Credit Insurance: A Business Solution

1. Credit Insurance: A Business Solution Pat Hudson Coface North America 1

2. Credit Insurance: A Business Solution • Increasing sales and profits • The primary focus of business strategy • Getting Paid • The most difficult function in business today • Credit Insurance • A solution for increasing sales and getting paid 2

3. Credit Insurance: A Business Solution • “Getting Paid” • Is the most difficult function in business today • Virtually every aspect of a business is insured except the most important – the accounts receivable • A large insolvency is more likely than a fire or theft or other major P&C loss • Yet less than 25% of all companies insure their accounts receivable 3

4. Credit Insurance: A Business Solution • What is Credit Insurance? • A Credit Insurance policy guarantees policyholder will be paid for goods or services sold to its customers • The policy insures commercial accounts receivables against non-payment. 4

5. Credit Insurance: A Business Solution Policy Benefits • Protection against bad debt loss • Increased sales • Better borrowing position with insured receivables • Credit information resource • Collection services 5

6. Credit Insurance: A Business Solution • Effective Utilization of Policy - Benefits Protection Against Bad Debt Loss • Maintain internal credit review • Credit insurance information resources • Fast moving business • Uses “Blanket Coverage” • Uses “Online Automatic Approval System” • Uses “Online Coverage Request System” to reach underwriters for immediate review 6

7. Credit Insurance: A Business Solution • Credit Insurance as a Profit Center Credit insurance is the only insurance product that can MAKE money for its purchaser: • Increased Sales • Lower borrowing costs • Replace costly letters of credit 7

8. Credit Insurance: A Business Solution Increased Sales Volume – Existing Customer Allowing for higher credit lines • Example- • Without Credit InsuranceWith Credit Insurance • Credit Limit: $50,000 $100,000 • 6 turns per year: $300,000 $600,000 • Margin on sale: 10% 10% • Risk Potential: $50,000 $60,000 • Gross Income: $30,000 $60,000 • Full coverage: $50,000 • Policy co-insurance: $10,000 • Insurance cost (0.1% of sales): $6,000 • Net “income” (with insurance) =$54,000 (gross income less insurance cost) • Differential income ($54,000 - $30,000)= $24,000 8

9. Credit Insurance: A Business Solution • Better Borrowing Position • Credit insurance is major component of banking agreement – keeps rates down and borrowing line up • Replace costly LC’s Credit Information Resource • Worldwide information database • Faster insurance decisions Collection Services • Outsourcing – More cost effective • Worldwide collection network 9

10. Credit Insurance: A Business Solution • Key to Growth • Ability to compete with larger companies for larger sales • On export sales, ability to compete by offering open account terms • Quick responses to orders • Cost control • Reduction in loss reserves • Reduced borrowing costs • Outsourcing collection services 10

11. Thank you 11