Communication is key!
One of the benefits of a credit insurance policy is the access it provides to information on customers, especially when there is adverse information or signs that a company might be in distress.
An important source of information for the insurer is the trading experiences of the policyholders, as they are in communication with their customers daily and should be aware of any changes to buying or payment patterns, particularly if a customer is paying later and later.
Nobody really expects payment on time every time, there might be a lost invoice, a late delivery or other query that results in slightly late payment.
The typical credit insurance policy that CMR arrange has a Maximum Extension Period (MEP) which is the period of time from the due date of an invoice until - under the terms of the policy - the account must be placed on stop and the debt notified to the insurer (you can of course put the customer on stop sooner than the MEP).
They can then monitor to see if this is an isolated issue or signs of a more serious problem, i.e. if a number of suppliers have notified on the same customer.
Any goods sent/invoices raised after the MEP is reached would not then be covered and the debt can be passed to CMR for collection action to commence, where appropriate.
For the above reasons, ensuring that you report overdue debts at the end of the MEP is vital, even if the customer has promised payment is on its way or has made some other promise, you should still notify, so that advice can be provided.
Notification is also a condition of the cover. Late notification can result in a claim being declined, because it can affect the risk for the insurer and chances of a successful recovery will probably be lessened.
The Maximum Extension Period will be shown on your Policy Schedule – but please contact us if you have any queries on the points raised in this article.