Benchmarking 2018-01-08T13:47:47+00:00

Selecting the Best Premiums and Claims Collection Firms

There are over 4,000 collection agencies in the U.S and thousands of law firms who engage in debt collections. Selecting the right collection vendor(s) is crucial and can be a daunting task. Of hundreds of carrier/reinsurer, agent/broker, TPA and Fortune 500 clients surveyed, all concur that the top 3 most important collection vendor requisites are: 

1.)  National Collection Agency Licensure & Compliance

2.) SSAE 18 Certification

3.) PCI Compliance

Alarmingly, an investigation conducted by an independent industry consultant reflected that less than 1% of collection firms researched at random possessed these 3 minimum requisites. For your information and safeguarding, the following due diligence benchmarking checklist encompasses the best industry standards that are applied when hiring third party debt collection vendors and/or conducting annual reviews of current collection agencies.

  • 1. National Collection Agency Licensure and Bonding Compliance

It is essential that the debt collection agency carry current valid licensure and any required bonding within all 50 states.

Some firms will vaguely claim “we are licensed.” However, it is important to ask them for proof or require that they at least submit an affidavit to you stating they are fully compliant with ALL state licensing and bonding requirements. Since it is an industry standard for insurers to require proof of licensure and bonding before appointing any agent/producers or even hiring a plumber, then any vendor who are hired to protect your financial interests and reputation should be held to the highest ethical licensing standards. It may be an impractical, time-consuming effort to contact every single state to validate compliance. If you wish to review an at-a-glance chart published by the American Collectors Association that lists each state’s licensing requirements, feel free to contact us.

  • 2. SSAE 18 Certification

An SSAE 18 audit examines the collection agency’s operating guidelines and activities, controls, policies and personnel. When the collection agency meets the quality, security, confidentiality, compliance and safety requirements, they would receive the American Institute of Certified Public Accountants’ Statement on Standards for Attestation Engagements. Certification is a significant achievement and distinguishes the agency within the collections industry.

  • 3. PCI Compliance

Compliance with the PCI Data Security Standard is imperative to ensure that your debtor insureds payment card data is secure. Collection agencies who are PCI DSS compliant adhere to a framework of specifications, tools, measurements and support resources to ensure the safeguarding of confidential cardholder information at every level. PCI DSS compliant collection agencies are committed to the highest identity and security standards to protect you and your insureds. 

  • 4. Proven Experience In Recovering Commercial Insurance Related Debt

Commercial insurance-related debts are considered the most complex types of debts to recover. Premiums and claims complexities vary widely depending upon the diverse lines of coverages underwritten within either Property/Casualty or Life/Health industries. Only those agencies with the ability to prove their commercial insurance proficiencies within your category of premiums and/or claims related debts should be considered. Never hesitate to ask for:

  • Trade references or testimonials 
  • Resumes from key personnel         
  • 5. Collection Agency Business Insurance and Bonding

Selected collection agencies should carry all coverages necessary to protect their business operations, assets, personnel, as well as coverages to safeguard its clients and their financial interests. At minimum they should maintain $5 million in professional liability insurance if you want the same safeguards afforded and required by many of the nation’s largest insurers. If your collection agency commits a wrongful act, there is the possibility that a debtor insured could litigate for damages.    

It is further recommended that collection agencies maintain a security bond of at least $300,000 for the protection of the insurance creditors they may serve. It’s important that you ask the collection agency to provide proof of their insurance and bonding well in advance of your retaining their services. Copies of their respective Certificates of Insurance and/or policy declarations pages should be readily available.   

  • 6. Certified by the Commercial Law League of America (CLLA)

The CLLA certifies commercial collection agencies who meet the CLLA’s rigorous certification standards. A certified agency uniquely distinguishes themselves by displaying the certification seal.

  • 7. International Debt Collection Ability

There are many reasons why it is important to select collection agencies with the experience and ability to collect on international debts, mainly to accommodate major carriers who provide insurance services to their foreign risks. Debtors not only relocate/skip to other U.S. states, but they may relocate abroad as well to avoid obligations. Agencies need to have protocols in place to follow these debtors to continue collection efforts that are in accordance with international laws. Additionally, there are instances where U.S. domiciled carriers insure the domestic operations of a foreign parent who is responsible for their accounts payable and finances. Global collection reach is also an indicator of an agencies overall thoroughness and due diligence.

  • 8. Insurance Trade Association Memberships

Reputable collection agencies with varying levels of insurance proficiency customarily maintain membership and actively participate in various insurance trade associations. Their being accepted within respective associations serves to evidence their shared interest in serving the best interests of the insurance community at large. Active participation in trade association seminars and educational conferences ensures that collection personnel learn and have access to the most current events and changing laws that impact insurance recoveries. Qualified collection agencies who engage in insurance related accounting, finance and collection functions should be able to prove to you that they have been affirmed by or are members of:

a.) AM. Best Affirmed as “Expert Service Provider”

b.) Insurance Collection Executives Association

c.) Insurance & Accounting Systems Association

      d.) Associate Member of the National Association for Mutual Insurance Companies (NAMIC)

A.M. Best is the oldest and most widely recognized provider of ratings of insurers and the insurance industry. Its ratings are recognized as a benchmark for assessing an organization’s financial strength. Being affirmed as “Expert Service Provider” is the most coveted and prestigious status sought after by service vendors to the insurance industry. It is critical to ask all collection vendors if they are A.M. Best affirmed.

Brown & Joseph is an Associate Member of the National Association of Mutual Insurance Companies (NAMIC). NAMIC has been serving mutual insurance companies for over 120 years. It is the largest property and casualty insurance trade association with over 1,400 member companies. The goal of NAMIC is to strengthen and support members and the property and casualty insurance industry through leadership in advocacy, public policy, public affairs, and member services. “It is our mission to stay abreast of changes in the Insurance Industry to adapt our processes and develop innovative solutions to meet the needs of our Insurance clients. NAMIC has been a tremendous partner in putting us in front of these changes through our sponsorship, participation in committees and conferences” Dennis Falletti Executive Vice Present, Brown & Joseph

Talk to One of Our Industry Experts!