For most of its history, Utah Metal Works, one of the oldest family-owned, non-ferrous metal recycling companies in the western United States, self-insured against credit-related losses. However, when heightened volatility tripled commodity prices and increased average load costs from $25,000 to $40,000, the risk of customer non-payment also increased significantly. The company’s once adequate $60,000 ballooned to $150,000 to keep up with this heightened risk while still leaving the company vulnerable to catastrophic losses and less stability.
“Scrap metal pricing has many variables and fluctuations in pricing can lead to uncertainty, making it difficult to determine if a customer will default,” said Chris Lewon, the company’s owner-operator. “Not only was our yearly process of building a bad debt reserve becoming risky, it was also becoming more expensive.” This realization caused the company to consider credit insurance for the first time.