Digital Trade Credit Insurance — Time to Think Big
by Todd Lynady, Managing Director and Global Head of Insurance Sales and Business Development at LiquidX.
by Todd Lynady, Managing Director and Global Head of Insurance Sales and Business Development at LiquidX.
We all know about the digital transformation that is taking place across the entire financial supply chain. Practically every function in working capital and trade finance is being reengineered to reduce manual processes, achieve affordable scale, and in the best cases, connect participants
Trade Credit Insurance is the next frontier for this digital revolution. The time is now, especially given
the strong demand for trade credit risk mitigation in wake of the pandemic as well as lenders leveraging
Trade Credit Insurance for financing facilities such as asset-based loans, receivables purchase programs,
and securitizations. The process of requesting, quoting, securing capacity, and then managing those
policies to date has largely been an offline, highly administrative, and manually intensive process.
Automated quoting is the first step.
Just think about how the quoting process has been managed historically. Brokers painstakingly collate each carrier’s proposal and manually enter data from upwards of a dozen carriers, sometimes more, into an excel spreadsheet which is then presented to the prospective insured. This is an incredibly manual and resource intensive process that some brokers estimate takes up 40% of their time. In addition, the sophistication of policy issuance and management varies by carrier. Even when carriers offer online policy management, it is on an individual policy basis, leaving policyholders and brokers without a comprehensive view of their insured portfolio.
A digital Trade Credit Insurance platform gives policyholders, insurance companies, and brokers the power to streamline these manual administrative tasks through digitization. Once the process is digitized the back and forth of emails and the associated delays is replaced with real-time access to underwriter decisions.
With everything online, brokers can also capture valuable data at both the submission and policy stages. This information can be used to track conversion rates, be leveraged to better understand propensities to buy and more accurately estimate portfolio retention. Understanding these metrics will also help brokers with more targeted origination efforts as well as resource allocation.
Automated quoting is the first step.
Just think about how the quoting process has been managed historically. Brokers painstakingly collate each carrier’s proposal and manually enter data from upwards of a dozen carriers, sometimes more, into an excel spreadsheet which is then presented to the prospective insured. This is an incredibly manual and resource intensive process that some brokers estimate takes up 40% of their time. In addition, the sophistication of policy issuance and management varies by carrier. Even when carriers offer online policy management, it is on an individual policy basis, leaving policyholders and brokers without a comprehensive view of their insured portfolio.
A digital Trade Credit Insurance platform gives policyholders, insurance companies, and brokers the power to streamline these manual administrative tasks through digitization. Once the process is digitized the back and forth of emails and the associated delays is replaced with real-time access to underwriter decisions.
With everything online, brokers can also capture valuable data at both the submission and policy stages. This information can be used to track conversion rates, be leveraged to better understand propensities to buy and more accurately estimate portfolio retention. Understanding these metrics will also help brokers with more targeted origination efforts as well as resource allocation.
Smart, digitized policies are the game-changer.
An even more impactful step in the digital journey involves policy management. Digitization converts the policy into a smart contact that enables brokers and insureds to replace manual policy management processes with automation. With digitized policies, participants can quickly verify that accounts receivable are eligible for coverage, confirm debtor authenticity via direct API to credit bureaus like Dun & Bradstreet, track performance of each covered receivable, and automate required reporting workflows.
Information from “smart” digital policies can provide aggregated position and risk monitoring – across carriers and geographies – allowing brokers, carriers, and insured parties to monitor their insured portfolio from the highest level down to the most granular level.
True big picture views are now available for the first time when Trade Credit Insurance portfolios are digitized. But even more revolutionary is the ability to connect automated policy quoting and management to the financial supply chain. For example, banks can seamlessly secure capacity and coverage to support their lending activity on the same platform where the financing activity takes place, or the timing of claim payments can feed directly into a corporate’s cash forecasting plan.
The market for Trade Credit Insurance is growing and gaining more prominence due to the current environment of global economic uncertainty. Carriers and brokers are looking to technology to scale their growth as well as seamlessly connect with their broker partners and clients digitally. Digital automation will aid market growth by improving access to coverage, managing the often-cumbersome coverage monitoring and claims process, and connecting the entire trade ecosystem.
LiquidX is a first mover in the digital transformation of Trade Credit Insurance, completely changing how Trade Credit Insurance is purchased and managed across the entire value chain. Brokers, insured parties, and carriers view LiquidX as true innovator that will aid market growth by improving access to coverage, providing transparency, and managing the often-cumbersome policy management, compliance and claims processes.
Todd Lynady is Managing Director and Global Head of Insurance Sales and Business Development at LiquidX. Reach Todd at tlynady@liquidx.com or +1 718-866-8454.
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