Insourcing vs Outsourcing Collections: The Choice Between Profitability and Customer Experience

[0:00] Moderator:

Alright guys, so thank you for joining today’s session on what you should go with insourcing or outsourcing collections. So a little bit of a speaker buyer at Zurich Insurance Group is a Swiss insurance company. And today we have two speakers from Zurich, Tisha Clausell to my left, and Gail Mengeling on my right. Tisha is a vendor performance manager and gal as a governance manager. So that’s it. That’s introductions, Please give a round of applause to these two ladies from get started. Thank you.

[0:37] Gail Mengeling:

Thank you for coming today, guys. So we’re going to talk about the difference between insourcing in house collections versus outsource collections. And hopefully by the time you end this presentation today, you’ll have a little bit of a feel on what we felt as we’ve gone through the journey of having both in house and external as well as we actually kind of use a hybrid approach, we have some that we still have in the house. And we used a vendor to outsource. So hopefully by the end of this, this certain session, we’ll have a feel of what our advantages have been in our experience, and then maybe some of our disadvantages that we see with either of the options.

[1:22] Gail Mengeling:

So for the in house, when we talk about in house collections, that means that we have the employees as part of our company, so they are Zurich staff. And they are doing the collection calls the collection letters trying to collect on the AR with that you know, we’re a company that pays benefits and all of those things and the salary so you have a higher cost often with an in house collections. Because when you can outsource you get that labor arbitrage benefit right off, of using a vendor. You actually think as part of a big advantage to them, you can build relationships, you can have some rapport that you can build with your customer when you’re trying to make those collection calls. And that can help you in securing funds. So when you think about your own lives, and if you have four different bills in front of you that you have to pay, maybe your phone bill, your electric bill, your gas bill, whatever it might be, if you’ve got somebody that you’ve spoken to a few times, you might be more in tune to want to pay that person first. If you’re if your funds were short, let’s say and you didn’t know what to do. And so there is that advantage where you can get a rapport you can build a better customer experience as you’re working through any other debt that they might have. When it is in the house. What I mean by 100% retention, you collect the money and you don’t have to pay any fees to anyone else you’ve paid for the salary of your employee. That’s what they’re supposed to do, they collect the money. It’s not like you’re paying out a commission or a fee to a collection agency on top of the funds that you brought in the door. And then this last one, I think, is critical from what we’ve seen, the higher visibility and control so oftentimes, in your company, you know, you’ll set out the year this is the goal season for us right now. Ours have to be finalized in about two weeks. And right now, our goals, you know, we’ve got a vision for what we want for the year. But in four months, let’s say something could happen. Maybe we have a merger and acquisition, something goes on in the industry then and we might want to tweak a goal or two and change the direction of where we want our collector to focus. When it’s in house and you’ve got to know your employee sitting right there. You can go and have a quick talk and you can tell Your goal now has changed. It’s going to be this XY and Z. When it’s a vendor and it’s outsourced, that’s a little harder to do because everything is bound by a contract that you signed, it had very clear parameters on what was expected on your results. And so it’s a little harder to make those tweaks and adjustments and to pivot, especially throughout the year, it takes a lot more to do that. So I talked a little bit about the increased cost of resources, it usually is more expensive to have an in house person than it would be to have an external one. And that’s because they’re doing volume, right? When you think about any kind of external collection, they’re just trying to get the business so they can get a fee for every dollar that they bring in the door. And so they’re not looking to make those relationships. They’re just looking to be the Harding hammer to bring money in the door. So the resources are that you? You get our fast and, and so they can cost more to have the internal resource staffing challenges.

[5:13] Gail Mengeling:

I would say in house, you know, today, companies and employees don’t seem to have the longevity and relationships that they used to. And so it costs a lot to train someone up. And every single time that that happens that someone would leave, you’ve got to start from square one again. And so that can be a challenge. And then delayed cash flow. Yeah, the usual delay in recovery customers impacting the cash flow.

