Have you ever been involved in an automobile accident? Likely the answer is “yes” and equally as likely the experience was not pleasurable.
What does this have to do with trade credit insurance, you might ask? Wreck the car compared to not getting paid for the goods and services provided to your customer; both are losses you expect your insurance carrier to make right. After all, you paid your premium, you expect to get your claim paid. Pretty simple expectations.
Unfortunately, most people view trade credit insurance in the same light as auto insurance, or property insurance, or any insurance product. A loss is indemnified. I would venture to say that even the dozen trade credit insurance providers operating in the USA spend most of their marketing budget drilling down on the topic of protecting a business from the perils of not getting paid from their customers.
A quick gander at some of the marketing statements from the major trade credit insurance carriers:
AIG- Trade credit- provide credit to new customers without putting your business at risk.
QBE- Selling on trade credit terms is becoming the norm. Yet with this comes customer insolvency, overdue accounts and political risks. Trade credit insurance helps your company mitigate these risks.
Atradius- Trade credit insurance protects your receivables from non-payment.
Coface- Credit insurance protects businesses from bad debt caused by a customer’s insolvency or payment default.
Euler Hermes- Trade receivables are protected, and your cash flow and profit line will be more secure.
Pretty much a common theme in these marketing statements and value proposition assertions. These five carriers represent almost 90% of all trade credit insurance written in the USA, all are global players and highly regarded. They all pay their claims.
So, what does this have to do with auto insurance and my Cadillac?
Trade credit insurance is so much more than getting a claim paid for a customer who defaults on their trade credit obligation. Let me illustrate the difference through a personal event which occurred a few years ago while my wife, daughter and I were traveling to Virginia Beach on vacation.
We were making decent time from our home in Maryland that Saturday in June 2004, we were already past Richmond heading south on I-64 nearing Williamsburg, Va. Traffic had now stalled, and we came to a stop on a bridge. I heard some noise behind us and looked in my rear-view mirror to see this car weaving in and out of the lanes. At that instance, bang, this guy had plowed into my Cadillac. Although I was standing on the brake, the force of the crash pushed me into the car in front of me. Pretty much pancaked my Caddie.
While the damage was significant, no one was hurt in any of the three vehicles.
From this point forward, I experienced what I consider to be one of the finest demonstrations of customer service in managing my claim. Encompass by All State was exceptional in every regard. They set us up in a rental within an hour and had us on our way to Virginia Beach in our minivan. They called me the next day (Sunday) to see how we were doing and explained that likely by Tuesday they would have the claims examiner’s report regarding the state of the Cadillac.
On Tuesday, they called and advised me that the Cadillac is not repairable and has been declared “totaled”. They provided me with the salvage value and issued me a check which was waiting for me when I returned from vacation. On Thursday, I purchased a new Cadillac from Risk Hendrick Cadillac in Norfolk, Va. In which I drove home with my family that Saturday.
The claims service was exceptional, I couldn’t have asked for anything more. Or, could I?
A few days after we returned home, the customer service department of All State Insurance called to ask me to participate in a survey of my experience. I eagerly agreed and I explained that I have spent my entire professional career in the insurance industry, and I could only hope that our claim management professionals handled our client’s settlements as promptly and professionally.
I explained that this experience had really helped me realized how to best differentiate trade credit insurance from all other insurance products. The real added value associated with trade credit insurance is the management of the risk and the avoidance of the accident altogether. Insurance is a zero-sum financial proposition in most cases; however, trade credit insurance is all about value added services supporting profitable sales, minimizing losses and maximizing capital management. Trade credit insurance will always provide a positive ROI if it is utilized and understood properly.
When the interviewer asked how I might improve their services, I suggested that having “someone tapping me on the shoulder 60 seconds before impact and to get the hell out of the way” would be the ultimate service. No matter what financial view is analyzed, the avoidance of a loss is the most cost and time beneficial solution.
The real value proposition of trade credit insurance is associated with loss avoidance, mitigation and management. Most of the major players have deep resources to augment their client’s credit management capabilities. These carriers have invested in human resources in the thousands, globally positioned to be near the actual risks, utilize tremendous analytics, effective debt collection and recovery teams, maintain deep and current informational sources, etc.
While my Cadillac story had a reasonably happy ending, I can assure you that I would have much rather avoided the accident altogether. Trade credit insurance is far more about the risk and receivable management services they provide beyond the expected claim settlement when avoidance was not possible. The best trade credit insurance partner is the one best able to continue “tapping you on the shoulder” to avoid a loss.
For additional information, fee free to call (800) 320-7338 to speak with a local credit insurance expert.
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