In a dynamic business environment, the risk of corporate defaults is a constant concern. Credit insurance emerges as an effective solution to protect companies against this risk. It provides a financial safety net and promotes sustainable growth.
Solvency assessment
The credit insurance process begins with an exhaustive assessment of a company’s solvency. This assessment includes:
- Credit analysis: Review of credit reports and other relevant financial data to determine the customer’s payment capacity.
- Ongoing monitoring: Constant supervision of the solvency and repayment behaviour of customers, updating the information as financial circumstances change.
- Early alerts: Issuing notifications when signs of financial distress are detected, allowing companies to make proactive decisions to mitigate the risk of non-payment.
Insurance coverage
Once the solvency of customers has been assessed, the credit insurance establishes a coverage that protects the company’s credit sales. The key aspects of this coverage include:
- National and international sales: Protection for domestic and international transactions, ensuring that companies can operate with confidence in different markets.
- Credit limits: Establishing personalized credit limits for each customer, based on their solvency and repayment behaviour.
- Coverage policy: Clear definition of the types of defaults covered, such as bankruptcy, prolonged default and other events of default.
Debt collection and recovery management
In the event of default, debt collection and recovery management is a crucial part of credit insurance. This process includes:
- Professional recovery: Debt collection and recovery management by experts, using effective techniques to maximize the recovery of amounts owed.
- Reduction in administrative charges: The insurance company manages the recovery process, allowing the company to focus on its main activities without distractions.
- Preservation of commercial relations: Respectful and professional management of debt recovery, maintaining good business relations with customers even during the recovery process.
Compensation
If the debt recovery is unsuccessful, the credit insurance provides compensation for losses suffered, thus providing a financial safety net for companies. This process includes:
- Filing claims: The company submits a default claim, providing the documentation needed to support the claim.
- Claim assessment: The insurer reviews and validates the claim, ensuring that it complies with the terms of the policy.
- Payment of compensation: The company receives compensation for the unrecovered debt, usually a percentage of the value of the sale, which minimizes the financial consequences of default payments.