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Insurance Collection Executives Optimizing Accounts Receivable Management

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Track through to clearing internal dunning. Automate workflow, document images, reporting ... Date to Clearing. Past due 90 decreased 48%, Customer Sat. ... – PowerPoint PPT presentation

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Title: Insurance Collection Executives Optimizing Accounts Receivable Management


1
Insurance Collection ExecutivesOptimiz
ing Accounts Receivable Management
Date October 23, 2007
2
Discussion Agenda
  • Introduction
  • Strategy
  • Tactics
  • Questions

3
Introduction
  • Receivables Management is a Tough Job ! AR
    Managers
  • are like referees
  • manage most company revenue and 99 isnt good
    enough
  • are a service touch point for all customers
  • must promote revenue but control risk
  • are accountable for AR results without
    controlling all the determinants (upstream
    processes, economy, etc.)
  • practice as much art as science
  • must do it all for one to two tenths of a percent
    of revenue
  • Youve all been successful, but improvement
    expected
  • How will you do it?

4
Introduction
  • Todays Objectives
  • Challenge your current thinking and practice. How
    are you going to improve?
  • Convince you to consider strategy (and tactics)
    proven effective in difficult collection
    environments (independent, regional, and national
    insurance agencies, hospitals, distributors,
    construction trade, etc.)
  • Share experience in improving collections for
    over 100 companies in a wide range of industries
  • Ask yourself would these tactics work at my
    company?

5
Introduction
  • Objective of Collections
  • Convert premium to cash as quickly and
    efficiently as possible
  • Ensure an uninterrupted flow of services to your
    customers
  • Benefits of Effective Collections
  • Increased investment income from enhanced cash
    flow
  • Higher underwriting capacity from lower
    non-admitted assets
  • Reduced revenue leakage/concessions on disputed
    retro adjusted, loss sensitive, etc. premium
  • Increased subrogation and reinsurance recovery
  • Lower cost of collection function
  • Lower bad debt expense

Collections can deliver huge cash and profit
improvements
6
Strategy the Three Levels
  • Corporate strategy for receivables
  • Financing customers as competitive advantage
  • Maximize cash flow
  • Minimize bad debt
  • Least cost to manage
  • Undefined
  • A Shared Corporate Vision for Receivables
  • Payment expected on due date
  • Disputes are customer satisfaction issues first,
    AR issues second
  • Vision shared by C level management, Sales, et
    al not just Credit as a voice in the
    wilderness.

Strategic alignment required to optimize the huge
investment in AR
7
Strategy the Three Levels
  • Portfolio Strategy
  • Different approach for different customer
    categories, just like the Marketing segmentation
    approach
  • Agents and Brokers vs. Direct
  • Commercial vs. Personal
  • Workers Compensation
  • Major account vs. small account
  • Line of business retro adj. vs. straight
    premium
  • Government vs. private sector
  • Credit risk rating
  • Allocate staff resources to each segment - and
    skill set
  • Align metrics where prudent

One size does not fit all
8
COLLECTION INTENSITY MATRIX
of of Level A/R
Accts A 70 559
(gt50K) B 19 705
(20-50K) C
11 2278 (lt20K)

Proactive Calls Frequent
Calling Periodic Meetings
Escalate
Collection Calls Proactive Calls
on Large Invoices Escalate
Collection letters series Collection
Calls Escalate Credit Hold



Invoice Date Due Date Due Date 30 Due
Date 60
9
Tactics
  • Key account (preferred broker/agency) approach
  • Premium customer financial service
  • Maintain account in good standing to ensure
    uninterrupted flow of services
  • Proactive collection reminders drive cash flow
  • Skipped invoice, dispute resolution
  • Account maintenance (clutter)
  • Face to face meetings
  • Relationship hierarchy escalation protocol
  • Payer profile

10-20 of customers who generate 80 of revenue
deserve greater proportion of time and best staff
10
Key Account Approach
Key accounts can also create disproportionate
problems if not managed properly
11
Tactics
  • Lower value accounts
  • Well defined collection timeline (treatment)
  • High volume contact
  • Sooner rather than later
  • Automatic
  • Automated
  • Lower frequency billing
  • Incentives for credit/procurement card payment,
    direct debit
  • Policy mandates for accelerated, secure payment
    based on volume or delinquency

High volume, fast, standard approach required
12
Tactics
  • Metrics
  • Actual DPO vs. Best Possible DPO
  • Past due amount (1-30 or 11-30) and , especially
    gt 90
  • Credit risk rating of asset
  • Clutter or dilution
  • Actual cash collected vs. target
  • Incentives can be tricky but are powerful
  • Based on actual vs. target cash collected
  • Quarterly measurement and payout
  • Meaningful amount (15 of base)

Accountability and incentives for the right
metrics will enable staff to drive results
13
Tactics
  • Dispute Management
  • Cross functional, shared responsibility
  • Cleary defined workflow, roles responsibilities
  • Standard resolution timeframes
  • Categorize by type price, retro adj., etc.
  • Route to person best positioned to resolve
  • Track through to clearing internal dunning
  • Automate workflow, document images, reporting
  • Metrics
  • , age, value by responsible party and in total
  • throughput
  • Ultimate outcome collected or credited
  • By type causal analysis

Dispute management is critical to AR and customer
satisfaction success
14
Dispute Management Cycle Times
Illustration of Dispute Resolution Improvement
240
238
216
200
160
Days from Inv. Date to Clearing
100
120
80
86
40
0
January March June
September
Past due gt90 decreased 48, Customer Sat. Improved
15
Tactics
  • Continuous Improvement of Billing Accuracy
  • Measure it Billing Quality Index
  • Utilize dispute data to direct efforts
  • Redesign upstream processes Lean, Six Sigma
    (cross functional)
  • Ensure invoice format is helping, not hurting
  • Redesign reconciliation processes retro adj.,
    loss sensitive, preliminary vs. final invoice,
    premium trust account, etc.
  • Probability of recovery prioritization
  • High speed procedures with decision points
  • Automation tools faster, less work

Billing accuracy is the Holy Grail of AR
management
16
Tactics
  • Technology
  • Automate repetitive functions and data collection
    in
  • Cash application auto-cash and hit rate
    improvement
  • Collection prioritization, workflows, contact,
    follow up
  • Predictive and auto dialing
  • Credit vetting scoring
  • Document storage, retrieval, and routing
  • Reporting
  • Reconciliation tools
  • Essential in direct billing environments and
    Personal lines
  • Direct debit one client collects 20 of revenue
    this way

Technology is absolutely required to achieve peak
effectiveness and efficiency
17
Conclusions
  • New or different actions required to get better
  • Strategy
  • Define and align
  • Everyone on board
  • Portfolio segment, targeted approach, align
    resources, execute
  • Tactics
  • Metrics and incentives
  • Dispute resolution workflow, imaging,
    automation
  • Billing accuracy
  • Reconciliation productivity
  • Technology

Good luck !!
18
Questions
  • Your questions now
  • Ill be at entire conference to answer your
    questions later

19
Thank You
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