FAQ - Credit Management & Insurance

1. What is Credit Insurance?

Credit insurance provides your business with protection against the failure of a customer to pay their trade credit debts. This can arise as a result of your customer becoming insolvent or because your customer fails to pay within the agreed credit period. These risks are referred to as 'commercial risks'. The protection covers as standard goods or services sold and delivered, but can be tailored to cover many other risks such as work in progress and binding contracts.

Companies that export can protect themselves against a range of 'political' risks which may prevent or delay payment. Examples include war or civil war in your customer's country; cancellation of the contract by the government of your customer's country; or governmental regulations such as embargo or quotas that prevent the export or import of goods.

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2. How Does Credit Insurance Differ from Credit Information and Factoring?

Credit insurance is different from credit information in that:

· Its opinions are backed by insurance. Information agencies do not typically offer a guarantee to support their opinions.

· Much of the information gathered by Euler Hermes UK comes from Euler Hermes' own intelligence gathering. This often makes it much more up-to-date than published information which can be over 12 months old.

Credit insurance is different from factoring in that:

· A credit insurer does not finance companies by advancing monies against receivables. However, their activities are complementary.

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3. Who Uses Credit Insurance?

Companies of all sizes use credit insurance. Euler Hermes UK has credit insurance solutions which suit the needs of the smallest SME up to the largest multi national company.

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4. Why Should I Consider Using Credit Insurance?

Research suggests that 18% of companies that fail, do so because they have experienced bad debt or poor working capital. Businesses protect their tangible assets such as property and plant, but often neglect to cover their receivables which can represent 40% of their current assets.

Credit insurance can reduce the unnecessary cost of bad debt and protect hard-earned success, and provide the cornerstone of secure growth.

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5. Are There Additional Benefits?

There are many additional benefits to using Euler Hermes UK. These include:

· A reduction in bad debt provisions, thereby releasing tied up capital

· Better risk prevention through the 'early warning' system provided by the credit limits service, and Euler Hermes UK's extensive information database.

· Greater access to finance. A credit insurance policy can be used to provide security to a lender for trade or export finance.

· Better sales targeting - our information can be used to target new customers and markets as well as monitoring existing customers.

· Representation at meetings of creditors and free legal and practical advice on enforcing Retention of Title rights.

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6. How Much Cover Is Available?

On average, the level of indemnity is 90% but this can vary, depending on the type of policy you choose or on your specific requirements.

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7. Do I Have to Insure All of My Customers and All of My Turnover?

The majority of our clients choose this route. However, you can just cover certain markets or your exposure to exceptionally high losses. We will tailor a policy to suit your needs.

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8. How Soon Will A Claim Be Paid?

We will pay a claim within 30 days of confirmation that an insured debt has been admitted to rank in the insolvent estate of your customer, but in many cases we pay considerably quicker than this.

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9. Are Your Services Available Online?

Yes. Our on-line service known as EOLIS is available to all our clients. You can request credit opinions and credit limits, monitor existing credit limits and those you have applied for, as well as examine your customers' and prospects balance sheets.

If you need to collect a debt, you can also place this with Euler Hermes Collections UK on-line.

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10. How Much Does Credit Insurance Cost?

The cost of a credit insurance policy is directly linked to the risk to which your business is exposed and is related to the amount of turnover that you wish to insure. It varies in relation to where your customers are located, your business' track record [in credit management], the nature of your customers, the trade sector in which you trade, etc.

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11. How Does a Policy Work?

A Euler Hermes UK policy is a management tool that helps to consolidate and enhance your existing credit management systems and routines. It works like this:
You ask us for a credit limit on each of your customers with whom you trade above an agreed level.

Below this agreed level you do not need to ask us for a credit limit. Instead you use your own sources of financial status information and trading experience to justify the trade credit you extend.

We strongly recommend the use of our own Credit Opinion services which provide you with access to the same unrivalled global information and risk office network used for writing your policy credit limits.

By using our opinion to justify trade under your Discretionary Limit you also benefit from enhanced policy terms - including a higher Insured Percentage than if using opinions obtained from other information agencies and a 12 month period of validity for your opinion.

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12. What Information Do I Need to Provide?

You will need to tell us: If a customer's account becomes overdue beyond the contractual due date or any extended due date which may be allowed under the policy.

If you receive or become aware of any adverse information about a customer, which suggests that the customer may not be able to meet its financial obligations under the sale or service contract covered by the policy.

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13. Can You Collect An Overdue Debt For Me?

Yes, our own debt collection company - Euler Hermes Collections UK - is one of the largest and longest-established collections agencies in the UK. It offers a range of services covering domestic and international collections, low value accounts and a tracing service for 'gone aways'.

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14. Can You Provide Me With Credit Opinions On My Customers?

In the current economic climate, regular credit checks on clients are more necessary than ever. Our domestic First Source and export Credit Intelligence Opinions services provide credit opinions to all our credit insurance clients helping them to justify trade under their Discretionary Limit. In today’s volatile economic environment you can’t afford to take unnecessary risks by relying on out of date financial information or previous payment performance. The quality of our information sets us apart and is backed up by our insurance. Through our global risk office network we are closer to the risks and have local risk knowledge of both your domestic and export partners; helping you to trade in confidence and expand your markets safely.

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