Several factors can significantly influence the cost of your credit insurance premiums. Here’s a breakdown of the primary ones:
Factors Directly Related to Risk:
-
Industry: Industries with higher historical default rates, volatile economic cycles, or complex supply chains will generally have higher premiums. Examples include construction, textiles, or some manufacturing sectors.
-
Customer Creditworthiness: If you sell primarily to companies with poor credit ratings, unstable financials, or a history of late payments, your premiums will be higher.
-
Geographic Concentration: Sales concentrated in countries with political instability, economic risk, or currency restrictions increase premiums due to the heightened risk of non-payment.
-
Sales Volume: The higher your total value of insured sales, the higher your premium as it reflects greater potential exposure for the insurer.
Factors Related to Policy Choices:
-
Coverage Type:
- Whole portfolio coverage is generally more expensive than selective coverage.
- International policies carry additional costs compared to domestic-only coverage.
-
Deductible: Choosing a higher deductible lowers your premium as you assume a greater share of the initial risk.
-
Coinsurance Percentage: A higher coinsurance percentage (you sharing more of the loss) reduces the insurer’s risk and lowers your premium.
-
Coverage Limits: Requesting higher overall policy limits or buyer limits will naturally increase your premiums.
Other Considerations:
-
Insurer’s Risk Appetite: Different insurers have varying risk tolerances and underwriting standards, leading to variations in their premium rates.
-
Your Claims History: A history of frequent claims can lead to higher premiums or even restrictions on coverage.
-
Market Conditions: Economic downturns, increased risk, and general fluctuations in the insurance market can impact premium pricing.
Important points:
- These factors interact: Your premium is determined by a combination of these elements, not just one in isolation.
- Negotiation: There might be some room for negotiating premium rates, particularly for businesses with excellent risk profiles.