credit insurance - History

An insurance taken out where a business sells on credit terms (ie asks for payment at a later date). In this way the insurer provides a safeguard against the possibility of a customer not paying, thus creating a ‘bad debt’.

Trade Credit Insurance is purchased by business entities to insure their accounts receivable from loss due to the insolvency of the debtors or other factors. Ironically, the links and history below are relevant to the subject of Trade Credit Insurance

Credit Life Insurance is a consumer purchase, often sold with a big ticket purchase such as an automobile. The insurance will pay off the loan balance in the event of the death or the disability of the borrower.

Credit Insurance is an insurance policy associated with a specific loan or line of credit which pays back some or all of any monies owed should certain things happen to the borrower, such as death, disability, or unemployment.

The sale of credit insurance is controversial because it is almost always cheaper for an individual to forgo credit insurance, and instead have a term life insurance or disability insurance policy to cover the credit balance. The reason is that credit insurance is guaranteed issue, no matter if a person would otherwise be insurable or not.

In addition, there is an even more controversial practice (called single premium credit insurance), usually associated with the sub prime lending industry, of charging the premium only one time at the beginning of the loan. Critics contend most people do not realize this and lose money by refinancing once again, thereby losing the benefits of the credit insurance.

History

Credit Insurance was born at the end of nineteenth century, but it was mostly developed in Western Europe between the first and Second World Wars.

Credit Insurance is a term used to describe both Trade Credit Insurance and Credit Life Insurance.

Credit Life Insurance is a consumer purchase, often sold with a big ticket purchase such as an automobile.

Trade Credit Insurance is purchased by business entities to insure their accounts receivable from loss due to the insolvency of the debtors.

Over the '90s, a concentration of the Trade Credit Insurance market took place and three big companies became the main players of a market focused on Western Europe:

Atradius. Euler Hermes, merger of the two credit insurance companies of the Allianz Group.