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6 Key Features of Trade Credit Insurance

Why trade credit insurance is important to businesses?

 

Q:

Hello Hassan, you recently took over as Commercial Director for Hong Kong, Taiwan and Korea. Having been in the business for over 10 years, how do you explain the key features of trade credit insurance to your prospects and clients?

A:

  1. Simple purpose, simple policy
  2. Let’s start with the obvious. Trade credit insurance has one simple purpose – to make sure your invoices are paid. It is one of the most effective credit management tools employed by all sizes of companies to enhance account receivables management.
  3. Based on our APAC CFO Survey conducted in 2020, 73% of respondents said that they had experienced different levels of unpaid invoices over the last three years. Meanwhile, 82% said that they had endured delayed payments in the same period. Trade credit insurance is a protection against these payment risks by giving you peace of mind in your business.
  4. As the leading trade credit insurer in the world, our worldwide collection network will also act on our policyholders’ behalf for debt collection in the event of late payments or even non-payments. Ultimately, taking out a policy with us can ensure you will get paid regardless.
  5. Affordable premium
  6. Contrary to popular belief, trade credit insurance is very affordable as the premium is calculated based on a percentage of sales, sometimes as low as 1%. For instance, if your sales were USD1 million last year. the premium could be around USD10,000 to have that entire turnover covered.
  7. Obviously, the premium varies every year. Factors such as claim activities, the performance of your customers and sectors, as well as risks such as trade exposures and political ones. Our proposal will take all these into account but generally not far from abovementioned principle.
  8. Applicable to all business
  9. In view of the complicated trading environment in recent years and not to mention the Covid-19 pandemic, every business can benefit from good credit management thus trade credit insurance is more sought after than ever. Trade credit insurance is particularly beneficial if you are selling on open account terms to other businesses. Even if you trade on other terms we have the right expertise and services that can support trading activities and strengthen your credit management.
  10. Foster business growth and expansion
  11. Think about suddenly you received a sizable order from a new buyer in a new country. Tempted to take it on of course, but what do you know about the buyer and risks associated? This is where our 125+ years of experience can help. We track over 90% of global GDP and our intelligence can help you understand your new buyers’ creditworthiness and how best to shape your payment terms with them. As for bank facilities, many financial institutions offer better terms if your businesses are backed by trade credit insurance. It is why credit insurance has become an integral part of global trade.
  12. Transparent claim process
  13. Generally speaking, we indemnify up to 90% of the amount of the debt. Factors in consideration are policy terms, credit terms, status of the accounts receivable portfolio and premium target. We target to pay off a claim within 30 days of the date of loss. Digital transformation is a big part of our vision in recent years. We boast an industry-leading digital platform to give our policyholders excellent policy management capabilities and options to get in touch with us. Through our online platform, our policyholders may request credit limits, file a new claim and monitor progress of current claims.
  14. Worldwide collection service
  15. One of the value-adding advantages for our policyholders is our worldwide debt collection service. With over 400 collection professionals in 35 countries, our collection team operates worldwide and covers all sizes of debt. Collecting debts is a step-by-step process and we start with amicable approach such as telephone calls and letters to initiate first contact. To no avail, we may consider going through legal process which would usually take longer. Of course, we keep our policyholders abreast of the process and certainly ahead of any actions taken, so that neither the relationship nor reputation between the parties are severed unnecessarily.
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Export credit insurance helps companies remain competitive by offering open terms when letters of credit or prepayment may have previously been the only safe way to do business. In fact, foreign companies buy an average of 40 percent more when they are offered open terms, according to the World Trade Organization. Export credit insurance providers protect your sales from political risks, including import/export changes and foreign government intervention. Whether you have export credit insurance or not, there are still many ways you can take steps to mitigate risk while doing business internationally. Exercising the following precautions of credit management can only benefit your business and help you protect your cash flow and finances while expanding your growth even more.