The outbreak of COVID-19 has had devastating impacts on countries all across the globe, bringing booming economies to a grinding halt. Unfortunately, many businesses have suffered and crumbled under the weight of the global pandemic. Even businesses not directly affected by the COVID-19 pandemic have felt the wrath through the domino effect, seeing disruptions to business cash flow, supply chain and movement of goods globally. There is no question about it, ensuring your business and its cash flow are protected is crucial, especially in times of great financial crisis like we are currently facing. Perhaps your business already has credit insurance and are unsure what is covered by your policy, or the current financial climate has highlighted the importance of credit insurance for your business. Regardless of what event has brought you here, credit insurers have had an influx of trade credit claims as a result of the pandemic. The trade credit insurance market has undergone drastic changes as a result of COVID-19. In this article we will dive deeper into these insights and what this means for you and your business.
COVID-19 Impact On Trade Credit Insurance
While we are certainly not out of the woods yet, companies are beginning their preparation to recover from the impact of the virus. As part of this preparation, many are seeking the advice from their credit insurers to identify what they are covered for and receive advice on the best way to maintain business continuity. The longstanding rules of the credit lending industry have shifted as a result of COVID-19 and the implications are being felt worldwide.
As a result of COVID-19 many insurers have opted to reduce their trade credit protection cover and introduce tighter credit limits and reductions. The pandemic has seen a significant rise in the amount of clients and customers unable to pay, citing COVID-19 as the reason. More customers are also seeking the assistance of other loan institutions to help their cash flow including increased payment periods and returning stock they cant sell. These risk mitigation actions ensure your business is able to recover from the economic effects of the global pandemic.
Tips To Protect Your Company
Review Your Insurance Cover
When facing such uncertain events, it is important to know exactly how your business will be protected against the unknown. Talk to your insurance provider and review all aspects of your policy to understand exactly what you’re covered for. Be sure you understand the wording of your policy and any exclusions there may be. It is also important to review the product disclosure statements available in relation to your policy. Your account manager is happy to resolve any queries you may have and ensure you have total confidence in your knowledge of your policy.
Compliance is equally as important as understanding your insurance policy. Ensure your company understands what is required to be eligible for the policy to be valid. Confirm with your insurer exactly what triggers your particular policy to allow a claim and understand the required timelines. Without compliance to your policy, you will be unable to make a valid claim and your business will be vulnerable.
It is also important to know the maximum extension period for your insurance account. This is the point at which your insurer must be notified that an overdue account could result in a claim. Full transparency between yourself and your insurer will allow you to assure your business is protected.
Communicate With Your Clients
The element of surprise is not always welcome, especially when it comes to unexpected disruptions to your cash flow. Ensure you are regularly communicating with clients and understand any concerns to cash flow or trading they may be experiencing. Identify any pressure points that may cause a delay or default on payment. Be sure you are aware of any issues that may affect you, and understand the flow-on effect for your business. Discuss any concerns with your insurance account manager and ensure you understand your business is covered. It is always better to err on the side of caution rather than be caught out by an unexpected event.
Moving Forward
The impact of COVID-19 has highlighted the importance of trade credit cover and insurance for businesses all over the globe. Regardless of the goods or services your business sells, it is crucial to be protected. Trade credit insurance is a valuable part of a company’s risk management strategy. While the internet is full of general information regarding credit insurance cover, it is for information purposes only. It is essential to discuss this directly with your insurance company to ensure your business is properly protected.
For premium trade credit and export insurance services, get in touch with Niche TC. We have helped hundreds of Australian businesses protect their bottom line with policies and covers matched to their specific needs and requirments. Give us a call today on 02 9416 0670 or get in touch through the website form.
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