Digitalisation has revolutionised receivables management, and enables debt collection service providers to collect receivables quickly and efficiently. However, like many other financial service providers, insurers are subject to increased legal and regulatory requirements in their receivables management processes. These and many other aspects must be considered when it comes to debt collection for insurers.
In this article, we will outline what insurers should know about debt collection, what to look for when selecting the right debt collection service provider, and the benefits PAIR Finance offers with its innovative, AI-based debt collection.
Insurers face unique challenges when it comes to debt collection. With every contract concluded, insurers take on risks. Missed payments by consumers can lead to insurance policies lapsing or not being established in the first place. For example, if a customer holds multiple policies with the same insurer, but fails to pay just one of them, the customer relationship must be handled with care and approached with great sensitivity.
Moreover, the implementation of debt collection procedures requires legal expertise and experience. A good debt collection partner is familiar with the Insurance Contracts Act (Versicherungsvertragsgesetz, VVG) and knows, for instance, that insurers can commission a debt collection service provider not only in cases of payment default on subsequent premiums (§ 38 VVG), but also in cases of payment default on initial premiums (§ 37 VVG). Besides such legal nuances, changing customer needs and digital advancements pose further challenges for insurers.
Customer Demands on Insurers Are Rising
Due to societal and technological developments, such as digitalisation, the changing economy, and a strained economic climate, today’s customers are informed, critical, and willing to switch providers. According to a survey by the Digital Association Bitkom (as of 2024), eight out of ten Germans (79%) have taken out an insurance policy online at least once. The trend towards online sign-ups is also evident in other countries: In the “Digital Empowerment in Insurance” study by consultancy firm Sollers, 24% to 40% of surveyed customers from Germany, France, the UK, and Poland indicated that they take out their insurance policies via digital channels (Sollers study, 2023).
However, this study also reveals that insurance customers want digital services that do not completely replace interactions with agents and customer advisors, but rather complement them across multiple channels. Those who consider the customer journey holistically and implement a sophisticated omnichannel approach will provide customers with what they desire. Insurers who place customer needs and emotions at the centre of all phases of the customer journey, including receivables management, will continue to succeed.
Receivables Management for Insurers: What to Consider When Choosing a Debt Collection Service Provider
Choosing the right debt collection service provider is crucial for insurers. There are several criteria to consider when selecting the appropriate provider. At PAIR Finance, we highlight the seven most important aspects and demonstrate how, as a leading fintech company for digital debt collection and receivables management, we meet these requirements.
1 – Insurance Expertise
This includes the experience and expertise of the service provider in handling debt collection for insurers. It is worthwhile to examine the provider’s existing clientele and legal expertise.
The PAIR Finance team understands the specifics of §§ 37 and 38 of the Insurance Contracts Act (VVG) and the differences in liability between internal and external relationships. We are familiar with the challenges of billing provisional cover in car insurance as a separate contract and the possibilities of the access fiction (§ 13 VVG). We are also aware of using the no-claims discount block as a tool to secure receivables.
2 – Tailor-Made Service
Those outsourcing debt collection should have a partner who understands their challenges and works together to determine the best strategy for the insurer.
At PAIR Finance, we advise our clients on special insurance topics. For most composite insurances, it is advisable to keep policies active during the debt collection process. With us, ongoing receivables such as overdue premiums from active contracts (e.g., liability insurance), can be reintegrated into the debt collection process.
3 – Digital Focus
Insurers should ensure that the provider relies on modern communication channels and digital payment methods. In digital debt collection, messaging via channels such as email, SMS, or WhatsApp is tailored to recipients and reaches them where they are active.
PAIR Finance adopts an omnichannel approach to the debt collection process, enabling consumers of all age groups to experience a cross-device user experience. This ensures messages reach recipients wherever they are active.
4 – Personalised Support with AI
More and more customers expect personalised offers for their specific concerns. With artificial intelligence (AI), the debt collection process can be tailored to meet these needs. If pre-litigation efforts fail, the provider can initiate judicial debt collection processes (GMV), though this is not always necessary.
