The head of a leading trade credit insurer has spoken out about common client misconceptions, saying many businessowners still believe coverage is too costly and has limited scope for customisation.
While understandably biased, Atradius managing director Mark Hoppe (pictured) says trade credit insurance is among the most vital of coverages – particularly for businesses which rely on cashflow.
“Trade credit insurance protects businesses when their customers fail to pay and it can help keep an organisation’s cashflow healthy, even when the revenue expected isn’t forthcoming,” says Hoppe. “Insuring accounts receivable can help the business to operate with more confidence, knowing that cashflow won’t be disrupted even if customers don’t pay.”
However, Hoppe says many businesses avoid taking out trade credit insurance because of a misperception that it’s too expensive or not suitable for their specific business needs – concerns he says simply aren’t warranted.
“The cost of trade credit insurance is calculated based on a percentage of the organisation’s turnover combined with the level of risk,” says Hoppe. “That means every policy is priced according to the individual business’s circumstances and requirements.”
Hoppe also says few customers realise the scope of trade credit insurance products.
“There are many products available, and each one is designed to suit a different need,” he says, noting that insurance premiums can be designed for businesses with revenue below or above $5 million, for multinationals and major exporters, as well as special products designed to cover events and situations that arise outside the organisation’s control.
According to Hoppe, the premiums for these products are typically less than 0.25% of the turnover insured.
“The value provided to an organisation could outweigh the cost of the premiums, not to mention the peace of mind business owners can gain just by knowing that the next time a customer doesn’t pay, it’s not money out of their bottom line,” he added.
