Book contents
- Frontmatter
- Contents
- Foreword
- Introduction
- Disclaimer
- Chapter 1 What is trade?
- Chapter 2 What is trade credit insurance?
- Chapter 3 Product types
- Chapter 4 Risk types
- Chapter 5 Typical set-up of a trade credit insurance contract
- Chapter 6 Premium, the price for cover
- Chapter 7 Day-to-day policy management
- Chapter 8 Buyer risk underwriting in trade credit insurance
- Chapter 9 Debt collection
- Chapter 10 Imminent loss and indemnification
- Chapter 11 Renewal, expiry, termination of a policy
- Chapter 12 Single risk business
- Chapter 13 The single risk insurance market: Private and public players
- Chapter 14 Reinsurance of Trade Credit Insurance
- Trade Credit Insurance resources
- Glossary of trade credit terminology
Chapter 9 - Debt collection
Published online by Cambridge University Press: 18 January 2018
- Frontmatter
- Contents
- Foreword
- Introduction
- Disclaimer
- Chapter 1 What is trade?
- Chapter 2 What is trade credit insurance?
- Chapter 3 Product types
- Chapter 4 Risk types
- Chapter 5 Typical set-up of a trade credit insurance contract
- Chapter 6 Premium, the price for cover
- Chapter 7 Day-to-day policy management
- Chapter 8 Buyer risk underwriting in trade credit insurance
- Chapter 9 Debt collection
- Chapter 10 Imminent loss and indemnification
- Chapter 11 Renewal, expiry, termination of a policy
- Chapter 12 Single risk business
- Chapter 13 The single risk insurance market: Private and public players
- Chapter 14 Reinsurance of Trade Credit Insurance
- Trade Credit Insurance resources
- Glossary of trade credit terminology
Summary
One of the important pillars of the trade credit insurance policy is debt collection in case receivables remain outstanding after due date of the invoice. Insurers require from their insured a good credit management and monitoring of outstanding receivables. This is of course in the interest of any supplier of credit, whether credit insured or not. Unpaid invoices can have a serious impact on the insured's turnover or cash flow.
As soon as the insureds become aware that a claimable event is imminent or has actually occurred, they are obliged to take all necessary or expedient actions and to exercise all due diligence to avert or to mitigate the claim. This includes in particular drawing down securities, exercising his rights to retention of title and, if necessary, taking court action to recover the receivables. In doing so the insured is obliged to follow the insurer's instructions and to obtain the insurer's prior consent before concluding any composition arrangements, agreeing to payment schemes or entering into similar agreements.
The credit insurer expects the insured to conduct its buyer monitoring as if the credit were not insured. This means that it is expected the insured will spring into action if the invoice is still unpaid after the due date. Payment reminders should be sent to the buyer and/or phone calls should be made. This way possible disputes or complaints about deliveries can be detected in an early stage.
Most policies give the insured the freedom to continue deliveries despite the outstanding invoices, realizing that few buyers have the habit of paying their bills in time. This grace period is usually called the maximum extension period, and it starts on the due date and ends 30, 60 or 90 days later depending on the policy conditions. The variable duration of the maximum extension period can be related to the specific country, sector or financial status of the buyer. Continuing deliveries during the maximum extension are of course subject to a sufficient credit limit.
- Type
- Chapter
- Information
- A Guide to Trade Credit Insurance , pp. 75 - 82Publisher: Anthem PressPrint publication year: 2015