From the credit risk perspective, we often see clients submit claims on accounts receivables collections that have very little backup accompanying them. Sometimes this can’t be helped. If a company with a lax credit policy and/or procedures is involved, your broker has to deal with what info is available before the Trade Credit Insurance Policy is in place. However, once you have a Trade Credit Policy in place and a broker to help you manage it (and we’re hoping that’s us!) both your broker and the Insurance Underwriters will work with you to develop the appropriate policies to insure that your claims are paid without incident. There are some easy steps to take to help you make more accurate credit decisions on the front end while helping claim efforts on those accounts that may go bad.
At the very least we strongly recommend that you require a credit application with a legible signature from a company officer/owner. If you decide to use Trade Credit Insurance, it is not required to request a Personal Guarantee to secure the line.
On the Insurance Broker side, evaluation is key. The most obvious standard used is performance. More dollars collected is always better. This is a little easier to evaluate when a company places a high number of claims against their insurance policy.
When testing Insurance Carrier’s abilities, a small sample size can skew results in either direction. In an industry where percentages are so key, we need to make sure that all of your I’s are dotted and your t’s are crossed so that when it is necessary to file a claim, it will be processed without delay to avoid any downside to your business operations. We ask a lot of questions when we become your partner: Are files turned over at the same age after the same number of attempts are made? Does balance size affect how long you work it in-house first? What are the demographics or industry of the customer accounts? In addition to making us more informed and more effective, it also opens a meaningful dialogue with our client. As we become more familiar with your policies, we can provide feedback which can hopefully be used to improve all stages of the process.
When it comes to making a trade credit insurance claim, there is no such thing as providing too much information to the insurance carrier. In the world of credit and collections, it can result in substantial financial hits. If you have questions about your collection policy and would like to discuss potential changes, contact us today.