward and not too difficult to manage.
The credit insurance claims process is another story where you need to be an expert of the General Conditions to be able to properly handle it. Furthermore, with the flow of unprecedented claims that are due to come, credit insurers will certainly be much less flexible when assessing claims and will not forgive any contract breaches due to the deterioration of their loss ratio.
To conclude, you are better off having on your side a specialized credit insurance broker if you want to increase your chance of getting your claims paid by your credit insurance.
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