A business’s accounts receivables are generally the largest asset on its balance sheet. It is also, most likely the only asset on the balance sheet that is uninsured. Also the perception of risk/reward is often skewed. A company will pay to insure the return of a $500 smart phone, which if lost is a nuisance but will stand naked on a $500,000 credit risk, which if lost could be catastrophic.
Independent agents and brokers should view credit insurance with both an offensive and defensive strategy. All national and most regional insurance brokerages have internal departments dedicated to trade credit and political risk insurance. With only single digit market penetration these brokers see the upside potential.
The defensive posture is that these national brokers, understanding the limited number of insured’s use Trade Credit Insurance as a wedge product into the larger relationship. Imagine your clients hearing from your competitor “If you broker has not discussed insuring the largest asset you have, what else have they not told you about”. If the Incumbent Broker/Agent does not introduce domestic and International accounts receivable insurance to their clients, they run the very real risk their competitor will.
An offensive strategy involves the producer to introduce credit insurance to their clients. This will uncover business that currently use the product without your knowledge, missed commission opportunities, as well as identify new needs, with their revenue opportunities. Using credit insurance in prospecting for new clients can lead to unmet needs their current provider is not addressing.
Trade credit insurance is a specialized line of insurance with a limited number of carriers. Policies are tailored made and each has their own compliance requirements. This not knowing what they don’t know leads many independents to shy away from the product. Why jeopardize a much larger relationship by introducing something they have limited knowledge of.
By dealing with a Trade Credit Insurance specialist, who is also a broker, the independent can:
- Meet their clients needs
- Protect the client relationship, the specialist deals only with this product and has no interest in the rest of the P&C relationship
- Make additional commission through revenue sharing arrangements