Overdue notification (trade credit insurance)

A small manufacturer in Lyon ships 180,000 euros of parts to a German distributor, payable 60 days end of month. The March 31 due date passes with no payment. Its credit insurance policy gives it 60 days after the due date to file an overdue notification, a deadline each policy sets in its own way, sometimes counted from the end of the maximum extension period; beyond that, the insurer can deny cover on the receivable. The overdue notification, or non-payment notification in London wordings, is the notice by which the insured reports the unpaid debt before it becomes a claim. It opens the file and usually starts collection by the insurer. Its heaviest effect bears on the rest of the account. Once it is received, the buyer's credit limit is frozen in practice: later shipments are no longer covered without the insurer's written consent, and some policies drop cover as soon as the delay exceeds the maximum extension period, before any notification is filed. A supplier who keeps shipping to hold on to the customer does so at its own risk. Payments received afterwards are allocated under the policy rule, which may apply them to the oldest invoices first, and the insured exposure can shrink faster than the insured had worked out. Insurers hold firm on the deadline for a collector's reason: an overdue account known early is recovered better, and an insured who waits four months hoping for a transfer has let the buyer pay its other creditors first. The notification is not a claim for indemnity. The loss is only established on the buyer's legal insolvency or at the end of the protracted default waiting period.