Every company that begins to use a credit insurance policy has a few steps to take to fully implement that policy to begin to utilize it fully. Here’s how.
Quoting
The first step in using credit insurance is to complete an application and get a quote. Part of the quote is underwriting the top 10-20 accounts to sample the customer base for likely coverage.
When the top accounts are approved for coverage, the coverage is reserved so that if the you buy the policy those accounts are already approved and are covered on the policy. The quote is the beginning of implementing a new policy.
For more on how credit insurance companies make underwriting decisions, see How Credit Insurance Coverage Decisions Are Made.
Binding Coverage
When the company decides to buy the policy, Coface “issues” the policy or “binds” coverage just as in other types of insurance. Once bound or issued, the coverage begins on approved accounts.
At the beginning, the new policy only has coverage on the key accounts that have been approved during the application/quote process. If unnamed coverage is being used (Discretionary Credit Limit or “DCL”, L Rider or other types), the accounts that fall under that type of coverage are also insured.
What about the rest of the accounts? What happens to them?
Most companies have far more accounts to insure than the 10-20 that are approved during the application process. To add those to the new policy, each must be underwritten and approved for coverage by the insurance company. Depending on how many accounts there are, there are 3 ways to do this.
- The new policyholder can enter them in the web portal individually. Coface’s portal is called Cofanet and the process of entering a buyer is very easy. Sometimes, the buyers are added as new orders come in. Other times, they are added in bulk by in-house accounting staff or even temps who are brought in.
- Another option is for the new policyholder to provide a customer list to Coface and we will enter the accounts. We can do this when the number of accounts isn’t too large.
- For high volume companies with hundreds or thousands of customers, the final option is to export a list of accounts using Excel to make the process electronic. The export file will have the name, address and phone number of the customer along with a requested coverage amount and an identifier like the DUNS number if possible. Coface will upload the file into our underwriting system, which automatically assigns each account to an underwriter with a coverage request. (The work involved in creating the export isn’t overly difficult but only makes sense with a larger number of accounts. Otherwise, manually entering them is usually the easiest way to get this done.)
Policy Delivery and Training
Coface produces the actual policy and delivers it electronically to the new policyholder by email. We also provide a hard copy.
The policyholder learns how to use its new credit insurance policy in an implementation meeting with their agent (me!). In this meeting we cover several important points such as:
- How the rest of the accounts will be loaded into the policy using one of the 3 methods described above.
- How the unnamed coverage works (if applicable). This is the DCL or L Rider.
- A review of the claim filing deadlines.
- Training on Cofanet.
- A review of any special riders in the policy that cover things like custom, un-shipped inventory, extended terms of sale, delayed effect of cancellation and others.
After this meeting, the company is ready to begin using their new policy to increase sales, access more working capital with their lender, make faster, more informed credit decisions and to operate with a protected balance sheet.
To learn whether credit insurance can help your business, either email me at tate.parker@coface.com or visit my website at tateparker.com.
Recent Comments