The past two years with the Covid pandemic have seriously been tough on businesses. Here we discuss prevent rejected trade credit insurance tips for businesses.
During the pandemic, there has been a lot of help from the government including loans, grants, furlough schemes, and other supports that have been a business’s lifeline. Now, that these are starting to dwindle away, the chances of businesses becoming insolvent are increasing as they have been delayed through this support.
For those businesses that have been lucky enough to stay solvent, they will now be looking at how they can grow their business to thrive.
One thing to take into consideration when rapidly growing in a recovering economy is that they can grow far too quickly and overwork themselves. Growing too fast and overstretching your business too much can lead to bad cash flow issues which can result in failure which then leads to claims on trade credit insurance policies.
Trade credit insurance claims are rising meaning insurers are much more vigilant and are looking more closely at the business failures complying with policy terms and conditions. These failures can then lead to reduced or even rejected claim settlements which can also lead to insolvency.
In this article, we will go through some helpful tips on preventing credit insurance claims from being rejected or reduced.
1. Documentation is vital
Claims are rejected all the time when businesses can’t provide the correct documentation that the insurers need for evidence that policy terms and conditions are met. An example of this would be an insured client could not provide delivery notes. If a business can’t provide the documents required such as the delivery notes, the claim would be rejected.
To avoid this from happening to you, it is essential that you document every transaction and everything else you think you will need to be documented too. By doing this, it will increase your chances of making a successful claim rather than it being rejected.
2. Agree on credit limits in advance
This is essential if you are expecting a full claim. Even if it is to get a quick deal, do not allow debt to build up before you have agreed on a credit limit as you can put yourself at serious risk of your business affordability.
There are unfortunate instances where businesses trade with buyers, but then go to obtain an insurer credit limit after they have already built up a significant amount of debt. This is a fast track for a business to become insolvent.
In these types of cases, the credit limit will only apply for the credit after the limit is agreed upon. This then means that when a business takes a claim, the limit will only be for the trade that has been made after the credit limit has been arranged. This then means that you will not be able to claim for the significant debt that you already have.
3. Be aware of fraud
Due to the recovering economy in the UK, it is going to be much more likely that there will be an increase in fraudulent activity, this, unfortunately, is not covered by a trade credit insurance policy.
There are many forms of fraud, but one of the most common is buyer impersonations. Due to the policy not covering fraud, it is essential that you follow all your credit control procedures, due diligence, and regular checks. This will help you to understand who you are dealing with so that you can protect yourself from being a victim of fraud.
There are some warning tips for fraud including:
- Be careful when you are contacted via a mobile phone, with no landline.
- Be wary of a site that looks great but has very little functionality. A reputable site will have many pages and be functional.
- A reputable business will have a business email address rather than a Hotmail or Gmail account.
- If the buyer is not interested in a price or negotiation, you need to think if this is legit as this is one of the main things they want to know first.
- If there is an unusually short period between first contact, order, and request delivered, then you should be investigating why.
- Bank account details change
- A reputable business will have a real address rather than a PO box address or serviced office.
There are many ways in which you can help to get the most out of your claim but if you are wondering if there are any factors that will restrict your claim then look at these top reasons why claims are not paid. For the right support to help you protect your business, it is best to work with a professional who can offer credit insurance broker services.
Manuela Willbold
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