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I suspect you'd find that sales from existing customers have NOT fallen to 80%. Given the rising cost of insurance, rising turnover levels (and insurable turnover levels compared to 2009), and other factors, I'd suspect you'll see that 'sales from existing customers' might well have increased, possibly even beyond 100% of like for like.

But that's not what was referred to...'renewal rates' is. Different.

Customers don't always cease to credit insure because they are unhappy with the service:
Customers can themselves go bust
Get taken over by businesses whose policy is simply not to insure
Get offers they can't refuse from the bank
Debtor profiles change to make credit insurance no longer relevant or viable.
Become 'priced out' of credit insurance because their loss record is too severe.
Get Ron Bidwell as a Credit Manager/FD/MD...someone who doesn't value credit insurance
And a whole host of other reasons which I could go into why companies dispense with Credit Insurance.
And sure, there are also customers who dispense with it because they're not happy with the service.

However, given that most clients who purchase it (not all....some are simply obliged to purchase it), fundamentally value it, then the tendency to dispense with it based on poor service is not the norm. The preference is usually to find an insurer who can provide a better service.

I back what Martin has said.

Renewal rates are typically 80/90% in the best market, and as Martin pointed out it doesn't mean that 10/20% of policyholders have walked.

Given the reductions in capacity and increased premiums (at least 20% in the majority of cases) that's a very good renewal rate, to which must be added new business.

There's always a tipping point, when the cover/price ratio becomes unviable, but that seems to be a small % of cases from what I've seen, rather the policy would be restructured to remain for the proportion of insurable debt.

Renewal rates, new business rates Etc. Are just numbers that can be manouvered to say whatever you want them to say. From where I sit I can honestly say that a lot of professional credit managers see credit insurance as expensive, difficult to work with and not what it says on the tin. So you can dress it up to be whatever you want, but as I have said before. It might suit some and not others. But lets not lose sight of the pitfalls in credit insurance. After all....... it is just a product designed to earn money.

Ron

Hang on Ron...
It was Andrew who raised the issue of numbers initially and you who chose to piggyback on the basis of completely erroneous presumptions.
You then tried to score points from the base of those error strewn assumptions and now you're, somehow managing to cry foul about manipulation of figures.
Whilst of course reminding the board as to what your views are in regard to Credit Insurance...just in case we weren't listening last time, and the time before that.

Well your half right Martin.
A good discussion allows an open debate and free flowing of ideas and experiences. I have repeated time and again that credit insurance suites some but not others. So as you can see my comments are measured and fair. I have also said that some of the rules that credit insurance businesses operate are unfair. Not only unfair but they actually operate against the principle a good credit manager would work to. This has been substantiated by others. I have also said that the credit insurance company's are in business to make money (which they are) and so their rules will be geared towards ensuring that happens. There are issues around the administration required to keep credit insurance within their rules. there is also the issue of some credit insurers insisting on a particular credit report from a particular agency that is not only more costly but needs to be done twice a year instead of annually. Why would that be?

So from a senior credit managers point of view. I see credit insurance as a bit of a waste of time for me. Other company's who do not have as strong a credit department as perhaps they should have would need it. Just a balancing job really.

But like I say numbers can be manipulated to mean anything... Quite what an 80% renewal rate means (if that is the figure) is quite simple isnt it.

My last post is correct. Credit insurance is a product designed to earn money. No one will dissagree with that surely. So who is most likely to suffer that being the case.

As other credit managers have already said. Credit insurance can be awfully difficult to administer and add cost to the business.

And quite frankly it is not a ronseal product. (it does not do what it says on the tin).

We should be campaigning the government for not only tighter guidlines on credit insurance but perhaps a joining of forces in a more commercial manner. Have credit insurance companies been the downfall of some majot businesses.... Yes they have.

My opinion. My choice.

Regards

Ron

You are absolutely entitled to your opinion Ron but when your opinion crosses a line into technical anomalies, potentially damaging and, at best unproven or at worst potentially reckless assertions, is where you're always going to find irritating oinks like myself stepping in.

Some of the rules that credit insurance businesses operate are unfair? Which rules Ron? Explain?

Credit Insurers are in business to make money? Ron, who isn't? Why do you keep reinforcing this point? Yes, they are there to make money. Aren't all businesses there to make money?

Some credit insurers do try to insist on clients utilising the more well-known status agencies and in some cases the validity of status information has indeed been reduced to six months. When claims levels have risen so dramatically and when large numbers of smaller claims have resulted from status agencies recommending credit limits on companies who have consequently failed then it's to be expected that insurers would focus on this area.
Remember Ron, when a status agency get's it wrong, they ride away in the sunset leaving the credit insurer and/or the supplier holding the baby !!
A status agency recommended credit limit of £100k based on two and a half year old accounts, provided the day before a company falls insolvent doesn't cost that status agency a penny. They state "they are only giving an opinion". That's a nice position to be in.

