Trade Credit Insurance FAQs
What is the most frequent type of claim?
The most frequent claim type is an insolvency claim, which can be processed as soon as the buyer enters any form of insolvency proceedings.
Are bad debts affecting SMEs?
Over 90% of registered UK businesses are SMEs so bad debt are affecting them. Bad debt quite often destabilises and causes a supplier to collapse if they do not have a trade credit insurance policy. A huge benefit of trade credit insurance is that it stops the domino effect. The domino effect relates to businesses further down the supply chain that could be affected by a bad debt. An example would be sub-contractors suffering late or non-payment as the main contractor's client becomes insolvent.
What is the price of a policy?
The price of a trade credit insurance policy is dependent on a few factors. The turnover, the countries that a business trades into, the history of bad debt, the number of customers insured and the trade sector. The minimum premium level is around �3,500 for a whole turnover policy. A single risk policy is normally priced higher and is underwritten very differently.
How can brokers help in the process?
Brokers can help by providing a business with the best possible cover to ensure they are protected and getting the best value for their client. As a trade credit insurance policy is an active policy, the broker can continue to help by ensuring they have obtained cover on their buyers and notify overdue accounts when necessary. When a policy is with CMR, we work with for the broker to the benefit of all parties involved.
Should brokers inform the insurer when a clients' terms of credit have been exceeded?
The point at which a debt becomes notifiable is when the MEP is reached and can be notified by the client on an online system. The broker can help the client with regards to notification of overdue accounts but as they may not have access to their aged debtors this may be difficult and is usually the clients' responsibility.
How does the insurer notify the broker that the buyer's credit worthiness has changed?
Any changes to buyer credit limits will be notified to the client and the broker can be copied in too if requested. At CMR we send monthly reports to brokers informing them of their clients' positions.
Can a policy be amended during a policy period?
CMR can adjust a policy wherever necessary. Should a policyholder need a larger maximum credit limit (MCL), insurers maximum liability (IML) or turnover in a new market/country, this can be added. Amendments may incur additional premium. Should additional premium be due then an MTA will be quoted, and upon acceptance an invoice will be raised, and the policy will be amended.