The unique AI technology at PAIR Finance identifies how to address different customer types most effectively, contacting them at their preferred time on their chosen channel with a customised message. For some insurers, we achieve a net recovery rate of over 40% within 12 months during pre-litigation.
5 – Data Protection and Security
Compliance with data protection regulations and legal requirements is also a critical aspect in the decision-making process. If the debt collection provider uses AI, it must not use data that directly reveals the consumer’s identity.
At PAIR Finance, data protection is a top priority. We use separate databases (learn more about our approach to AI on our blog) and adhere to the globally recognised ISO 27001 standards with our Information Security Management System (ISMS).
6 – Real-Time Access
Insurers should have full visibility of where their receivables cases stand in the processing workflow, even when outsourcing. It’s even better if they can manage case progression themselves. This is helpful when customers reach agreements with insurers, requiring the case to be closed, or when repayment arrangements made with the service provider are relevant for ongoing support in the insurance sector.
Through the PAIR Finance client portal, our customers can view the status of their cases at any time and provide instructions, regardless of the country where the receivable is located. Whether in Germany, Austria, Switzerland, the Netherlands, Sweden, Spain, France, or Belgium, a single login provides access to all data in the countries where PAIR Finance is registered.
7 – Customer-Friendliness
To maintain the relationship between insurers and policyholders, even in cases of payment default, the debt collection provider should adopt a customer-friendly approach. Since every individual reacts and thinks differently, a good debt collection provider should use data and insights to uniquely approach different customer types.
At PAIR Finance, we leverage data analysis, machine learning, and behavioural psychology to address different debtor groups individually. We see debt collection and receivables management as part of the customer journey our clients offer, and we can help improve it. Learn more about the debt collection customer experience at PAIR Finance.
Fraud as a Challenge in Insurance Debt Collection
In addition to the general challenges in the debt collection process, insurers must also consider the risk of debt collection fraud. This involves fraudulent practices by unscrupulous debt collection providers, which attempt to collect unjustified claims or exert undue pressure on consumers.
A reputable debt collection partner is not only obligated to collect claims legally, but also to prevent fraud. Insurers should particularly look for the following points:
- Transparent and Verifiable Claims: Debt collection providers should be able to substantiate every claim with clear and traceable documentation. Unlawful or unjustified claims are often indicators of fraudulent practices.
- Legally Compliant Practices: Unscrupulous debt collection providers often use aggressive or unlawful methods to pressure consumers. A professional debt collection partner must ensure all receivables management steps comply with applicable legal requirements and avoid any unethical tactics.
- Use of Modern Security Solutions: To prevent debt collection fraud, providers should implement advanced security measures such as verifying claim documents, encrypting payment information, and regularly checking transactions for irregularities.
PAIR Finance continuously works to enhance the efficiency of debt collection through modern technologies like artificial intelligence and data analysis, while also identifying and preventing fraud early. Our systems can, for example, identify unjustified claims before they enter the debt collection process, minimising risks for insurers.
Conclusion: Digitisation is a Great Opportunity for Insurance Debt Collection
Debt collection poses unique challenges for insurers. Missed payments by consumers can lead to insurance policies lapsing or not being established at all. In addition, digital advancements mean insurance customers expect digital services. However, the balance must be maintained: digital services should not completely replace interactions with agents and advisors. A good debt collection provider can help insurers tackle these challenges and recover receivables efficiently and digitally.
When choosing a suitable provider, insurers should ensure the provider is well-versed in the insurance sector and offers robust legal advice. In today’s world, a digital, customer-friendly approach that uses AI responsibly – to deliver personalised receivables management across multiple channels – is indispensable. Furthermore, insurers should ensure real-time access to all cases.
Are you looking for a reliable partner for the receivables management of your insurance company or insurtech?
PAIR Finance offers specialised digital debt collection services for insurance companies and is a trusted expert in receivables management.
