Having spent more than a decade in the insurance industry, I learned a lot as a Billing and Collections professional: how to get money in the door, how to manage vendor relationships, and how to preserve relationships with customers even when they go delinquent. Now that I’m on the other side of things working for a collection agency, it’s my job to help my insurance clients get the most out of their collections partners and maximize their efforts. And there are some things I wish I had known about working with collection agencies when I was a Billings and Collections Manager:
Lean on your vendor to be more proactive
Or more simply: you don’t know what you don’t know, and so you should expect your collection agency to help educate you and make suggestions for process improvement. Your collection agency should provide extensive reporting at both the macro and granular levels, giving you a comprehensive understanding of your portfolio.
Since they’re seeing your receivables farther down the line than your team, there’s a great chance they may be able to pinpoint specific trends or offer ideas to increase collection results. This information can be especially helpful to other parts of your organization, such as your underwriting team or your operations department. It can inform new customer outreach initiatives or identify common obstacles that are making it harder for your customers to pay on time.
Always work with a champion – and a challenger
In my years in the industry, I frequently saw insurance companies use only one agency to collect. When an account would go past due, the company would bundle their accounts, send them over to their single-source agency, and hope for a positive resolution. The problem is that some agencies need to be motivated to achieve the returns you want.
To really get the most out of your receivables, consider a champion-challenger model. The champion-challenger approach compares two or more agencies in order to promote the one that performs best. Typically, these comparisons are done on a quarterly or semi-annual basis, and the top-scoring agency is awarded a larger percentage of the portfolio for the next evaluation period. A great collection agency will be driven to out-perform their competition and do what it takes to retain your business.
Consider a first-party solution
Have you considered outsourcing your first-party collection efforts? In a first-party environment, your collection agency acts on your behalf, contacting your customers before their policy goes into cancellation. The primary goal of a first-party program is to preserve the relationship your customers have with you.
The account specialists contacting your policy holders are brand representatives for your company, contacting in your name and helping customers catch up on their premiums before they fall farther behind. This approach not only helps reduce customer loss, but it can also be a valuable source of data to help shape future strategies. The account specialists can gather information about why your customers aren’t paying on time and provide insight into the factors that may be driving delinquency, in addition to getting payment in-hand.
In the end, your level of success directly corresponds to how effectively you manage your partnerships with your collection agencies. Know their relative strengths and weaknesses. Build yourself a winning hand that will maximize results while strengthening those critical customer relationships that serve as a barometer of your company’s value in a challenging marketplace.