Many auto lending executives would be surprised to learn that filing insurance claims is one of the most effective ways to reduce overall loss severity on their repossessed auto portfolio. Maximizing the institution’s return on auto insurance claims requires the right process be in place. Below we will share four ways to ensure your auto claims process is successfully managed.
- Create a process that allows you to notify your insurance claims vendor as early as possible.
Most banks outsource the claims function but often fail to give their partner enough time to work the claim before the vehicle is sold at auction. Managing the claims process in this manner will almost always reduce the final recovery amount, as settlement amounts will often times be higher if your claims vendor can work through the process before the car is sent to auction.
- Make sure you have a process for insurance coverage tracking.
This requires the lender to monitor its auto loan portfolio for changes that could potentially leave the institution at risk. For instance, it is not uncommon for borrowers who are behind in their car payments to also let their auto insurance lapse. If this happens, the institution is not covered.
Most carriers will alert both the borrower and the institution should coverage lapse, but if the lender doesn’t have a policy in place that requires someone to secure insurance, whether it be a bank employee or an outside partner, no claims can be filed and thus, no funds recovered.
- Utilize a good inspection service to get accurate and usable evidence of damage.
Lenders need to work with a company capable of being very thorough in documenting the damage through good photographic evidence. Too often we encounter photographs of auto damage that are taken from so far away that the nature of the damage cannot be ascertained with any true degree of certainty. This will likely prompt the carrier to send its own adjuster out to see the vehicle which in turn, will take even more time. As a general rule, a set of good inspection photos will clearly show each of the four corners of the vehicle as well as detailed close-ups of any damage.
- Partner with a good claims vendor who can work quickly and recover the maximum amount possible.
These are the professionals who will actually file the paperwork, defend the claims and secure the recovery. A good partner will ask to be involved in conversations that occur with other vendors supporting the bank in this area, particularly the inspection service. The goal is to secure a full recovery as soon as possible, but because these professionals don’t actually see the vehicle, they depend upon the quality of the photos and reports provided by the bank’s inspection service. If the documentation is poor, the claims partner will work with them to get better material in order to secure the maximum recovery for the institution.
Auto lenders can substantially reduce their losses on repossessions by partnering with a reputable insurance claims adjustment service provider. Furthermore, by employing a process that meets all of these suggested requirements, this partnership will be even more effective in mitigating collateral losses.