Sponsored column by CreditAssur

All insurance brokers aspire to offer excellent service and cutting-edge advice—in short, to exceed their clients' expectations.

More often than not, advice is limited to general insurance. But did you know that you are also well positioned to advise on a highly specialized product that is often misunderstood by commercial clients?

Credit insurance: guarding against write-offs

Credit insurance provides coverage against client insolvency or non-payment of accounts. This means that companies with a client placed under the protection of the Companies' Creditors Arrangement Act may be able to avoid steep financial losses if they are covered by credit insurance. Similarly, if clients are late in paying, credit insurance may offer some protection.

A total of nine companies offer credit insurance in Quebec. A number of them deal directly with clients, although they all distribute their products via specialized brokers.

Would your clients benefit from this coverage?

From time to time, you might come across things that will give you a valuable clue. For example, if a client calls you up and asks whether her building insurance covers losses caused by the bankruptcy of one of her customers, you'll know she should have taken out credit insurance.

Unfortunately, this knowledge would unfortunately come too late for your client, and she would most likely have to absorb the loss. But if you speak to her about credit insurance and refer her to a specialized broker, she may well regard you as a genuine partner in her business success!

How credit insurance works

Credit insurance is designed for companies (particularly manufacturers) with annual revenues of $1 million or more. Each company can choose which operating segments it wishes to insure. For example, a company may elect to only cover its US account receivables. Another company might choose to insure certain specific clients accounting for significant portions of its revenues and whose default could place it in a difficult financial situation.

Credit insurance policies are very specific about which companies are covered. Each company to be insured must be identified and must be assigned a risk limit.

This product has another major advantage. Policies stipulate that credit insurance companies must monitor the operations of insured clients. In the event of financial difficulty, the companies would quickly inform their clients about any worrisome situations. The insureds would not only be covered in the event of non-payment or bankruptcy; they could also proactively take action with their own client to enter into an arrangement and thus avoid having to file a claim.

Michelle Davy, president of CreditAssur, has worked as a credit insurance broker for the past few years. With a daring streak and a bit of luck on her side, she began specializing in this area, which requires an insurance broker licence as well as knowledge of the credit industry. "Receivables can represent up to 35% or 40% of a company's assets," she notes. "That's a lot. And as with any other type of insurance, situations often arise when you're least expecting them. When Target went bankrupt, for example, a number of my clients were very relieved to have credit insurance, which meant they avoided major losses."

Ms. Davy also has a client whose delivery truck was getting ready to leave the warehouse when the credit insurance company called up with news that that the business that had placed the order was experiencing financial difficulties. "My client still mentions the fact that her credit insurance saved her life!"

All in all, taking out credit insurance could be a beneficial decision for some of your commercial clients. Why not bring up the idea?