Reasons your business needs credit insurance

As the UK eases out of lockdown and government schemes draw to an end, there has been an increase in policies being taken out for credit insurance. In light of this, Ravenhall Risk Solutions wanted to revisit a topic looked at previously in our blog – ‘What is trade credit insurance?’.

Within this article, Ravenhall introduced trade credit insurance and how the policy can be applied. As businesses still face high levels of uncertainty surrounding the increasing cost of supplies, furlough schemes, social distancing and how business can return to ‘normal’, we may see the level of insolvencies surpass the previous global financial crisis.

The BBC recently reported about the effected ‘long covid’ and debt in the UK. Read this article here.

How can trade credit insurance help?

There is no doubt that many businesses have had to change and adapt since the start of the pandemic. Companies that prepare themselves against the longer-term effects of Covid-19 will stand a better chance of survival. The team at Ravenhall Risk Solutions have access to a global data network and predictive intelligence data through Euler Hermes. This data can support businesses and deliver accurate and proprietary information, providing them with the confidence to trade and grow confidently through these unprecedented times.

10 reasons to buy credit insurance

The first and most immediate benefit is being reimbursed for losses like any insurance product. But some companies underestimate how valuable this is.

Charlotte Champagne, Head of Product at Euler Hermes UK & Ireland, comments: “If a customer doesn’t pay, it’s not just your margin you’re losing. You’re losing everything.” The maths is simple: a company with 10% margins that has a £5,000 default doesn’t have to sell an extra £5,000 of goods to recover — it has to sell an extra £50,000.

Laura Flandin, Head of Commercial Underwriting, adds: “If you have low margins, one unpaid invoice can have a huge impact on your balance sheet.”

1. Protection – This insurance policy is designed to quickly replace money lost through bad debt.
2. Speed – Having considered the risks and having the insurance in place, the understanding can help you make the right decisions quickly and therefore improving efficiency and profitability of the process.
3. Peace of mind – Feel safe in the knowledge that outstanding invoices are protected.
4. Funding – We can even help in securing trade finance which improves banking relationships and access to finance.
5. Profitability – By being able to make good judgements and business decisions your business can build relationships with more customers. Therefore, improving your profitability.
6. Competitiveness – Your business may be able to take opportunities where some of your competitors can’t or won’t.
7. Growth – Credit trade insurance facilitates expansion with security and allows you to deal confidently with new clients and increase credit lines to existing ones.
8. Information – The intelligence that this policy provides access to allows you to calculate balanced risk.
9. Cash flow – Credit trade insurance complements and enhances existing credit control procedures to improve the number of days awaiting payment on invoices.
10. Confidence – It can provide you with confidence to enter new markets, including overseas.

Understand more in this short video:

Credit security out of the pandemic

Since the start of the pandemic, in the UK we’ve seen a polarisation in terms of country and sector performance. While some sectors may have fared well throughout lockdown, others have struggled. The polarisation will continue and the gap could widen as the year progresses.

We understand that unpaid rents in the UK have reached £6bn, which is worrying. Inflation and raw material price increases are points of attention too.

Some of the current government schemes are due to come to an end in July, as well as the start of repayment on ‘bounce back’ loans. This could see even more business closures and bad debt and increase the need for credit trade insurance.

Remember, peace of mind is a benefit too.

If you’re conscious about recovering bad debt, or protecting your business to enable you to grow, contact our team of Chartered Insurance Brokers who can talk to you about this type of policy.

If you want to read more about why more and more companies are looking at trade credit insurance as an investment, take a look at this article from our partner Euler Hermes ‘Time to look at the big picture‘.