1. Credit Insurance: A Business Solution1
Credit Insurance:
A Business Solution
Pat Hudson
Coface North America

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 Insurance With Credit Insurance
Credit Limit: $50, $100,000
6 turns per year: $300,000 $600,000
Margin on sale: 10% 10%
Risk Potential: $50, $60,000
Gross Income: $30, $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