When a recoverable amount arises as a result of a “not at fault” claim, insurance claims recoveries are required. For example, an insurer may pay for repairs to their insured’s vehicle. The insured is not at fault for the accident and has provided information about the responsible party. The vehicle repairs can then be recovered or collected from the at-fault party. This debt collection or recovery can be done internally or externally by a debt collection company.
The question is whether insurance companies attempt to perform this complex debt collection process on their own or outsource it to a professional. If they outsource, at what point do they do so?
The reasons are straightforward. Outsource claim recovery from the start so that the professional outsourced service provider can begin the debt collection process right away. Insurance companies go through cycles in which they outsource all claims recoveries from day one, which works extremely well, then they in-source, with varying degrees of success, and finally outsource again when things go wrong.
Another thing to keep in mind is that during major claims events and disasters, it is the claims recoveries that are left behind, which has an impact on claims costs, which spiral during these times.
Here are some of the advantages of outsourcing insurance claim recovery:
Make the First Contact.
Clients who outsource immediately do not have to worry about attempting location or skip-tracing or waiting two to three weeks for an answer to an undeliverable snail mail letter.
Initial friendly contact with the debtor as an agent of the insurance company. Conduct skip tracing if they have not been located, apply for police reports, licence or registration searches- all of the time-consuming tasks that claims officers simply do not have time to complete.
Dispute Resolution.
One of the most time-consuming aspects of the recovery process. Frequently, the at-fault parties will contest either the quantum or the liability, or both. All disputes are handled by requesting versions of events, obtaining witness statements, and communicating with third-party brokers, insurers, and any other stakeholders who may be involved.
Expertise.
A good insurance recovery company will have employees who are well-versed in the General Insurance Code of Conduct, the Insurance Code of Practice, and the Insurance Contracts Act. They can serve as an extension of the insurance company’s claims team, supplementing and streamlining the entire process. They can provide debtors and other stakeholders with quick responses. They can manage the debtor’s relationship with the insurance company by acting as a liaison or “buffer” so that the insurance company does not have to deal with potentially time-consuming calls and emails.
Payments and Contracts.
Debt collection agencies are experts at obtaining payment in full or as close to payment in full as possible. If this is not possible, collection agencies are usually set up with fully automated payment and arrangement processes, allowing them to track and report on instalments and repayment cases over time.
Legal assistance and legal proceedings.
The majority of reputable insurance recovery companies will have their own legal department. We offer free legal advice to all of our ongoing clients on both recovery and defence matters. In addition, we offer our clients free legal letters of demand. This significantly improves the overall recovery rate.
Saving both money and time
The most significant savings for an insurer is, of course, the cost of hiring all of these debt collection experts themselves. Claims costs can be reduced by simply outsourcing the entire recovery function to a professional service provider. Saving time is also important. Claims staff can then focus on assisting the insured and completing the claims process without having to worry about skip tracing or debt collection.
Recruiting a Debt Collector.
Companies that can provide a “one-stop-shop” solution are recommended. Location work, skip tracing, debt collection, investigations, report applications, and litigation should all be capabilities of the insurance recovery company. Look for a service provider who has the capacity and expertise to handle the work.
If you have any further questions, please contact our Legal-Litigation Lawyer Nikola Fratric on (03) 9999-1122 or by email nik.fratric@adclegal.com.au.