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Bectran Product Team
I
December 16, 2025
7 minutes to read
Credit insurance provides a necessary backstop for accounts receivable. It protects the balance sheet against catastrophic loss and allows companies to trade with confidence in volatile markets. However, a distinct challenge arises when the insurance policy stops acting as a safety net and starts acting as the primary decision-maker.
For many credit departments, the insurer-provided limit becomes the de facto credit limit. If the insurer approves $50,000, the customer gets $50,000. If the insurer cuts coverage to zero, the customer is placed on hold or moved to cash-in-advance terms. While this approach minimizes work and transfers risk, it also transfers control.
When a credit team relies entirely on external coverage to dictate sales volume, it effectively outsources risk strategy. This limits revenue potential and can damage customer relationships when coverage is withdrawn due to macro-economic sector fears rather than specific customer behavior.
The core issue is the absence of an independent internal review process. When the insurance limit automatically becomes the credit limit, the credit department ceases to assess the buyer's actual creditworthiness. They simply administer the policy.
This dynamic creates a rigid operational model where sales are capped artificially. If a long-standing customer needs $100,000 in credit to support a seasonal spike, but the insurer's algorithm caps exposure at $60,000 based on general industry trends, the supplier loses $40,000 in potential revenue. The credit manager is left in a difficult position: explain to Sales that the deal is dead because a third party said so, or scramble to find a justification to override the limit without a structured process to do so.
Credit teams have stopped performing deep independent analysis and settled into a workflow where the insurer's output dictates their input. In some cases, teams hang their hat on the credit insurance: they ask for X, they get X or they get half of X, and off they go selling them half of X or up to X. The portfolio gets managed that way. This illustrates common "pass-through" logic. The team asks for X. If they get half of X, they sell half of X. The decision is binary and external. Portfolio management becomes reactive. The team manages compliance with the insurance policy, not actual risk.
Why do experienced credit teams default to this passive model? The answer stems from resource constraints, data limitations, and rigid ERP configurations.
Conducting a comprehensive financial analysis for each customer is time-consuming. It requires gathering financial statements, analyzing trade references, checking bank data, and monitoring payment trends. For a department managing thousands of active accounts, manually performing this for every limit increase is impossible.
Credit insurance offers a shortcut. The insurer has the data and the analysts. Relying on their limit saves the internal team hours of work per account. Over time, this efficiency becomes a crutch. The team stops building their own credit files because the insurer's file is "good enough."
In many organizations, the ERP system is set up to block orders that exceed the credit limit. If the credit limit field is populated via a flat-file upload from the insurance provider, the block is triggered automatically.
To override this, a credit manager often has to manually calculate a "top-up" limit or a self-insured portion. If the ERP does not have separate fields for "Insured Limit" and "Internal Limit," managing this hybrid exposure becomes a manual nightmare. Matching the ERP limit to the insured limit avoids system conflict.
Corporate mandates often dictate risk tolerance. If a CFO states that "all sales must be insured," the credit manager has zero flexibility. This policy is designed to protect the company, but it fails to account for the nuance of relationship-based trading. It treats a 20-year customer with a perfect payment history the same as a new prospect if the insurer decides to cut limits on that sector.
Insurers adjust limits based on their network data. This is powerful, but it can be slow or overly broad. A supplier often has more recent data on its specific customers, including payment speed, dispute frequency, and communication quality. However, if this internal data is stored in emails or spreadsheets, it cannot be readily used to develop a counterargument to the insurer's decision.
To move beyond the safety net, credit managers need a structured way to assess risk alongside the insurance coverage. This does not mean cancelling the policy. It means treating the insurance limit as one data point among many.
The most effective way to regain control is to separate the Insured Limit from the Total Credit Limit in the customer master data.
Example:
By formally documenting the self-insured portion, the business acknowledges the risk without rejecting the revenue. This requires an internal scoring model that can justify the gap.
When an insurer cuts a limit or offers partial coverage (the "half of X" scenario), the credit team should trigger an automatic internal review rather than an automatic reduction in sales.
The Review Checklist:
Blindly accepting the insurer's limit is a missed opportunity for negotiation. Insurers are data-driven. If a credit manager can provide updated financials, proof of recent payments, or context on a specific project, underwriters are often willing to reconsider a limit.
Instead of "we ask for X, we get half of X," the process should be: "We asked for X, we got half of X, we supplied evidence A, B, and C, and negotiated it up to 80% of X."
Shifting from a passive, insurance-led model to a proactive, internal risk model delivers measurable value across the organization.
The most immediate impact is the preservation of sales. By establishing a protocol for self-insuring trusted customers, companies avoid disrupting supply chains due to conservative insurance algorithms. This builds loyalty. Customers remember which suppliers stood by them when the market tightened.
Understanding the true risk of the portfolio allows for better policy management. If internal scoring shows that a specific segment of low-value customers is extremely low risk, the company might choose to remove them from the insurance policy entirely to save on premiums, reserving coverage for high-stakes accounts.
When the credit team owns the risk decision, they can move faster. They do not need to wait 48 hours for an underwriter to review a file in a different time zone. They can review their internal score, verify the payment history, and release the order within minutes.
To execute this strategy without adding headcount, technology must bridge the gap between internal data and external coverage.
Modern credit management platforms allow teams to:
This eliminates the manual labor of checking limits and frees the credit manager to focus on high-value decisions, such as determining which customers warrant the additional risk.
Credit insurance is a powerful tool for risk transfer, but it should not replace credit management. When a team "hangs their hat" on the insurance limit, they abdicate their role as strategic partners to the business.
By building an internal framework for independent risk assessment, credit leaders can challenge limits, justify self-insurance, and support revenue growth even when the insurance market contracts. The goal is to learn how to walk on the wire when necessary, without ignoring the safety net.
1. Audit Your Dependency
2. Define "Safe" Self-Insurance
3. Challenge the Insurer
4. Questions to Ask Your Team
Track insurance coverage and internal risk assessments in one system. Bectran imports your insurance limits as a data point, builds custom scoring models from your payment data, and triggers automated workflows when coverage gets reduced—so you can justify self-insured exposure with documentation. See how risk scoring works.
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