[5:51] Tisha Clausell:

Okay, so I’m Tisha Clausell and as Gail said, she talked about an instant in house and I’m going to talk a little bit about our outsource Both of us actually have been involved and in house and we also work with the outsource group. I am a vendor performance manager. So my entire team is to outsource. So I don’t have anybody report to me that’s in the house. I do have some people that can have matrix reports that make them do some jobs and functions that are cash related. But I am the vendor performance cast manager so most of my team is outsourced. So just do a little survey in the room. How many of you use external companies as embedded so as to be more like a call base or email base and your company? Well, yeah, we do both to we, we have a lot of customers that we just email them their late letters, some of them are automatically sent and our system sometimes we pick up the phone to there are times where You can pick up the phone, if you know a customer repeatedly pay late. So you may want to call them on the 10th of the month because you know, every time the bill is doing a 15, they never pay it. So maybe you give them a quick call, maybe five days ahead of time, so hopefully, they’ll pay on time. So we do a little bit of both. And we have both regional and global customers with Zurich as well. So some of the benefits, Gail mentioned some of the benefits that she can give you a little bit of the benefits, but in house and outsource. So some of these things may seem a little repetitive, but I’ll go over them. Anyway, they let you know that it’s a lot less expensive to have outsourced. So that’s one of the benefits, you can get more collectors for less cost. So maybe in house, you may have 10 when we were able to outsource, we could double that and still have less cost and we’ll be happy with having an internal customer. Internal employees like Gail said, we have to pay benefits. When you have an external you pay those benefits, that’s for their competitors to pay those benefits for them. So you’re just paying for them to process the work, not the other benefits you get at your company like benefits, you get bonuses and different things like that, that we don’t pay for those outside people. Where we were also able to do is we focused on my attempts for insourcing an in house team. So what we did, we had them focus on more complicated accounts, if they needed more reconciliation the business unit said, we don’t want this account being how to outsource we wanted to stay in the house, it’s a sensitive account. So those we may have kept in the house. The ones on lessons, the less complicated, we were able to transition those to an outsourced company. We also saw improved cash flow, because before I may have had a hundred accounts, and of course I couldn’t get to each one of them had too many. But now that we have more resources, you can get to those accounts faster and Have a medical action rate at that point. So some of the challenges, and Gail and I both know we’ve seen on our teams that we’ve outsourced is a poor attrition rate. So when they’re outsourcing, they’re not lower to us. I hit the button. Okay, sorry. They’re not lesser than that company. So they actually could leave, which means that you have to retrain somebody. And what we do every time they get a new employee, I don’t go to India and train that person. We expect them to train the trainer. So I’m training my staff and I expect them to go and train new people. So the knowledge base is lost sometimes. And we see that happens with people leaving the company for various reasons. So you do have to train more. And like Gail mentioned earlier is not as flexible. If we decided that we wanted to focus on a certain business that wasn’t in that contract. It’s not as easy. They’re changing when it’s in the house when it’s outsourced, you have to look at your contract. See, do I have to make changes to set the rules differently. We use bad debt recovery resources as well. So some of the accounts, they’re bad, they’re, those are ones that we’ve tried to click in house, our password outsources group where we weren’t successful. So in those cases, we would outsource to a bad debt recovery system company, those companies have a better result, but they cost you more to use them. So there’s benefits and cost to it. So we looked up some information. This is not necessarily for Zurich, but we found out that most companies charge about 15 to 40%. To cover the amount so if you have $1,000 you’re giving them $400. Possibly, I’ll answer you only collected 600. And that’s like I said, That’s not direct. That’s something that we love. doubling the survey, aware of the comments have said that they found when they use the bad debt recovery person.

[11:09] Tisha Clausell:

So, which one should you choose? Well, that’s the benefit of both. So Gail, what do you think of some of the benefits for in house that you want to have like?

[11:20] Gail Mengeling:

Well, like I said, it’s, it’s much easier to pivot when you’ve got a change in your direction or your strategy for your company base. I would say that is a major, major factor for me. Number two, I can go and have a quick talk with an employee and coach them and guide them on the way that I want them to work. And then I have, you know, the performance review and it’s tied to, you know, paper performance, I can eliminate that person through the process if I needed to if they didn’t perform. That’s a little harder again, with a vendor, I would say so for me that those would be probably the two that are the best benefits.

