Skip to main content Accessibility help

We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.

Close cookie message
×
Hostname: page-component-84b7d79bbc-5lx2p Total loading time: 0 Render date: 2024-07-30T10:42:04.539Z Has data issue: false hasContentIssue false

Chapter 6 - Premium, the price for cover

Published online by Cambridge University Press:  18 January 2018

The International Credit Insurance & Surety Association
Get access

Summary

Before the prospect decides to accept the proposed conditions for cover, negotiations may focus on several aspects of a policy: general provisions, credit limits, specific conditions and, of course, the premium rate. Every insurer has proprietary pricing tools to calculate a premium rate but some of the common pricing building blocks are mentioned in this chapter.

When a prospect applies for a credit insurance policy, the insurer knows which parameters to take into account for the premium rate he will offer.

- The subjective risk

The prospect gives details of its company and trade sector, the usual credit terms agreed upon, credit management procedures, the current outstanding receivables and the losses sustained in the past. The insurer can check the creditworthiness of the prospect and may decide whether to start a business relation or decline to make any offer. When the prospect is a member of a trade sector association and maintains a credit management policy aimed at the prevention of losses, this may be a reason for the insurer to include a premium discount in the calculation of the premium rate.

- The objective risk

Details about the portfolio of buyers will determine the premium rate to a great extent. The following elements may play a role:

  • • the volume of turnover;

  • • the spread of risks;

  • • the trade sector of the buyers;

  • • the creditworthiness of the buyers;

  • • the possible inclusion of cover of political risks;

  • • the buyers’ domicile(s) and respective sovereign creditworthiness;

  • • the possible inclusion of the pre-credit risk and the average/ maximum delivery period;

  • • a monthly declaration of whole turnover or of outstanding receivables

  • • the credit term agreed upon with the buyers;

  • • the effective credit term;

  • • the loss history;

  • • the percentage of cover applied for;

  • • the possible inclusion of a bonus/malus arrangement;

  • • the inclusion of deductibles such as a non-qualifying loss, an each and every first loss, a threshold or an aggregate first loss.

    • Type
    Chapter
    Information
    A Guide to Trade Credit Insurance , pp. 41 - 44
    Publisher: Anthem Press
    Print publication year: 2015

    Access options

    Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

    Save book to Kindle

    To save this book to your Kindle, first ensure coreplatform@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

    Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

    Find out more about the Kindle Personal Document Service.

    Available formats
    ×

    Save book to Dropbox

    To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

    Available formats
    ×

    Save book to Google Drive

    To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

    Available formats
    ×