Outsourcing the auto insurance claims component can be advantageous for both auto finance companies as well as their clients. However, being successful within the auto finance industry depends primarily upon remaining compliant regulatory guidelines and investor and business requirements.
As mentioned in a previous blog, regulatory oversight for auto claims processing may be behind mortgage claims processing, but your compliance processes should always be up to date in preparation for future compliance and regulatory requirements.
Now, as default rates on subprime auto loans are increasing, the question is: Are your auto insurance claims processes compliant? In order for compliance to be established, auto lenders must look at all areas of their business including vendor management, licensing and consumer data protection.
When it comes to vendor management, it is important to use experienced specialty insurance service providers to help mitigate risk in auto claims processing. Auto lenders should look for partners with proven experience and expertise, who have a central focus on trying to offset or mitigate lender losses on damaged vehicles. Keeping this a priority allows clients to receive the most money for damages.
When using a third party, auto lenders are subject to the same vendor management issues and audits as any financial service organization. You should note that the Consumer Financial Protection Bureau (CFPB) checks into all consumer-related financial transactions, so it is vital that your service providers know all of the processes and controls in place in order to be compliant with consumer data security and business continuity plans, in addition to other requirements.
While often overlooked, technology is also an important tool to aid in compliance. Auto lenders should ensure that their partners are investing in technology to speed up the claims process in order to increase accuracy and provide better returns before the vehicle is sold at auction, as well as deliver enhanced reporting tools to allow more client visibility into vendor managed claims.
In order to maintain compliance, third-party adjusters must be licensed and bonded to the correct amount, in accordance with the state(s) in which they are filing claims, adding a level of expertise and financial commitment to the process.
If you are working with an insurance service provider who also provides mortgage claims processing, it is best to ensure that all of the adjusters have the experience and knowledge required to work in the auto industry.
Consumer Data Protection
Your service providers should be striving toward, or have already achieved, a SSAE 16 Certification. In claims processing, the borrowers name and other personal information are considered confidential information. It is important that your service provider proves that they are SSAE16 compliant and have the borrower’s security in mind at all times.
In addition, performing due diligence exercises with existing vendors has become an industry best practice to ensure information security and the highest quality of service. For example, it is important to hire vendors who will collect on all damages. Some vendors have high average recoveries because they are only filing claims on vehicles with a significant amount of damage, while other vendors may have a lower average recovery, but their total dollar recovery is higher because they are able to capitalize on all claimable damage.
The key to establishing a successful auto insurance claims business process is making compliance a top priority. By keeping this in mind while managing service providers and working with qualified adjusters, you will be ahead of the game in the auto insurance industry.