CM November 2019 atradius

INTERVIEW
COVER
LINES
Has the credit insurance industry
recovered from a poor showing following
the economic collapse a decade ago?
SEAN Feast FCICM puts the
questions to Stuart Ramsden,
Head of Commercial for UK and
Ireland at Atradius.
SF: What is the biggest
challenge facing the credit insurance sector
today?
SR: Although Trade Credit Insurance has
been supporting trade in the UK for a century
(ECGD began in the UK in 1919) one of
the key challenges for the industry is still
the lack of awareness and the level of understanding
about the full range of benefits
available from the products and services provided.
While industry statistics report nearly
13,000 policies are in force with Association
of British Insurers (ABI) members in the UK,
covering £340 billion of trade, there are also
a significant number of businesses trading
entirely without protection.
When you look at other insurance sectors,
legalities aside, there are few individuals who
would dismiss the need for insurance for a
home, a holiday or a car; the risk exposure
is simply too great. However, too many
businesses do not look at their bottom line
in the same way and are leaving themselves
exposed to the risk of non-payment by
minimising the value of trade credit
insurance.
With uncertainty dominating the economy
and insolvency rates rising, credit insurance
in today’s climate should be an essential for
any business. Within the industry, we are
confident in our proposition and the part
we play in facilitating trade and we must
collectively do more to raise awareness of
credit insurance, its benefits and the part it
plays in supporting business growth.
SF: Is the market growing and if so in
what areas?
SR: With a rocky insolvency climate and
predictions of increasing business failure
rates, demand for trade credit insurance is
rising. While there is always more we can
do to raise awareness, the developments in
digital access and tailored products designed
for specific segments and business areas
are changing the way businesses think
about credit insurance. Often seen in the
past as ‘too complicated’ or ‘too expensive’
for smaller businesses, credit insurance is
now accessible to every segment and that is
enabling growth.
We have seen an increase in claims across
the industry, which reflects the current
business environment. The ABI reports the
number of insurance claims made in the
first quarter of this year reached a 10-year
high with 5,114 new claims to the tune of
£48 million. In these circumstances, we
do anticipate a rise in new enquiries as
businesses take a more cautious approach
to risk and avoid becoming a casualty of the
next insolvency.
SF: How important are SMEs?
SR: By the end of 2018, there were almost
six million private businesses in the UK; this
is over 60 percent higher than for the same
period in 2000. SMEs account for over 40
percent of all UK businesses at this time. So,
if SMEs exert this amount of influence and
impact on trade, then of course they are also
exposed to varying business risks, including
the risk of non-payment. This is why we
firmly believe that trade credit insurance is
an essential tool for the SME segment.
SF: What are you doing to address their
specific needs?
SR: We have developed Modula Freedom,
a product specifically designed to meet the
needs of SMEs. SMEs often just want to get on
and run their businesses and have ‘access to
finance’ when they need it rather than spend
ages going through prolonged applications
and administration. Consequently, for a
company with a turnover of say £3 million,
the process of applying for a typical whole
turnover policy, with all the necessary
declarations and vetting procedures, is timeconsuming
for them and their broker. The
process for Modula Freedom is very simple
and consists of one application form. There
is also a simple purchase process that quickly
provides the customer with access to our
online portal 24/7. Modula Freedom’s specific
Raising awareness about the
importance of good credit
management practice and
the benefits of trade credit
insurance is something that is
always on the agenda.
The Recognised Standard / www.cicm.com / November 2019 / PAGE 16
The Recognised Standard / www.cicm.com / November 2019 / PAGE 17

INTERVIEW
AUTHOR – Sean Feast FCICM
features include first orders cover giving
customers more flexibility and opportunities
to grow their sales with the protection of
Atradius. Customers can also choose the level
of maximum liability required from several
options.
SF: What other new products/
innovations have you recently
launched?
SR: The industry is constantly evolving
and as the way trade transactions
take place changes, so we too, continue
to adapt to a more digital world.
Atradius Atrium is our digital platform that
enables our customers (and brokers) to communicate
with us on every aspect of their
policy through one single login – and as you
would expect it is available not just ‘on the
go’ but 24/7. But as important as it is to have
a digital capability there is still a real value in
human interaction and we take pride in not
just our customer service proposition, but the
strong relationships that we build with customers,
brokers and industry in general. For
example, our Risk Underwriting approach revolves
around knowing the market and trade
sector and our Underwriters work closely with
businesses to ensure that the business information
that decisions are based on is current,
and relevant at all times.
SF: Have the lessons of the past been
learned?
SR: The severity and ferocity of the financial
crisis of 2008/9 and the sheer number of
firms falling victim to insolvency during that
period make it stand out as an extreme event
in history – there were lessons to be learned
for everyone. The world has changed in the 10
years since the crash and more sophisticated
financial management strategies alongside
fiscal regulation now create a very different
environment.
The approach to buyer risk underwriting
has also seen changes. Accurate and up-todate
information is critical as the crisis proved
it was no longer enough to rely on annual
reports or aged accounts. Understanding
the strategic direction of a business as well
as analysing their financial strength is
critical. Our underwriters have built up close
relationships with most key players within the
industry, enabling informed insight into trends
and developments and individual payment
behaviour. We always advise businesses to be
open and transparent with us. We operate an
open-door policy and are proactive in seeking
information to enable us to make informed
credit decisions in support of our customers.
Early warning of a deteriorating risk and
loss mitigation action is essential to protect
against the loss to a customer’s income. It is
important to understand that insurance protects
the majority percentage of monies owed,
but it is industry standard practice for the insured
to carry an uninsured percentage (usually
10 percent) of the debt. One of the reasons
why customers insure in the first place is to
ensure that they trade with businesses that
are strong enough to support credit terms.
If their potential customer is a poor risk,
they want to know that upfront so that they
can make informed decisions. When a risk
deteriorates it is important for all stakeholders
to be aware of what is happening, and
when the risk of non-payment increases significantly
it is appropriate to review the cover
arrangements with our customers – being
alerted to a probable default is a warning that
any supplier would want to receive.
SF: What more could credit insurers
do to educate businesses/credit
managers?
SR: Raising awareness about the importance
of good credit management practice and the
benefits of trade credit insurance is something
that is always on the agenda. The ABI has
done a great deal to help create awareness
and has also supported the key providers
in an initiative to work together from a PR
perspective.
We constantly seek out opportunities to
talk about trade credit insurance and share
our expertise with businesses whether
through publications, events, networking,
speaker opportunities as well as media
segments and of course social channels. In
an uncertain economic environment, there is
a prime opportunity for insurers and brokers
to work collaboratively to demonstrate the
value of trade credit insurance to businesses
both in terms of its ability to protect from
non-payment and through its role as a trade
partner in developing robust trade strategies
to seek out new opportunities and mitigate
risk.
Business growth and trade credit insurance
are intrinsically interlinked and, as the
insurer, we need to be involved well ahead
of a contract or new trade relationship being
agreed. It is also important to remember that
education is not one-way. As insurers we are
also learning all the time – listening is key!
We have strong relationships with all of our
stakeholders, which helps us to stay ahead of
the curve in an ever-changing marketplace.
The Recognised Standard / www.cicm.com / November 2019 / PAGE 18
The Recognised Standard / www.cicm.com / November 2019 / PAGE 19