The repercussions of the global credit crisis have highlighted the vital role that credit insurance can play in stabilizing trade flows. Some even blame the disappearance of well-known brands of credit insurance companies. But this shows a misunderstanding of the role of credit insurance.
Companies have found that their customers cannot pay and often cannot obtain business credit financing from their banks to compensate for the lack of cash flow.
Insurance – other insurance – must have limits.
Credit insurance is insurance. Like any other form of insurance, credit insurance is designed to protect insured clients. And again, as with any insurance, there are limits to what you can insure.
Unsurprisingly, the auto insurance company refused to insure an unlicensed driver, or that at any point if the insurance was terminated with a licensed driver losing his sight. The car insurance company will make intelligent, common-sense decisions to cover the risk profile of potential drivers. These solutions help the customer to avoid unacceptable risks. Even an increase in insurance premiums will not change the high risk of accidents that these drivers are exposed to while driving a vehicle cannot be met.
This is what credit insurance companies do regularly. Consider the risk of a customer not paying for purchases made on credit, and non-customer recommendations are more likely to fall into this risk category. However, in the current economic environment, it is considered necessary to help customers avoid unnecessary risks by often reducing the reach of potential buyers.
There is an analogy here with credit insurance. The economic landscape is constantly changing, and during a recession like this, change happens quickly and quickly. Thus, credit insurers need to review their risk portfolio and remove protection for buyers who have passed the transition from uninsured to insured risk.
But let’s put this in perspective.
For the entire portfolio, the number of group withdrawals is minimal by one per cent and is aimed at a smaller percentage of companies. Atradius covers the vast majority of threats, providing coverage and financial protection that will be invaluable in the current economic crisis. (https://atradius.no/kredittforsikring/)
Like the prudent mover of an insurance company, credit insurers have a responsibility to direct their clients to unacceptable risks, not just to cover all transactions, no matter how risky they may be.
As always, credit insurance companies are just doing their job.
There are many examples of credit insurance companies that keep customers in bilateral trade beyond the first signs of the imminent demise of customers. Credit insurers will only withdraw coverage from buyers as the last resort.
Moreover, credit insurance companies are just insurance companies and financial companies. Their job is not to provide support to sick or bankrupt companies. It could be the work of banks in companies or investors and not the credit insurance company whose customers decided to trade with these companies.(https://atradius.no) A credit insurance company exists to protect its customers’ credit by guiding the customer to the reasonable risks and his willingness to enter into the sale process with buyers who believe the chances are bad. When the credit insurance process ensures it ends in its absence, the amount agreed upon in terms of your insurance contract is refunded to clients.