Forgive me for beginning with a blanket statement, but here it is: More than 99% of all agencies do not sell trade credit insurance (a.k.a., TCI or accounts receivable insurance).
Initially, that doesn’t seem like a terribly interesting revelation. TCI is not a household term nor is the product part of a BOP or many commercial insurance portfolios.
However, when we ask “why?” the plot thickens. Why wouldn’t agents and brokers take a proactive stance to offering an additional product to their small business clients? What’s stopping them?
I see three possible explanations.
Reason #1: It’s different.
Agents and brokers adapt to change and learn new things, but TCI may seem outside their expertise. Savvy businesspeople often seek to stay in their lane, figuratively speaking.
Reason #2: It is frequently viewed as a discretionary purchase.
Agencies may not receive many submissions for this type of business, so they have little impetus or incentive to learn about this new product. The uncertainty over earning commission on a discretionary purchase serves as an additional disincentive.
Reason #3: A distribution gap creates lack of awareness.
Few domestic carriers are involved in distribution of TCI. In fact, most policies are underwritten by monoline, European carriers. U.S. carriers who underwrite these policies have capitulated to distributing via a narrow channel of less than 50 agencies with trade credit specialist capabilities.
Also, we have a paucity of promotion. Insurers do not have a great incentive to promote TCI products in the mainstream when fewer than 1% of agencies actively sell and service this product class. The result is a sorry lack of education, access and knowledge for companies that might otherwise be interested in exploring the many benefits of coverage.
Why this matters
These factors combine to create a stark reality for the TCI and accounts receivable insurance market: there are only about 50 insurance agencies and brokerages selling these products. Many of these are larger brokerages which work best with larger, commercial insureds.
Yet TCI is becoming more of a business imperative. This is particularly true for businesses seeking funding, as more and more of the lending banks are recognizing accounts receivable risks. They are also becoming aware of TCI and encouraging customers to invest in it.
That means neglecting to pursue TCI business creates lost opportunities for agents and brokers—and for small businesses. By proactively discussing trade credit and accounts receivable risks with commercial insureds, agents and brokers have a business opportunity, proving their role as an advisor on risk management. For small businesses, TCI offers business-saving protection and peace of mind against lack of payment or trade disruption. Plus, there is an opportunity for hundreds of brokers (or more) to work with TCI products.
Agents and brokers may not get many submissions like this, so there’s a lot to learn. We’re here to help—contact us today to learn how we can help simplify trade credit insurance and make it available for brokers and their clients.