You can't simply state that credit insurance is the domain of companies who 'do not have as strong a credit department'. It's shows complete disrespect and contempt to Credit Managers and FD's who do buy the product for all manner of reasons.

Numbers can indeed be manipulated to mean anything. But, to remind you, the original post which I responded to said this :
Classic case of a spin doctor in the marketing department of the credit insurance industry attempting to put out another headline which does not quite align with what even the story itself says. Perhaps it is a result of spending too many years as a credit manager having to read what is actually going on through the picture which is provided however even some of my more creative customers would have thought twice before telling me that a 20% drop in sales was a surge in demand!
The assertion there is absolutely 100% INCORRECT. I can prove that to be the case...it is NOT a matter of opinion Ron. An '80% renewal rate' does not imply a '20% drop in sales'. I'm not tinkering with figures, I'm not fudging or spinning things...I'm telling you. This assertion is WRONG.

Credit insurance can be difficult to administer. It certainly is not for everyone Ron. Policies are improving. Their wordings are becoming 'clearer', less ambiguous, more plain English. But yes, operation of a credit insurance policy can be time consuming and on occasion frustrating.

Campaigning to the government. The campaigning took place two years back Ron. One of my colleagues, a Director within the company and Chair of the British Exporter's Association, spearheaded the campaigning which resulted in Mandelson introducing the UK Government credit insurance top up scheme.
When then setting the actual scheme up, Mandelson decided not to bother consulting with the major broking houses on policy wordings and consequently made a total pigs ear of a potentially superb product.
My point....we do, in the broking industry, take this product, it's shortfalls, and our responsibilites quite seriously Ron.

Credit Insurer's have been the SOLE downfall of some major businesses?
Ron, name them?
And how has Credit Insurance caused their downfall?
I really am intrigued by this and I've heard it stated many times.
I can accept someone stating that the markets' removal of cover was the 'final straw' or that the insurers 'contributed' to a businesses downfall but the assertion that Credit Insurers have been the sole cause of a businesses downfall is a dangerous one Ron.

Blimey Martin. I thought my replies were long. My opinion is my opinion. For the credit insurance business though it should be worrying that like myself there are other credit managers out there that have the same opinion. I am not alone by a long way. But that is personal preference and experience. Do not want to fall out (never do) but just because I have an opinion that is different to yours does not make me wrong. The same would be the other way round. I do not think I have ever discussed just renewals. But hey ho might have.

As far as rating agencies are concerned yes snapshot and likely to be wrong in their assessment if they have based a rating on 2 year old accounts. However that being the case it wouldnt matter if you had a report twice a year or once a year. It would still be out of date, so why?

As far as the contempt issue..... now now. Personally I could not work for a company that operated credit insurance to prevent losses. Apart from the fact it does not do that. I would not be a credit manager I would be a collections manager surely. I once asked a credit manager what their company policy was. The answer was. They do not give credit of any sort unless they can insure the debt. In my book that is a credit managers role in title but not by action. Unfortunately sometimes we have to stick with what we have to do in order to keep our role. However if you interviewed credit managers in that position they would all say they would move if they had the wider scope and the package was the same.

Not going to go into it but yes credit insurers have been the cause of businesses failing. Lots of them. If it wasn't for credit managers taking calculated commercial risks there would be many more. A very large DIY shed would have gone down 3 years ago had it not been for some commercially minded credit professionals granting credit to a growing concern. The insurers pulled the plug on all cover. I myself gave them a £2m line of credit they spent £6m with me and we made a very big profit. They are still around and some degree of cover has been re established. ! !

I agree with you on the Mandelson issue hence why I will not be voting for his party. The top up policy was absolutely no good. Did not go far enough by a long stretch and could have helped industry far more than it did. However I also think that more regulatory changes should be made.

Unfair rules yes there are and I have already covered them.

Etc. Etc.

Like I have said. Credit insurance is ok for some and not for others.

You may be in the industry directly. But just because you are does not mean everything is right. I do not think my industry is right. When in the reporting and collections industry I was very outspoken ( I am sure there will be some agree with that comment) but what was happening was wrong and needed to be said.

My opinion my right to speak. Please do not take it personally it is not. Perhaps what the industry needs is to sit down and talk to credit managers and see if there are gaps that can be closed. Focus on service levels for results as well as and not just analysts.

Happy voting

Ron

No-one's falling out Ron.

