Credit insurance provides efficient transfer of risk relating to customer payment defaults due to insolvency and protracted payments.
Credit insurance not only indemnifies bad debts, it also improves internal processes and procedures, and, as a result, the relationships with a company’s clients. Additionally, it increases negotiation power towards various stakeholders (banks, leasing companies, suppliers, etc.) as the credit rating of an insured company improves.
Insured clients expect indemnification from the insurance in the first instance. However, a relationship with a credit insurance broker brings great improvements in protection and optimization measures internally in sales and finance departments, allowing constant care of compnay receivables.
Well implemented credit risk management improves a company’s credit rating. As a result, a credit-insured company has a stronger position in negotiations with its suppliers, banks and other financial institutions, which means better access to financing. Effectively, credit-insured receivables are regarded as quality assets that can be used as additional security.
Credit insurance provides improved liquidity. Through credit insurance, unpredictable cashflow becomes more predictable. A credit-insured company has less problems with planning cash-flows as buyers’ payments are more predictable. Credit insurance enables safe trade on open account, which makes the insured supplier more competitive in the market.
Within credit insurance, updated information on existing and
potential buyers is availabe, including credit-worthiness. Thanks to establisehd monitoring, credit insurance companies are informed about all changes in observed companies instantly and not only once yearly.
A credit insurance company as a financial institution can be more important towards certain buyers in comparison to certain suppliers. Therefore, if the credit insurance company is actively involved in the process of debt collection, such intervention may increase buyers’ payment discipline and prevent non-payments. Furthermore, recoveries are increased significantly.
Established credit insurance affords a business more time to focus on additional sales activities, which results in higher turnover and consequently in better business results. Furthermore, the portolio of a company’s buyers is improved, as cancellation or non-approval of credit limits gives a clear signal regarding a buyer’s credit-wothiness.
Credit insurance company takes over the insolvency cases.
Credit insurance strengthens credit risk management culture.