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A man makes a online claim on his trade credit insurance

Preventing rejected or reduced trade credit insurance claims

During the COVID-19 pandemic, government loans, grants, schemes (such as furlough), legislation (to delay the persecution of unpaid business debt) and state support for trade credit insurers, were a lifeline for many businesses. Now, as government support winds down and funding is withdrawn, it is likely lead to an escalation in insolvencies that were otherwise previously delayed.

Earlier this year we wrote about how trade credit insurance can support your business after lockdown. And for those businesses who have remained solvent, the attention is now very much focussed on growth. The signs are promising too with a projected GDP growth in excess of 6% over the next 12 months. However, in periods of rapid growth during a recovering economy, some businesses can expand too rapidly and overstretch themselves. This can lead to cash flow problems, and sometimes failure, leading to claims on trade credit insurance policies.

As trade credit claims rise, so will insurer scrutiny as they look closely for any failures from businesses to comply with policy terms and conditions. This can lead to rejected or reduced claims settlements. Here’s how you can help avoid a rejected or reduced claims settlement.

Documentation is vital

We have seen claims rejected where clients have been unable to provide documentation that insurers require to evidence that policy terms and conditions have been met. In a recent example an insured was unable to provide delivery notes. As a result the claim was rejected. Please ensure your transactions are fully documented. This will improve your chances of making a successful claim.

Agree credit limits in advance

If you allow debts to build up before agreeing a credit limit you could be putting yourself at risk. We have seen instances where a business has traded with a buyer, but only obtained an insurer credit limit after a significant debt had already built up and then the buyer became insolvent. The credit limit only applied after it was agreed with the insurer. The claim settlement was therefore limited to the deliveries made after the credit limit was arranged, excluding the significant debt already owed.

Be aware of fraud

As the UK economy recovers, we anticipate an increase in fraudulent activity which is not covered by a trade credit insurance policy. While there can be many types of fraud, a common form is buyer impersonations. As the policy will not cover this it is important that you follow your normal credit control procedures including your usual checks and due diligence to know who you’re dealing with to protect yourself from falling victim to such fraud. Warning flags for a fraud include:

  1. Contact made via a mobile telephone with no landline provided.
  2. A professional looking website, but has little functionality.
  3. Use of Gmail or Hotmail email addresses.
  4. A buyer not interested in price or negotiation.
  5. An unusually short period between first contact, order, and request of delivery.
  6. A one-off low-value order or, following payment of several low-value orders, a one-off larger request.
  7. A buyer requesting to collect goods in-person, often in unmarked vehicles, or requests to change the delivery address at short notice.
  8. Conflicting sectors, where the buyer is in a different trade sector to the supplier.
  9. Registered office addresses that are PO Box addresses or serviced offices.
  10. Changes in bank account details.

It is critical that you are familiar with your responsibilities under your specific policy and, by carefully adhering to policy terms, you can ensure claims are paid in full. If you’re interested in learning more about the most common grounds for claims rejections, or part payment of claims, head over to our colleagues in Marsh.

If you have questions about trade credit, please get in touch or reach out to your Marsh Commercial advisor.


1. https://www.cbi.org.uk/media-centre/articles/uk-economy-back-to-pre-covid-level-by-end-of-year/