Utilising Credit Insurance for the benefit of our customers and the business

You may be wondering 'what is Credit Insurance?'

In simple terms, Credit Insurance is an insurance policy which transfers the risk of non-payment of invoices due for payment by customers after the goods have been received.  This non-payment could be due to insolvency or default on the part of the customer.

But credit insurance does more than just that. 

  • It protects the cash flow of the business and provides security as 90% of the insured loss will be paid out by the policy in the event of a bad debt.
  • It assesses the appropriate value of credit limit for the risk with numerous sources of information at hand to be used by the insurer’s underwriting team, such as a worldwide database of company information, Companies House, status agencies, and management information.
  • It continually monitors changes in your customers risk factor so that credit limits can be adjusted accordingly.  Customers’ credit limits are managed by the insurer’s specialist underwriters.

Many businesses who have customers paying on invoice, and are therefore effectively ‘lending them money’ to the value of the goods they’ve received until such time as the invoice is settled. will have up to 40% of their assets held by debtors.  This often remains unprotected.  The only security is the invoice.

Being in this situation can have adverse effects on the business as it may fail to grow for fear of the unknown and may choose to place new customers on pro-forma invoicing.  Businesses may not have the time nor resources to asses a client’s financial standing and may not have the expertise to set appropriate credit limits based on the information available to them.  Directors are also at risk as most company overdraft facilities and loans are often secured by personal guarantees.

Credit Insurance does, of course, come at a cost.  There is a premium based on a percentage of the total risk being covered. However Lamberts feels it is expenditure well worth making.  Trina Beare, Managing Director at Lamberts, says “Apart from the obvious protection that Credit Insurance affords, a major benefit to us as a Company is the flexibility it allows for us to meet our customers' ever changing needs."

Customers have greater credit facilities and can therefore order the goods they need when they need it.  Laurence Hill, S-Tech Insurance Services Ltd, says “Credit insurance should be a serious consideration for most company boards, particularly during this period of economic instability where insolvency numbers continue to increase due to changes in consumer buying habits and currency devaluation due to Brexit."

The benefits of guaranteed payment of a very large percentage of the debts, and the ability to offer insured credit limits on client accounts, will ensure the customer can continue to make purchases, and the business can continue to make sales. Both businesses will continue to grow as a result.

And more importantly, by protecting its risks Lamberts can form good customer relations by offering better terms to customers and further build on those relationships that are so important to the business.
With over 14,000 products in stock at www.lamberts.co.uk just imagine what we can do for you to help your business grow.

To discuss your existing or new credit facility with Lamberts call our team on 03300 535598 to explore the possibilities open to you.

Scott Price
Regional Sales Manager

If you’re interested in discussing how credit insurance might benefit your business contact Laurence Hill.