Business owners demand expansion of commercial credit insurance

Small and medium business owners called on insurance companies to expand the provision of “commercial credit” insurance, in light of the great economic activity witnessed by the country, the bifurcation of economic relations between companies, and the increase in exchange activity between merchants locally.

They explained to “Emirates Today” that the market includes a very large number of companies, and it is difficult to ensure their ability to fulfill their obligations, or the payments required of them in futures transactions, which calls for an urgent need for the commercial credit insurance service in dealing with them.

They pointed out that insurance companies have recently begun to provide this type of insurance easily, but it is still on a limited scale, despite the large number of insurance companies operating in the market.

For their part, two experts told Emirates Today that the need for this type of insurance appears in companies that are not known to each other, or there is a case of default by the buyer.

They emphasized that companies that buy this type of insurance receive the appropriate compensation and coverage agreed upon by the insurance companies, in the event that buyers are unable to pay for their purchases, pointing out that this type of insurance motivates commercial companies to maintain their reputation and commitment, as they are subject to a study. Its financial situation, and they expect insurance companies to expand offering this product as economic activity increases.

Trade credit

Insurance expert, Muhammad Abanda, told Emirates Today: “This type of insurance is known as (commercial credit insurance), and it means that companies that sell products or services to other companies fear that some buyers cannot pay, so they buy Insurance against the risk that buyers will not be able to pay for the goods or goods you sell.

Abbanda added: “In most cases, the need for this type of insurance appears in companies that are not known to each other, or are known, but there are difficult circumstances or the like that are attributed to the purchasing party, and here the seller himself insures by purchasing insurance against the risk of non-payment in the future from Before this buyer.

He continued: “Companies that purchase this type of insurance receive the appropriate compensation and coverage agreed upon by the insurance companies, in the event that the buyers are unable to pay the prices of their purchases, due to insolvency, fraud, or any other reason mentioned in the contract, in a way that ensures that the companies are not exposed to The seller is facing financial problems as a result of the number of commitments made by her clients from other companies.”

Abbanda stated, “This type of insurance is not widespread at the present time, because it is difficult for all insurance companies to provide it, because there is a need to study the financial situation of buyers, and the setbacks they have experienced, in addition to their income, their position in the market, and other things.” Surrounding dangers.

He said: “But with the increase in economic activity and growth significantly over the past few years, it is expected that insurance companies will expand in providing this product, and that there will be terms, conditions and clauses that guarantee the rights of all parties, in a way that does not affect the performance of insurance companies or cause them unconsidered losses.” .

Catalyst for companies

In the same context, financial and accounting expert, Ashraf Ali, said: “There is an increase in demand for this type of insurance by commercial companies, with the expansion of relationships and the increase in trade exchange activity between merchants locally.”

He added: “There are usually consulting accounting offices that provide insurance companies with the service of studying the financial position of companies against the risks of non-compliance, based on their financial statements, their credit status in banks, and other indicators that can benefit insurance companies when submitting a request, and thus facilitate the determination of the value of the premium and the amount. Compensation if the buyer defaults.

Ali continued: “There is an understanding from some insurance companies of the market’s need for this product, and indeed they offer it, but there are still companies that are reluctant to offer it. However, it can be offered if financial advisory services are available that explain the companies’ situation impartially. This is a guarantee for insurance companies, and it also stimulates… Commercial companies in general must maintain their reputation and commitment, as they are subject to studying their financial situation at any time, if the companies they deal with request reports on their financial situation.”

. Trade credit insurance provides “compensation” in the event that the buyer fails to pay for purchases.

. This type of insurance motivates commercial companies to maintain their reputation and commitment as they are subject to a study of their financial situation.

. Increasing exchange activity between merchants locally will enhance the expansion of the commercial credit insurance product offering.