Digitalisation has revolutionised receivables management and enables collection service providers to recover receivables quickly and efficiently. However, like many other financial service providers, insurance companies are subject to increased legal and regulatory requirements in their receivables management processes. This and much more must be taken into account when choosing a collection partner.
In this article, we show what insurers should know about debt collection, what is important when choosing the right debt collection service provider and what advantages we at PAIR Finance offer with our innovative and AI-based debt collection.
Insurance providers face unique challenges when it comes to collections. With every contract that is signed, insurance companies take risks. Non-payment by consumers can result in the insurance policy lapsing or not being issued at all. For example, if a customer has several policies with the same insurance company and only one of them does not pay, it is particularly important not to jeopardise the customer relationship and to proceed with great sensitivity.
In addition, legal knowledge and experience are required when carrying out debt collection procedures. A good debt collection partner is familiar with the German Insurance Contract Act (VVG) and knows, for example, that insurers can instruct a debt collection service provider not only in the case of late payment of subsequent premiums (§ 38 VVG), but also in the case of late payment of initial premiums (§ 37 VVG). In addition to legal peculiarities such as these, changing customer needs and digital progress also pose a challenge for insurance companies.
Due to social and technical developments such as digitalisation, the switching economy and a tense economic climate, customers today are informed, critical and willing to switch. Eight out of ten Germans (79%) have already taken out an insurance policy online and more than 90 percent of 16 to 49 year-olds inform themselves about offers online before taking out a policy (Bitkom survey, 2022). In other countries, too, the trend is towards taking out insurance online: In the study “Digital Empowerment in Insurance” by the consultancy Sollers, between 24% and 40% of the customers surveyed from Germany, France, Great Britain and Poland state that they take out their insurance policies via digital channels (Sollers study, 2023).
However, this study also shows that insurance customers want digital services that do not completely replace interaction with agents and customer advisors. Rather, they should complement them, on several channels. Those who think holistically about the customer journey and rely on a mature omnichannel approach give customers what they want. Insurers who focus on customer wishes and emotions in all phases of the customer journey, including in claims management, will therefore continue to be successful.
Choosing the right debt collection service provider is crucial for insurance providers. There are some criteria to consider when choosing the right service provider. We present the most important seven aspects and show how we, PAIR Finance, cover them as a leading fintech for digital collections and receivables management.
This includes the experience and expertise of the service provider with debt collection for insurance companies. It is worth taking a look at the existing clients and the legal expertise of the provider.
The PAIR Finance team is aware of the special features of § 37 and § 38 of the Insurance Contract Act (VVG) and the differences in liability in the internal and external relationship. We know the challenge of settling provisional cover for car insurance as a separate contract as well as the possibilities of the fiction of access of § 13 VVG. We are also familiar with the blocking of the no-claims class as an instrument to secure claims.
Those who outsource their debt collection should have a partner at their side who thinks along with their own challenges and jointly determines the best strategy for the insurance.
At PAIR Finance we are also happy to advise our clients on specific insurance issues. With almost all composite insurances, it is worthwhile to maintain policies during the collection process. We can therefore integrate current claims such as arrears of premiums of active contracts (e.g. liability insurance) into the collection process.
Insurers should ensure that the provider uses modern communication channels and digital payment methods. Messaging via channels such as email, SMS or Whatsapp is tailored to the respective recipients and reaches them where they are active.
PAIR Finance takes an omnichannel approach to the collection process, providing consumers of all ages with a cross-device experience. In this way, messaging reaches recipients where they are active.
More and more customers expect personalised offers for their individual concerns. Artificial intelligence can be used to adapt the collection process to these personalisation needs. If the dunning procedure is unsuccessful, the service provider also implements the judicial dunning procedure. However, this is not always necessary.
PAIR Finance’s unique technology identifies how each customer type can be addressed most successfully and picks up consumers at the time that suits them, on their preferred channel and with a personalised approach. With some insurers, we achieve a net recovery of over 40% within 12 months before court.
Compliance with data protection guidelines and legal regulations is also an important aspect in the decision-making process. If the debt collection provider works with artificial intelligence, it must not use any data points that directly reveal the identity of the consumer.
At PAIR Finance, we attach great importance to data protection and therefore work with separate databases (more on our handling of AI here). Furthermore, our Information Security Management System (ISMS) is certified according to the globally recognised ISO 27001 standards.
Despite outsourcing, insurers should be able to see at any time where the claims files are in the processing process. It is even better if they can independently control the progress of the files. This is helpful, for example, when consumers reach an agreement with the insurance company and the claim is to be discontinued. But also when insured persons have already made repayment agreements with the service provider, which are relevant for further support in the insurance sector.
In PAIR Finance’s client portal, our clients can see where their files are at any time and give instructions for action. It does not matter in which country the claim is located. Whether in Germany, Austria, Switzerland, the Netherlands or France and Belgium, in all countries where PAIR Finance is registered, you can access all data with just one login.
To ensure that the relationship between insurer and insured remains intact even in the event of non-payment, the collection agency should emphasise a customer-friendly approach. Every person reacts and thinks differently. Therefore, a good debt collection provider should use data and clues to specifically approach different types of customers.
At PAIR Finance, we use data analytics, machine learning and behavioural psychology to target different debtor groups individually. We see debt collection and management as part of the customer journey that our clients offer and can help to improve it. Here we show more about PAIR Finance’s debt collection customer experience.
Debt collection is a particular challenge for insurance companies. For example, non-payment by consumers can lead to the insurance policy lapsing or not even coming into effect. Added to this is digital progress. Insurance customers want digital services. However, it is important to keep the balance: Digital service should not completely replace interaction with agents and customer advisors. A good collection service provider can help insurance providers to overcome these challenges and to repay claims efficiently and digitally. When choosing the right provider, insurers should make sure that the provider is well versed in the insurance industry and can provide you with the best legal advice. A digital, customer-friendly approach is indispensable nowadays, in which artificial intelligence is conscientiously used to operate personalised claims management on multiple channels. Insurers should ensure that they always have real-time access to all cases.
PAIR Finance offers specialised digital debt collection services for insurance companies and is a trusted expert in receivables management.