[12:00] Tisha Clausell:

And then no wonder, questions a lot of people as they can get good customer service when you outsource. Yes, you can. With us, we have CCT a customer experience team that focuses on a customer. So before you may not respond to customers for two or three days because you have so many accounts, I get so many emails, we have a team and outsource group that is obligated to respond within 24 hours. So whenever they get a message, they respond and it may not be the exact answer, but at least acknowledge that the customer says hi, we received your message. We look into it, we are affordable to someone else, but at least the customer feels better that somebody responded to me so you can get good customer service and a good customer experience even if you outsource. So let’s choose how to choose what’s right for your business. It’s not wrong or right but some things you have to do to figure out which one is best for you. These are the four categories that we picked out. Little The customer profile analysis that spans and success rates, the security and tech capabilities, and looking at the resource and training program that you have available. So we’ll talk about each one separately. The customer profile analysis. So you look at the past and present customer behavior, then you look at the region and the industry of your customers. So that’s important. For in house, usually, organizations prefer in house collectors having these accounts that are more critical and sensitive. You try to move the items to less sensitive accounts and a lot less reconciliation to the outsource. So you may do a hydric approach like we do, you won’t move everything right away. I wouldn’t recommend that. Most times you would do it as a subset and see how things go before you make that decision.

[13:55] Tisha Clausell:

Experiences success rate the experience with an in house you will see that their negotiation skills are well because you look at these people, some people probably have come from another company that you are a college student, they may have some training. So they have a high experience of weight, and you probably have really good results. But also outsource, you can see the benefits of that because their goal is those companies that are focused on collections are focused on that. So they also have good experience in doing that as well. So that’s the benefit of using those types of people is also security and tech capabilities. When it’s in the house. You already know your company knows what security and technology you have. So one of the things you have to do is what outsource you have to let your IT team get out what their security is and make sure your data is going to be safe. So with Zurich, we have AI will say along like several pages that it has to go through to prove to us that my dad is going to be saved in that some part affirmation from our customers is not going to be disseminated or lost. So we make sure that we look into that. And so that’s one thing that’s important that you do if you consider outsourcing. resource and training. We talked about that earlier, too. When you train, when I train, my new team there is outsourced, I was there in person, but I don’t go back every time they get a new person. So you have to make sure that your China materials are really good that if you’re not there that they can train that team exactly how you did it. And then you have to follow what we do for outsourcing at least once a year. We go out and visit them to do refresher training to maybe sit with the staff and see if they perform the work like we wanted to do and also send them better performance management. I do audits on my team monthly to see how they’re doing so I pick a sample like maybe how many payments were collected, Tammy, apply timely, they perform accurately as well. So we do samples of all the work that they do. And we look at their success rate. And if we see that they’re having problems, they do get penalties for not performing the way they should. So that’s something that you can do as well with your training and worrying about if that vendor is going to train the person like you expect them to do. So, that’s mainly our presentation. But if you have any questions about how Zurich decided to do in house versus outsource, Gail is a great resource because she actually managed in house and now she’s over to outsource too and I actually report to her so I had in house as well. And I also have a vendor Performance Team that I’m over now as well. So do you have any questions? Yes.

[17:07] Tisha Clausell:

So you place them on staff at the other location. Okay, so we’re gonna say, No, we give them the work and we just go for a visit and sit with them but they actually are totally responsible for those accounts that they’re handling are for the cash application. So they count that and we review what they’re doing so we don’t do that often. I could think of something similar to that maybe like the Mike Hayden went, yeah, but that was just like a project. So it doesn’t happen.

[18:00] Audience 1:

From 2015 to 2020, watch the development of the email conversion on your desktop.

[18:08] Tisha Clausell:

So with that, please check them out to make the collections power versus email. And now the collections are making the phone calls.

[18:16] Audience 1:

In 2015. It’s probably maybe 10 or 20%. And I think it should be now like over 60 or 70 years.

[18:23] Gail Mengeling:

So I would say that when we went to outsource, it was how long have we been doing this? 13 years ago, we started with doing a vendor at an outsourced offshore location 13 years ago, the receptivity to that from our customers was very, very low. They didn’t like to hear a different voice, dialect accent, whatever you want to say on the other end of the call. And so what happened over several years was that I think my collections team got very intimidated by that, they were given some really hard feedback on a lot of calls. And I tried to defend them as much as I could because we are all people, right. But I think they’re human too, and it hurts. And so they started to push towards only using email. And we struggled with that because it’s just not as effective. And when you talk about that customer relationship.

