1. LEVEL OF SELECTION

One of the ways to classify policies is according to the level of risk selection that the trade credit insurance allows. To what extent and under what conditions these product types are actually available in general or in a particular situation will depend on the individual trade credit insurer's own offering strategy. Generally speaking: the better the spread of risk and the lower the possibility of antiselection, the higher the probability of acceptance by the trade credit insurer and the lower the relative costs (= premium) for the insured.

a) Whole turnover

This is the most traditional policy form that covers the entire business-to-business turnover of the insured company, that is, all business transactions with all their buyers (both current buyers and future buyers). From the point of view of the trade credit insurer, this ensures a maximum spread of the risk over buyers and buyer countries.

b) Selected part of the turnover

As long as the risk-to-premium profile remains acceptable, trade credit insurers are usually prepared to cover a selected part of the insured's turnover. For example: only the company's domestic sales, only their export business or only a specific division or a particular product line (such as cover for the delivery of printers, but not for the sale of spare parts or for the maintenance and service contracts).

c) Selected buyers

Cover can also be restricted to the turnover made with a number of selected buyers. This selection may be on fairly objective criteria such as cover only for buyers on which the outstanding amount exceeds a pre-agreed level (‘Datum line’) or cover only for the insured's largest x number of buyers (‘Key account’ or ‘Key buyer’). Such selection may also be on less objective criteria, covering a number of buyers that have been explicitly chosen by the insured.

d) Single buyer

In this case the insurance covers all sales transactions with one specific buyer only. An even further level of selection is single contract cover, where the policy covers only one single transaction with a single buyer.