Insurance Claims Recoveries: When to Outsource to a Debt Collector
Hi, my name is Adam Stewart, Debt Collection Expert and owner of Debt Recoveries Australia.
Since we do a lot of insurance claims recoveries and general debt collection for insurers, I thought I would share some thoughts and suggestions on the question of exactly what stage should an insurance company outsource their claims recoveries.
Insurance claims recoveries are needed when there is a recoverable amount arising, as a result of a “not at fault” claim. For instance, an insurer pays out for the repairs to their insured’s vehicle. The insured is not at fault for the accident and has provided details of the at fault party. The repairs to the vehicle can then be recovered or collected from the at fault party. This recovery or debt collection can be done internally or externally, by a debt collection company.
The question is, do insurance companies try to perform this complex debt collection process themselves, or do they outsource to a professional? If they do outsource, at what stage do they do this?
My view is no, of course not and yes, outsource immediately.
The reasons are simple. Why would you want your claims team spending valuable time and resources, trying to do a specialist debt collection function, when you would rather them concentrate on what they do best, which is servicing the insured and processing the claim?
My suggestion is to outsource the claims recoveries from day one, so that the professional outsourced service provider can then immediately instigate the debt collection process. I have seen insurance companies go through cycles where they first outsource all claims recoveries from day one, which works really well, then they in-source, with varying degrees of success, then ultimately outsource again, when things go pear-shaped.
Another point to note is that in periods of major claims events and catastrophes, it is the claims recoveries that are left behind and this impacts on claims costs, which spiral during these times.
Here are some of the benefits of outsourcing your insurance claims recoveries:
Make Initial Contact
Our clients that outsource immediately, do not have to worry about attempting location or skip-tracing or waiting two to three weeks for an answer to a snail mail letter that is never going to come.
We make initial contact with the debtor in a friendly way, acting as an agent of the insurance company. We conduct skip tracing if they are un-located, apply for police reports, license or rego searches- all the time consuming tasks that claims officers simply do not have time to do.
This can be one of the most time-consuming parts of the recovery process. Quite often, the at-fault parties will dispute either the quantum or liability, or both. We handle all disputes matters by asking for versions of events, getting witness statements, liaising with third party brokers, insurers, any other stakeholders that may be involved. Sometimes this process takes months, so we have a diary process that can look after these cases.
A good insurance recoveries company will have staff that all have a full understanding of the General Insurance Code of Conduct, Insurance Code of Practice and the Insurance Contracts Act. They can act as an extension of the insurance company’s claims team, complementing the whole process and making it streamlined. They can provide quick response times for the debtors and other stakeholders. They can provide relationship management between the debtor and the insurance company, acting as a liaison or “buffer” so the insurance company does not have to deal with potentially time-consuming calls and emails.
Payments and Arrangements
Debt collection companies are the experts in getting payment in full or as close as possible to payment in full. If this cannot be done, collection companies are usually set up with fully automated payment and arrangement processes, so they can monitor and report on instalments and repayment cases over a long period.
Access to legal advice and legal proceedings
Most reputable insurance recovery companies will have their own legal arm. I set up ADC Legal Litigation Lawyers about 3 years ago now. My clients were always saying they wanted us to handle everything, including legal advice and litigation, so I provided that service to my clients.
We provide all our on-going clients with free legal advice on both recovery matters and defended matters. We also provide our clients with free legal letters of demand. This gives a real boost to the overall recovery rate.
Saving Money and Time
The biggest saving for an insurer is, of course, the cost of having to hire all these debt collection experts themselves. Costs of claims can be reduced, simply by outsourcing the whole recoveries function to a professional service provider. Saving time is also a major factor. Claims staff are then free to concentrate on helping the insured and getting the claims process completed, without having to worry about skip tracing or debt collection.
Hiring a Debt Collector
OK, so being the owner of one of Australia’s leading insurance recovery companies, Debt Recoveries Australia (DRA), of course I am going to recommend us. However, if you are looking at more than one company on your panel of providers, I would recommend that you look for companies that can provide a “one-stop-shop” solution. The insurance recovery company should be able to do location work, skip tracing, debt collection, investigations, report applications and litigation. This makes it easier for you to use one provider for everything. Look for a provider that has capacity to handle your work and they have the expertise, as discussed previously.
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