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Trade Credit Insurance

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Trade credit insurance for SMEs

Businesses that offer their customers credit terms are vulnerable to the risk of non-payment. If your customer does not pay their invoice on time or loses the ability to pay you, those outstanding receivables become a bad debt which in turn becomes your loss. Debt Protect is Aon’s exclusive trade credit insurance policy that can protect you against the risk of such losses and will support your business continuation.

A bad debt will not only wipe away profits, it impacts cash flow, weakens the balance sheet and takes your time away from the daily running of the business. You may think that as a small business your risk of bad debt losses are low or that getting such a product could be costly, but a trade credit insurance or bad debt insurance policy tailored to suit risks commonly faced by businesses with smaller revenues could provide a cost-effective option to protect your business against bad debts.

Debt Protect can be a simple and low-cost credit insurance solution to suit businesses that have an annual turnover of between $5M up to $50M.

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FAQs

Why choose Debt Protect?

Exclusive rates
By purchasing your credit insurance policy through Aon, you can access a clear and transparent pricing model based on turnover which makes it quick and easy to identify your premium. In addition to the competitive pricing, we have negotiated competitive policy terms and reduced credit limit fees. 

No more invoice chasing
As a trade credit insurance policyholder, you can access a team of global debt collection specialists. A ‘no collection, no fee’ service is provided, dependent on your level of coverage. You could also get up to 100% cover for collection costs and legal fees (excl. GST) which may result in savings. Collections support is available in any country.
24/7 online policy management
You can view and manage all your policy and credit limit information at any time and from anywhere with access to an online portal. Managing your trade credit insurance has never been easier.
Fast-tracked claims
The claims process is fast and efficient helping you recover from your losses as quickly as possible. The insurer will assess trade credit insurance claims under $40,000 within 5 working days of receiving all claim documents.

Case Studies:

Dick Smith: electronics retailer

Dick Smith’s insolvency demonstrates the catastrophic impact on suppliers when a buyer is unable to pay for the goods and services they have purchased. Aon assisted clients with more than $10m in claims following this insolvency.

Arrium Group: steel manufacturer and distributor

Arrium Group (aka Whyalla S.A. steel works) had administrators appointed when the company failed to recapitalise. All supplier accounts were frozen, putting them in a loss-making situation. Trade credit insurance became critical for these suppliers.

RCR Tomlinson: engineering firm

At its peak in early 2018 RCR Tomlinson was valued at almost $1 billion but by November it was in administration with over $250 million owed to 4,000 trade creditors. Aon assisted clients to successfully process claims ranging from $20,000 to more than $9 million.

Pumpkin Patch: clothing retailer

Pumpkin patch’s collapse in Australia and NZ left them unable to pay suppliers $13.2 million and owing the bank another $60 million. The suppliers with trade credit insurance policies were able to recover 90% of their losses through claims.

Frequently Asked Questions

What is trade credit insurance?

Trade credit insurance, also known as credit insurance or bad debt insurance, is protection against the risk of selling on credit terms. When selling on credit terms, there’s always a risk of non-payment. Insurers employ teams of analysts to monitor your exposures. The policy therefore becomes a credit management tool to help you to avoid losses as well as a safety net to help protect you against unexpected failures.

How do I apply for Debt Protect?

Applying for trade credit insurance with Aon is easy. You can fill out a form to request a free no obligation quote here or speak to a trade credit specialist for more information.

How much does trade credit insurance cost?

To correctly price your insurance, the insurer will usually need to know your buyers or customers and the risk involved in offerring credit to these customers. The benefits of using the Debt Protect policy arranged through Aon is that there are clear premium pricing bands to suit your revenue. As an indicator – if your business has a turnover of $3.5 million per year, your policy premiums could start at $10,000*. You will have to respond to a few simple questions to check if your business qualifies for this policy. You can request a free no obligation quote here or speak to a trade credit specialist for more information.

*Excluding GST and applicable taxes and charges. Subject to full policy terms and conditions. The pricing for Debt Protect is based upon 12 months cover. Debt Protect is subject to full terms, conditions and limits of the policy. Please review the full policy wording for more information.

 

How does trade credit insurance work?

A bad debt occurs when the money owed becomes unrecoverable, typically due to insolvency. The policy is designed to provide a safety net against unexpected losses but it can also help you avoid losses altogether. The insurer employs a team of analysts who review the credit profile of your clients and monitor financial information and payment experience to help you set credit limits. This can help you identify and avoid trading with businesses that are distressed. If an insured client becomes insolvent the policy reacts to ensure you get paid for the goods and services that you have supplied. The policy will cover up to 90% of the insured balance owing (minus your deductible) to ensure that your business can continue to operate with minimal disruption.

What claims are covered by trade credit insurance?

Standard cover can protect against insolvency and protracted default. However, you can also add protection for events such as political risk and orders commenced but not yet delivered (pre-delivery risk insurance). A policy can be structured to meet with the particular demands of your business and the territories in which you operate.

What are the benefits of insurance for trade credit?

A credit insurer becomes the eyes and ears on the ground for their client. They will check a prospective client’s stability, creditworthiness and reputation. Atradius, the insurer for Debt Protect has 160 offices in 50 countries around the world. Their combined underwriting team has live data on over 100 million businesses. Through their information, you can investigate the risk your customer’s credit terms pose to you.

If a customer fails to pay you, you have the protection of a policy to cover up to 90% (less your excess) of the outstanding amount to make sure that your business can continue unaffected. To make a claim for payment, all you have to do is log into the 24/7 online portal, complete the appropriate documents and your claim will be assessed by one of the insurer’s claims specialists.

Do I need credit insurance?

Some of the factors you may wish to consider when deciding if trade credit insurance is right for you:

Risk is an inherent part of credit based trade. Sometimes, it  doesn’t matter how well you know your market and customers – insolvency and payment default are commercial realities. Despite sometimes knowing your buyers for many years, you can’t predict the future of their business. Almost every business has had a direct experience with a bad debt, and this impacts cashflow, profitability and confidence

The payments owed to you are often a large chunk of your assets. Your accounts receivable function is one of the largest assets on your balance sheet. Just as you insure other valuable assets such as your factory or your office property, you may want to consider the exposure that your outstanding payments pose to your balance sheet. Trade credit insurance can insure you against this risk.

Also, chasing non-payments can take up significant business resources. Credit insurance can allow you to maintain sales and reduce negative impacts of non-payment. This often frees up the time and resources otherwise spent chasing payments, to focus on growing your business. 

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