Ron,

To address some of your points and add to what Martin has said, the insurers will ask for up to date financials or status reports because of the unprecedented decline in the economy over the last two years. Surely you can see that information which is 2 years old won’t give you any idea of how that company has performed through the downturn? A report based on information from within the last 6 months may not be fail safe but it will give you a much better idea whether they are thriving.

Also consider that the insurers are speaking directly to many of the buyers, getting information which is right up to date, and insights into their business plans going forward – often such information is provided on a confidential basis of course so whilst it won’t be shared with anyone directly it will form the basis of their decisions. A credit manager may not have the necessary relationship to enable them to ask the same kind of questions.

I don’t agree with you that the removal of cover has caused the downfall of companies – if anything, removal of cover has simply brought the inevitable failure of the business to a head.

There have also been cases where a limited amount of cover has been available and the buyer has told the insurer which of their policy holders they would like the cover allocated to. I’ve met FD’s and credit managers who have said they only sell to customers where they have insurance – this is their decision of course but I agree with you that it’s not credit management. A business can still make its own commercial decisions and take an element of risk themselves and credit insurance can help the credit manager make those decisions.

Credit Insurance will support the majority of the business and is an ultimate safeguard against the unexpected failure – and claims often arise in the least expected areas. If there are customers who the underwriter won’t cover, you will be able to find out their reasons why and then make your own judgment, be it to offer a limited amount of credit, trade on pro forma terms or use some other mechanism to offer some security.

You don’t have to insure your offices or warehouses against fire, you probably have alarms and sprinkler systems too, but I bet you still insure the risk!

Hi James.

How boring. You can keep harping on about how good and accurate credit insurance is all you like. I and other credit managers think not. But yet again I state that there are some companies it will work for. When are you going to get the message that I am not saying it is totally a product not needed. (sigh).

Removal of cover HAS been the main reason for some companies (and one or two large ones) going under. I even know of one incident where the credit insurer mentioned to a company (turnover £200m) that they thought their banking arrangements were not as good as they perhaps could be as there was no term involved and the bank could reduce its capacity to support at any time. The company went away set up a new 5 year deal with different bankers at better rates Etc. Only for the credit insurer to cut the limit by half. When asked why.. The answer was because they had changed their banking arrangements and it was not looked upon favourably. (I have seen the letters)

Credit reports.... A credit report that is 6 months old is as good as one 12 months old if the same information is used.

I sat with a risk analyst / underwriter in one of the major concerns. The information he had was interpreted in a totally different way to me. I got it right he didnt. I did £6m of business they recommended £0. Oh yes and I got paid..... Oh and 3 years on they are still trading.

In my capacity as consultant, I have recommended credit insurance on many occasions where I thought it was right. Not however as a "last resort" but as a way of growing new business. However that has always been dependant on excesses and premiums Etc to make it work.

I have (and others too) encountered situations where comapny A had a limit of £50k and was trading under that. Out of the blue they were advised the limit was cut to £20k. No reason given even when asked. The company had an order in the pipeline to require the full £50k. Ended up not being able to. (according to parent co rules) It turned out that it was not because of any other reason than the credit insurer wanted the extra £30k exposure for another client. Was proven. This was not and is not an isolated incident.

I really could go on and on and on.

But you really would not like me to... Just remember my sentiment. Credit insurance is not for everyone. It is for some but not others.

Ron

Hi Folks

The exchanges within the above threads are quite fascinating.

Opinions have been shared.

Technical anomalies have been challenged. And quite rightly so.

I think we should bear in mind that postings from those working within the insurance industry are bound to have a favourable bias towards credit insurance.

I’d like to pick up on what James said here:

Quote: jearley

Credit Insurance will support the majority of the business and is an ultimate safeguard against the unexpected failure – and claims often arise in the least expected areas. If there are customers who the underwriter won’t cover, you will be able to find out their reasons why and then make your own judgment, be it to offer a limited amount of credit, trade on pro forma terms or use some other mechanism to offer some security.

You don’t have to insure your offices or warehouses against fire, you probably have alarms and sprinkler systems too, but I bet you still insure the risk!

I personally cannot see how one can reasonably compare insurance against fire to that of credit insurance. The two risks are a world apart.

For example, the risk of a fire has substantial life threatening consequences.

For example a business may have sufficient reserves to provide for its biggest account going bust thus able and willing to self insure. Most businesses don’t have sufficient reserves to cover their entire stock being wiped out in a fire. The operational requirements of the two policies are so very different. It is in my opinion therefore a flawed comparison.

I don’t agree that claims often happen in the least expected areas. In my experience it does occasionally happen but certainly not often. Most often, the insolvencies or protracted payment defaults happen precisely with those customers that are considered most at risk.

I agree with Ron’s final comment above:

"Credit insurance is not for everyone. It is for some but not others."

Regards

Craig