Web-based technology is adding efficiencies and cost savings to credit control systems

There are three concerns that any company needs to consider before outsourcing any of its operations to a service provider.

The first and most common concern is the fear of losing control of the day-to-day management of the company. How can a company be certain that the service company is acting in keeping with their own standards, expectations and culture if the staff working for them are based in another office?

The second is performance. Why outsource a function unless the job can be done better? Naturally, the service company will explain that its own focus and specific expertise is on back-office administration, whereas the prospective client's expertise lies in its underwriting and/or claims adjusting. There is merit in this argument but whether this on its own ensures a higher standard of performance by the service company is questionable.

Finally, there is the cost. Where is the benefit to the client who transfers a job that employs 20 people to a service company that will then employ a similar number of their own people to do the same job? Will the prospective client be convinced that a service company can actually do the same job better at a lower cost? Service companies will always find economies of scale, where some staff can work on more than one account, but can this really be done to the extent that would be necessary to satisfy their margins and the prospective client's performance expectations? The prospective client will worry the service company is cutting corners.

Technology is the answer to all three of these concerns. The service company must embrace the solutions available through tried and tested technology, channel them into their clients' business processes, and then start working on the next improvements.

Experience is the key
Lambourn has introduced this technology through an integrated desktop and web application, designed and developed by BMN Systems, to manage its clients' credit control process. Effective credit control requires experienced staff with the ability to negotiate. However, regardless of the credit controllers' abilities, it is rarely practical for every single debt to be chased properly on a regular basis. For example, a company that writes 20,000 policies a year would find it extremely expensive to chase every single policy to avoid late signing. It could be done, but the staffing levels required would make the costs prohibitive. Automation through technology, coupled with sound workflow logic and well-trained staff can resolve this problem.

Data is downloaded from the client's core system into the credit control system. Depending on the status of the risks, which could be shortly due for signing or already late, the credit controller's tasks are automatically diarised, governed by the appropriate due date. Each credit controller has an inbox containing details of all policies, and relevant actions on those policies, that have to be completed during the day. These actions can be modified to suit each individual client and mirror their credit control wishes, either as a whole or with reference to a particular broker, class of business or account. Whilst many of the actions are pre-designated through workflow, the more experienced credit controllers may alter system-set actions to reflect their particular knowledge of a client or broker. The system introduces a discipline to the credit controller because all actions that are not carried out on their designated day are monitored and reported to management. By capturing all future actions and their owners, this system is also able to act as a useful resource management tool when it comes to managing employees' time and workload.

Client consultation
Naturally, in consultation with the client, specific items are identified and given top priority. This could mean items that are above a certain size or age, those with premium payment warranties, or those that are de-linked or multi-year, are all identified and treated accordingly. However, using this ‘catch all' system, the credit controller can focus on these priority items whilst knowing that everything else has been captured and dealt with. This process has shown excellent results. An experienced credit controller will tell you that the most important ingredient to success is persistence. This automated process allows for cost-effective persistence.

This then covers two of the company's concerns – performance and cost-effectiveness. The results, a measurable improvement on late signings, will speak for themselves whilst the automated part of the process means that considerably more work can be done with fewer people.

However, as a third party service provider, the client will still ask how can this effectiveness be measured and how can the work be monitored? The answer again lies in embracing technology. Clients have password protected access to the internet where all the information they would want to know is available. This allows them to look at what actions, and how many, have been taken on any given day, a complete chasing history at policy level and what actions have not been taken. Attached to each policy are the relevant e-mails and faxes that have sent, all responses given by the broker, together with transcripts of all telephone conversations. Not only is this a valuable tool for the client management in ascertaining the efforts and effectiveness of the service provider, it is also extremely useful for the underwriter to access a risk (either via the internet or through links in their core system) and examine the payment history in real time come renewal season. As the market is hardening, the ability to access the credit control details on all policies being brokered by an individual or group at the touch of a button is proving increasingly attractive.

The system allows reports that can be run whenever the client pleases, reflecting both real-time and periodic results. These reports are wide-ranging and client-specific but include age debt analyses (by broker, business type, underwriting team or credit controller for example), daily, weekly or monthly activity reports, and tailored reports examining any variable that can be automatically downloaded into spreadsheets or graphs. Indeed, the system can also report on the response times from each broker, and from the client themselves when assistance is requested on a given item. Gone are the days when the service provider can take it easy for 11 weeks in the quarter and then cram all efforts into the week before a report due date or a meeting. The service provider acquires new disciplines in the knowledge that the client can be looking at the data any time it pleases. This transparency of service ensures that, far from losing control, the client has a better view and understanding of what is being done than if the job was still being undertaken manually within their own offices.

This whole process does, of course, rely upon the support of the brokers. Again, there are advantages to be enjoyed by the broker. Firstly, by password-controlled access to their own particular sections of the system, the brokers have access to all supporting information and chasing history. When the broker is chased, a scanned copy of the slip can be attached to the chasing e-mail (as well as being viewed on the website), saving considerable time in the initial identification and reconciliation process. Answering any chaser is an easy process, either by e-mail or via the website.

Time saving
The whole process is designed to minimise the brokers' time, on the assumption that brokers are busy being chased by everyone for settlement. However, because the broker can easily identify the policy and the associated issues quicker they tend to respond to these chases first; it is a lot quicker to type up a reply with pre-existing policy information already supplied on a template than draft, type and send a faxed response.

In summary, technology has brought advantages to the client through:

  • improved cash flow position resulting from the ability to maintain both a ‘catch-all' and targeted approach simultaneously;

  • transparent ability to monitor the performance and activity levels of the service provider via the website;

  • real time and periodic reporting, both standard and through the ability to create specific reports at any time; and

  • cost savings from the effective use of manpower.

    Advantages to the service company are:

  • disciplines in place to monitor its own staff performance; and

  • good margins through the cost-effectiveness of the service.

    Advantages to the broker are:

  • time saved in the reconciliation process.

    Premium credit control has been identified as the one area for service companies to provide a web-based solution. This is particularly timely, as the events of September 11 have brought the importance of cashflow management more into focus. Indeed, these processes already have been adapted to manage reinsurance collections. The relationships between the various parties may be more complicated, but the technological third party solution is just as clear. Again taking base data from any common reinsurance ledger, the system caters for proportional, treaty and excess of loss claims and premiums, again dependant on client wishes.

    The tool is able to construct real time or historic aged debt analysis and provides a constant ledger system that calculates a client's position against any criteria (broker, reinsurer, class, year, loss etc), as well as providing the same checks and balances on the credit control function and third party provider.

    However, web technology can now help in all areas of administration in our industry where so many manual processes have (thus far) survived much of the technological revolution. Lambourn is developing a system to manage our work in other service areas, including:

  • policy input;

  • aggregate schedule input;

  • premium and claim processing;

  • reinsurance policy administration;

  • reinsurance recovery calculation;

    All of these processes have characteristics common with each other and the credit control process used in our example. It is a process initiated by the client (or an associated third party such as the bureau), which creates an initial ‘prompt' that can be channelled into a workflow management system. There are then a series of actions to complete to pre-defined service levels that are all automatically recorded. This means that statistic related to volumes, turnaround times and re-work effort are all made instantly available to the client on-line, real time. It also enables management to monitor individuals' workloads and direct resource to where it is needed, when it is needed to ensure service levels are maintained.

    Service companies like us are forever telling anyone that will listen how much better we are than the others, and how much we can improve the administration of a company. This technology will now reveal whether such claims are hollow.