Credit Insurance and Accounts Receivable Insurance

Business Credit Insurance: The Truth About What Happens in The Underwriting Process

by Heather Smart Johnson

 You want to protect your company’s accounts receivable and you know you need trade credit insurance. You’ve found a broker who has helped you get quotes from several insurance companies. After examining the proposed or estimated premiums, deductibles, co-insurance, and other policy features, you would like to move forward. What happens now?

Working With The Underwriter

Insurance companies employ underwriters that will help them establish an appropriate strategy to assume the risk. This strategy will attempt to control potential loss to the insurance company while supporting your business goals. Underwriters make these decisions through the analysis of documents such as corporate financial statements, annual reports, and press reports, which are used to form an opinion on the underlying creditworthiness of the risk that will be assumed.

But what does that mean exactly?

  1. Your clients may be underwritten individually or as a group.You will give the insurance provider a list of clients that you would like to have covered on your trade credit insurance policy. Using a risk management tool, the underwriter will determine the likelihood of your client(s) defaulting.
  2. The underwriter will place a credit limit on each of your clients to limit risk.In order to make sure that you are covered and protected from client default, you will need to abide by these limits.
  3. Your credit insurance policy will outline what happens when your client fails to pay.The policy will indicate how long you have to submit a claim and any forms or processes that go along with that.
  4. Covered events are determined during underwriting.What kind of coverage do you need? Are you concerned about political risk? Or are you more concerned about coverage in case a client defaults before a project is completed? Do you need to be covered for both? While your broker may help you figure out what kinds of coverage you need, the underwriter is the one who puts these options into place.
  5. Determine the percentage of compensation.The higher the percentage of compensation, the higher the cost of your insurance premiums will be. Work with your broker and the underwriter to find the balance between the amount of coverage you need and the price that you can afford to pay for your policy.

What Will I Need?

Be prepared to supply the following information:

  • A list of your top clients, including any clients you wish to have covered on the credit insurance policy.
  • A list of the countries where you are providing goods or services.
  • Details of your credit management and collection procedures, including any aged accounts from the prior year.
  • A history of your accounts receivable delinquencies and credit losses.

The underwriting process can seem intimidating, but it doesn’t have to be. A good broker will be with you every step of the way.

 We offer unbiased credit insurance specialists that find you the best credit insurance provider.

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