Leverage Insurance to Make Money
Indulge me for a moment. Imagine if your largest customer didn’t pay you. Maybe they filed bankruptcy or maybe they just couldn’t afford to pay you. Either scenario would have a dramatic impact on your business today and certainly force you to pivot on how you approach tomorrow. Credit insurance protects you from the immediate impact by paying out a claim to the policyholder for the amount owed at the time of insolvency or default. Your largest customer, who makes up most of your revenue, won’t be buying from you anymore. So, what will you do? How will you replace that revenue? This is where the “other things” that credit insurance can do comes into play.
Credit insurers have a ton of information. The truth is the carriers who offer risk underwriting have very robust data gathering departments. It is necessary for them to have this detailed information in order to underwrite the customers you sell to. Often times a credit insurer will be able to get financials on a privately held company, even when your sales or credit team has already tried. Now think about that as a business owner who has to find a way to replace the revenue from their “former” largest customer. As a policyholder, we can help you identify and pre-qualify new prospective customers or increase the number of gallons to your current customers. The value here is threefold:
- Pre-qualifying. Credit insurance helps speed up the sales cycle by identifying which prospects are credit worthy. This can cut the new customer acquisition time down by almost a week. It takes 7 points of contact from the business development team before a typical first business meeting will take place. Even the best salespeople will take at least 3 days, but on average it takes a week. So, wouldn’t you want to make sure they don’t spend a week chasing new business that is just going to get shot down in credit? Better yet, don’t you want them to know which prospects can have $200K of credit vs. the ones that can have $1MM worth of credit? This is an incredibly powerful competitive advantage.
- More profitable Credit insurers have so much information because they have so much exposure. As of 2022, the largest of the 3 major credit insurance carriers was insuring 1.2 trillion dollars in global exposure. To get to an exposure number that large, they must be willing to take some risk. Being able to sell more gallons to current customers is inherently more profitable than finding a new customer to sell those gallons to because it’s more efficient – they are already set up in your system and you already know their needs. It can be a very effective exercise to have us sit with your sales leaders for an hour or so to discuss which customers they could sell more to if credit weren’t an issue. These sessions ALWAYS lead to increased gallons.
- Customer credit risk monitoring. A pretty common blind spot amongst distributors is adequately monitoring the credit risk of current customers. Sure, they pulled data, reviewed financials, went through a KYC process when they set them up as a customer… 3 years ago! But what about today? Everyone can agree most enterprises have experienced a significant change to their financial health in the last 6 months let alone 3 years. Credit insurance can provide true 24/7 monitoring on customers they are covering. When there are significant past-due payments to other vendors or a dramatic shift in the firm’s balance sheet, the insurer notifies the policy holder. This can become invaluable in the challenging business environment we currently find ourselves in.
Marsh McLennan is the largest commercial insurance broker in the world. In addition to all the other lines of insurance, we offer credit insurance for fuel companies. We services the entire USA. Not only can we show you how credit insurance can make you money, we can review your current policy to make sure you aren’t overpaying your current premium. Contact us below to start the discussion.
Vice President, Trade Credit and Business Insurance
T +1 817-600-1916
M +1 817-715-5678
1600 West 7th Street Suite 300
Fort Worth, TX 76102 Cory.Watson@MarshMMA.com MMA.com