Global credit insurance provider Euler Hermes has partnered with insurtech start-up Factfin to help small to medium sized businesses better manage risks such as counterparty risk when exporting their products or services.
Based at Sydney’s Stone and Chalk, Factfin has developed an analytics tool to help insurers and lenders, predict whether a business will be able to pay invoices.
The partnership has culminated in a platform which uses the credit insurer’s global customer base alongside Factfin’s analytics tool to deliver real-time detailed credit default risk analysis of millions of businesses around the world.
The platform will be particularly helpful when Australian SMEs are exporting their products to new customers in overseas markets and want competitively-priced insurance to guard against the possibility their invoices will not be paid. It can also be used when businesses want to borrow money against these unpaid invoices.
Business will also have a better understanding about their counterparty risks.
“The emergence of platforms like Alibaba and Amazon have allowed SMEs to sell to anyone in the world. These platforms can help with logistics but not in addressing counterparty risk,” Factfin founder Paul Reynolds (pictured left), said.
Many of these businesses have to wait 30 or 60 days to get paid and for Reynolds that’s a big risk when you don’t know who your counterparty is.
“These businesses can buy Euler Hermes’ insurance to safeguard against the possibility it will not be paid
Data analytics and insights underpins the new offering.
“We have recognised that the Factfin risk analytics platform provides significant additional value to our product offering and therefore we are keen to cement this partnership,” Euler Hermes Oceania CEO Chris Doube (pictured right), said.
“Trade credit insurance is our core product. We have offered it in a similar way for at least 100 years. We have always had a vision that a great use of data at a granular level can provide better solutions to SMEs, empowering our client with better risk management.”
Reynolds adds that the SMEs are now also creating a data footprint through business interactions including global trade. This will be key for businesses who have often struggled to get services such as finance because of data availability.
“Banks and insurers have struggled to understand the risk profiles of their businesses because of lack of data. However, this data footprint increasingly captured on platforms like Xero and MYOB can provide better a better risk assessment where both banks and insurers can unlock the value for their customers.”
Reynolds said there has been 100 per cent interest from the banks, however, “they are bit preoccupied at the moment”, given the ongoing events such as the royal commission.
“Discussions are underway, and things are progressing well,” he said.
Both Reynolds and Doube see further developments in Australia’s insurtech market, albeit there will be some catching up to do.
“Insurtech has lagged a little behind fintech because banks have always invested in technology while insurers were not big investors. What we are seeing, however, is that technology is becoming more pervasive in both banking and insurance.”
As part of the working group on insurtechs, Reynolds is seeing progress in this area. “Insurers are starting to get involved. Watch this space.”
Euler Hermes’ Doube adds that larger insurers like his business are eyeing the sector.
“Three years ago, we launched an internal division to help us understand how to evolve the business digitally. One way of doing this is through partnerships. We will be reaching out to find business we can work with to come up with ideas and solutions to provide better value to our customers.”