Source: The Insurance Apprentice judges Gareth Joubert, Simon Colman and Marvin Tshezi (all seated) wait to brief the contestants.
The best learning curves are the steep ones – as the contestants in The Insurance Apprentice 2018 found out in today’s Hollard-sponsored task.
This specialist form of insurance, essentially covering bad debt, was the subject of the third task for the 2018 edition of The Insurance Apprentice, the reality show-style competition run by FAnews. Hollard is a Gold sponsor of the series.
The competition is currently being filmed in Johannesburg and is expected to be broadcast in weekly episodes in about two months’ time.
“The Insurance Apprentice is never an easy proposition, but this task takes the participants right out of their comfort zone because it involves a form of insurance unlike any others,” said FAnews editor Rianet Whitehead before the task commenced.
“And they don’t have much time to get their heads around the concepts involved either. But they’re a smart group, and I’m really looking forward to seeing how they respond to this particular challenge.”
At the beginning of today’s task, the judges – Hollard Trade Credit Insurance head Gareth Joubert, SHA Underwriters executive head Simon Colman and Hollard Insure head of procurement Marvin Tshezi – regarded the remaining seven contestants (one was eliminated yesterday) with a gimlet eye.
Right off the bat, Colman delivered a stern warning.
“One of you left yesterday, and today at least one of you will be leaving. And there’s nothing stopping us from letting a whole team go,” he told the group, who cannot be identified at all (lest we give away how the competition is going).
Turning to the task, Tshezi explained that the task involved examining three very different debtors through the trade credit insurance lens, and then answering six “simple” questions:
- Will you insure them?
- What is the highest credit limit you would extend to each?
- What is the ideal credit limit for each?
- How would you rank the three debtors in terms of default risk?
- Would you impose any special conditions to provide trade credit cover?
- What do you think the premium would be for each?
“I think the task will be a little tricky because of the unfamiliarity [of trade credit insurance],” Joubert added.
The contestants, who had competed as individuals in the first two tasks, were then split into two teams and instructed to choose a leader and team name.
Joubert then briefed the teams on the basics of trade credit insurance and the details of the task.
He explained claims triggers – an acknowledgement of the debt by a debtor, business rescue, confirmed judgment and liquidation – as well as elements that help to determine cover, such as payability, key dependency on certain debtors, the Banker’s Code, comprehensive credit reviews and buyer’s visits.
Turning to the task, he described the three hypothetical debtors:
- Debtor 1: an IT distributor sells on a recurring basis to a wholesaler, with monthly sales of R3 million and 30-day credit terms. The distributor requires trade credit insurance on the wholesaler.
- Debtor 2: a sub-contractor is installing kitchen equipment into a complex for a once-off contract worth R12 million, with a duration of six months and payment terms of 30 days from the invoice. The sub-contractor is concerned that it will install the kitchens and then have to unnecessarily wait to receive payment – or not receive it at all and wants to insure the default risk of the developer.
- Debtor 3: a diesel wholesaler that sells fuel worth R2 million a month to a supermarket chain is offering a better price – but much shorter, seven-day credit terms. The wholesaler is concerned about the default risk and would like to insure the supermarket chain against this.
He offered himself as multiple sources of information, such as the credit bureau, the client and a general source, and encouraged the teams to ask a lot of questions because this would affect the outcome of the task.
“You can get the task right, or you can get it really right. That’s the difference between who wins today, and who doesn’t,” he said.
After the briefing, Tshezi said: “Working in procurement, I know that bad debt is an ever-present risk. As insurance people, our job is to not only cover our clients for the risks they face but to assist them to reduce their risk."
“The trade-credit insurance process covers both these bases. By providing cover for when bad debt happens, and by showing them areas for improvement, we can help our clients to reduce the risk of bad debt, bring down their cost of credit and firm up their bottom line.”
Joubert added that this task could be one of the most enriching ones they undertake in The Insurance Apprentice.
“Hollard’s trade credit insurance offering is one of the most progressive of its kind and this is a really exciting niche market to be in – especially in these tough times, where creditors can easily go to the wall because of unpaid debt,” he said.
“Strong working knowledge of trade credit insurance should be an arrow in every insurance professional’s quiver, and I hope the contestants learn a lot today.”
