When is the best time to buy credit insurance? – Almost certainly now.
Many businesses are feeling a cash flow crunch at the moment, leading them to reconsider discretionary expenses like credit insurance. As business owners we get that. Recently I had a business owner decline a very competitively priced policy (and it was the only one I could get from the market) due to cashflow problems they had experienced because of the impact of insolvencies in their industry over the past year. It seemed a bit counterintuitive to me.
So here’s why now in spite of these day to day challenges businesses face, acting now is better than waiting. Insurers are currently offering lower rates despite paying out more claims than they have in years – that’s unusual and won’t last. Rates will rise, and their interest in certain industries and buyers will decrease. It’s a strange cycle in this industry: when demand for new policies is at its peak — in uncertain times or during large insolvencies – insurers tend to pull back and focus on their existing clients. We saw this during the early days of COVID, the GFC, and at other times since. That said, once you’re in, it’s easier to negotiate better rates and limits. Insurers focus can and often changes from trying to win new business, to looking after their existing book.
In summary:
- Lower rates now – that wont be the case soon. In six months, after more claims have been paid, premiums could rise significantly. By buying now, you lock in lower rates.
- Better cover now – because they’re hungry. Insurers are eager for new business and can offer new cover on buyers. They are taking more risk than they normally would to win business. But as claims continue, insurers become more cautious and tighten their offerings and will be less likely to offer new cover to prospects.
Bottom Line:
Buying credit insurance now allows you to take advantage of lower rates and a strong market appetite from insurers. That window of opportunity is finite.
