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TO BUY CREDIT RISK INSURANCE - (Continued - 4 of 4) |
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Evaluating Credit Risk Insurance Offers
Unfortunately,
because each carrier has their own risk appetites, underwriting
philosophies and contract wording, an "apples-to-apples" comparison
is not likely. Your broker should be able to help you understand
the offers provided by each carrier and highlight key differences.
While the coverage is fundamentally similar,
the carriers all differ widely in how they structure and administrate
their policies. So, after covering the basics of premium,
risk retention and coverage limits, you will want to take
the time to understand how each carrier differs on some of
the areas where the policy has to be customized to fit your
needs (special terms of sale, export sales in different currencies,
work in process coverage on custom goods, etc.)
From your perspective as a buyer of credit
insurance, you want to evaluate the carriers and their offers
based on three key categories- the carrier's financial strength,
their contract wording and the policy terms and coverages
they propose.
You will find that virtually all of the carriers
specializing in this type of coverage are either monoline
insurers specializing exclusively in credit insurance, or
are niche operations in very large, multinational property
and casualty companies. AM Best, S&P and/or Moody's ratings
are readily available. The top providers are highly rated,
investment grade companies. Financials are publicly available
for your review as well. Your broker can assist you with in
securing this information.
Contract wording is where you will find the
major differences between the carriers. Your broker can provide
specimen policies and wording for any key endorsements for
your review. Among the things you will want to understand
are how they define insolvency, what the claim filing deadlines
and requirements are, what reporting requirements are part
of the program, what their cancellation provisions are, how
they treat collections on past due claims and how recoveries
are shared. All of these items vary widely in some cases,
so understanding how one carrier operates does not necessarily
mean that you can expect the same from a different set of
underwriters.
The quotes, if you receive more than one
offer, will have some fundamental similarities, but you should
take the time to go over these differences with your broker.
Comparing premiums and deductibles and/or coinsurance has
to be done in light of what the carriers are offering on coverage
limits and policy conditions. Credit insurance is not a commodity
product that can be shopped on price alone. The goal is to
find the program that best matches you needs based on how
you want to put the policy to work. As custom tailored programs,
you should expect that some fine tuning of the initial quotes
may be necessary to bring the policy offers in line with your
requirements.
Implementing
and Managing the Program
Once you feel you adequately understand what
you are buying and have the policy fine tuned as much as possible
to match your needs, you will simply need to issue the policy
and pay the premium. It typically takes about two weeks for
the policy to arrive.
On an ongoing basis, you can expect to have
to maintain monthly past due reports in some policies. You
will also want to monitor your account exposures in the event
you need to add new accounts or increase the coverage limits
on existing accounts. You will want to note key policy requirements
like claim filing windows, and review the forms needed to
request coverage, report past due accounts and file claims.
Many carriers offer you the ability to manage these activities
directly online, but your broker should also be available
to assist where needed.
Credit
insurance is a tremendous financial and risk management tool.
With the right broker partner and carrier, you can enjoy protection
on one of your company's largest assets, safely expand your
sales, improve your borrowing arrangements and take advantage
of expert decision support and credit guidance.
Going
Further
If you
recognize the benefits credit risk insurance may be able to
provide for you, don't hesitate to contact us. Use this convenient
and confidential credit
risk insurance application form to receive an
evaluation at no charge.
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