Graham MacLachlan is one of only a handful of brokers in all of western Canada selling trade credit insurance. His largest competitors are also his suppliers. It seems an ideal position to be in. The market only has a 20% penetration rate, so there’s a lot more room for growth as well. MacLachlan, managing partner at Global Trade Credit, based out of Calgary, Alberta, spoke with Insurance Business about the insurance products he sells, and about educating potential clients. “I don’t say that I sell insurance – all I do is I educate,” he said. “My job is education, education, education. And if people ‘get it’ and understand it, they’ll take it.” With just 20% market penetration, growth will come through education, MacLachlan said. Once more people know about the product offerings, and how to access trade credit insurance, then more people will buy it, he said. Credit insurance, or accounts receivable insurance, protects business-to-business companies against bad debt, in the forms of unpaid bills, and customer bankruptcies. “It’s a great secret”, David Dienesch, chief executive of Euler Hermes Canada, told Insurance Business last week, speaking about credit insurance. “As a consequence of it being a specialty line, [many P&C brokers] are almost afraid to sell it.” MacLachlan agreed. From British Columbia to Thunder Bay, Ontario, there are only a handful of specialty brokers selling it. There is one other broker in Alberta and one main broker in BC selling it, he said, with the carriers – like Euler Hermes – also selling it direct, as competitors. “It’s a strange industry when your suppliers are also your competitors,” he said. “And I believe that’s why the growth of this industry has stagnated … all of the general P&C brokers are leaving money on the table because all of their clients are dealing directly with the insurers.” Global Trade Credit has many of its customers in western industries, MacLachlan said – including paper and pulp, aerospace, grain, and agricultural equipment. The firm gets its clients from “direct calling businesses; [through] bankers when they need extra security to get a deal through the door … and then through brokers.” And when it comes to P&C brokers seeking his services, it’s usually the “younger, hungrier” brokers who want to add on trade credit to their clients’ portfolios, he said. “Typically it’s the younger brokers who pick it up and think this is something they can get their head around,” he explained. “They’ll seek out a specialist like myself, and then I’ll either do it for them to keep their client happy, and in some cases they may want to split some commission if it’s large enough. “That’s the trade-off: I do their business for them and they keep their client happy. They’re looking for an edge – instead of just writing the P&C business, they’re looking for what else they can talk to their client about.” P&C brokerages who aren’t offering trade credit were, MacLachlan said, “underservicing their clients.”
The trade credit market has ample room to grow in western Canada, with a current penetration rate of just 20%. Many property and casualty (P&C) brokers are wary of offering the specialty line, which protects business-to-business firms against bad debt, said David Dienesch, CEO of Euler Hermes Canada. The fact suppliers are often also competitors, selling directly, has caused growth in the industry to stagnate, according to Graham MacLachlan from Calgary-based Global Trade Credit. However, he added that P&C brokerages not offering trade credit cover are "underservicing their clients".