By Robert Hawthorne, president, Accounts ReceivableRisk Management, LLC

The ongoing economic crisis is driving sales of a product thatis new to many agents: trade credit insurance. This product,used extensively overseas but underutilized in the U.S., presentsagencies with a great opportunity.

Many agents who have been selling insurance all their livesdon't know about credit insurance. It's a way for businesses toprotect their accounts receivable (A/R)—in other words, theiroutstanding invoices. If a customer should default, refuse to payor somehow be unable to pay, the policyholder is entitled tocoverage under the policy.

Since 2007, more than 160,000 U.S. companies have been forcedout of business. Virtually all of your customers have been affectedby one or more of these bankruptcies. Ironically, most companiesinsure virtually every aspect of their businesses, yet they leavetheir accounts receivable—their largest asset—unprotected. Intoday's economy, a loss due to customer nonpayment of invoices ismore common to a typical business than fire or theft. As we knowall too well, the consequences can be devastating.

With experiences from the latest recession still fresh, and withnew lingering doubts about the state of the global economy,businesses want to protect themselves. For agents, a product thatprotects their client's cash flow represents a tremendousopportunity. Credit insurance has less than 10 percent marketpenetration, yet it pertains to 100 percent of your businessinsurance customers.

Demand for credit insurance is growing. Many of the carriersexperienced double-digit growth rates last year. Globalpremium is about $8 billion and U.S. premium is about $800 million.That figure is expected to triple within 5 years.

Read related: “Business's Need for Credit Insurance Means Opportunity forAgents.”

Most credit insurance is placed through MGAs who will first andforemost respect the relationship you have with your client, assistin explaining the product and then service the account as needed.Commissions are paid on all new policies and renewals.

In addition to revitalizing a relationship with an existingbusiness insurance client, credit insurance is a great door openerfor those customers you were previously unable to see. And sinceit's only a matter of time before a competitor approaches yourexisting clients with credit insurance, it might be wise to broachthe topic first. You might be surprised how well the product isreceived.

In addition to protecting a company's accounts receivable,credit insurance also provides other benefits. For example, becausetheir orders are pre-approved, companies that have credit insurancecan be more aggressive with the terms they offer their customers,or they can increase the size of orders.

Read related: “CFOs Ask Risk Managers to Address New BusinessRisks.”

With their accounts receivable insured, companies can improvetheir own financial profile. Though bank lending remainsconstrained, banks are more likely to lend to companies withinsured A/R, and often lend to them on more favorable terms.

Credit insurance also enables companies to increase the size oftheir working capital. For example, banks might lend against 90percent of the receivables, rather than just 80 percent, becausethey're insured.

Between the increased sales and improvedbanking relationships, many customers say credit insurance givesthem a competitive advantage and may actually be a profitcenter.

There are other drivers for the interest in credit insurance.Exports by American companies—especially small and medium-sizedbusinesses—have grown by nearly a third in just 3 years. Thecurrent European economic crisis, and other regional concerns inLatin America and the Middle East, have made credit insurance amust for companies as they make difficult credit decisionsregarding whether or not to ship goods.

Read related: “Zurich in North American Increases Trade Credit InsuranceCapacity.”

There's really no reason not to discuss credit insurance withyour clients.

However, when dealing with any new product, agents need an easyway to present it to their clients. All you need to know are thefour main benefits of credit insurance:

1. Protection against a loss due to bankruptcy
2. Protection against past due receivables
3. Provides financial information on new and existingcustomers
4. Allows companies to negotiate better rates and limits ontheir bank lines.

The great recession has permanently altered the U.S. economy.Customers face new risks and it's up to their agents to addressthose risks. Conventional property-casualty policies only coverpart of the risk.

Agents also face a risk. Businesses want the kind of protectioncredit insurance offers. Unless you provide it for them, someoneelse will.