[19:25] Audience 1:

Email isn’t as effective as a call in Europe is the way around.

[19:29] Gail Mengeling:

Really. Yeah, yeah. No, we do like 99% email.

[19:35] Gail Mengeling:

No. Yeah.

[19:37] Audience 1:

Yeah, we do call.

[19:42] Gail Mengeling:

But yeah, I would. I think it’s the voice that is way more effective. But like I said, in our situation, what happened is they got intimidated and they didn’t want to be on the call anymore because they were, they were hearing.

[19:56] Audience 1:

The benefit of Europe here with the email is that with every email, we also send out a payment link. So they can use the payment link to choose their payment channel. Yeah, and they can pay on their time when they want instead of when you call there, it’s not appropriate or it’s not the right time when they open the email and it just puts the link and moneys in.

[20:16] Tisha Clausell:

And that’s a good thing to have their payment and we don’t have their email we have our payment information like where do you remit your payment how to remit if you want to send the wire, ACH if you want to send a check how to send that, but we don’t have a link in our emails to pay. But like she was saying it depends on the customer. Some customers don’t even have to call them because they’re going to pay when they get that email bill. But some customers are not paying.

[20:40] Audience 1:

For the people they don’t know in Europe, our conversion of shakes is 0.0000, it’s like I’m lost here.

[20:57] Gail Mengeling:

Yeah, they tell us that all the time when we can even believe that there are so many checks flying around.

[21:02] Tisha Clausell:

Yeah, they came one time and I was so surprised that she said the same thing you said and we’re in the US and are still at least 40% in check. So…

[21:10] Audience 1:

We send emails out and then within an hour we can see already the guys who have paid and we don’t have to call and it’s all taken care of. So we got so that’s the thing. It’s all about people. Yeah. And people, we say the people make the difference, but the system says when people have to make the difference and the rest of the system has to do so the thing was high rate is doing good. And first, you start by making a nice and good system. And then you need fewer people. And when you have fewer people you can afford them and you can pay them better and motivate them better and it’s our insourcing or co-sourcing or outsourcing you can go anywhere you want.

[21:51] Gail Mengeling:

Yeah. We have, you know, millions of lines of records every year that we are collecting on and I mean, spreadsheets can only do so much right? So we now have got some analytics happening. And it’s taking our collection strategy along with our customer base and those sensitive customers and all of that. And it’s doing the analytics to say, and to tell my collector out of his book of his thousand accounts that he has to collect, which one he needs to make a phone call on first. It’s taking us to that next level. And it’s, it’s great.

[22:33] Audience 1:

And in Europe when we talk about it. Last one last year we talked about in Europe as a third party collection. So I was like, you talk all about collections, but we call it credit management or depth control. So there’s also a thing which makes it difficult for the European guys to understand what’s happening here. Sure. Yeah. So I’m learning every minute here.

[22:56] Tisha Clausell:

I think you had a question too. And the guy yeah. For the red shirt, did you have a question? No? Ok.

[23:06] Moderator:

I’ll give you the mic.

[23:10] Audience 2:

Did you find that the collectors had to adjust to the analytical way of calling those customers? Meaning, you know, because before it was okay, I had a call on my 30-day customers, 60 or whatever. Now because it’s more analytical. How did they adjust to that?

[23:37] Gail Mengeling:

I think for them, they were excited about the idea that their results were improving because they knew who to target. Right. And it was very well received and they found it made their jobs a bit easier, quite honestly.

[23:59] Moderator:

Any more questions? So

[24:00] Tisha Clausell:

He raised his hand again, did he have a question this time? I’m like, yeah, you’re gonna ask.

[24:10] Audience 3:

So when you guys make a wise call for the collections, do you record the sessions? And then what do you do with any kind of analytics on voice recognition?

[24:23] Gail Mengeling:

So, today, we do record them. And we do an audit, if you will, we go back and we review some of those calls and we make sure that the experience for our customer is still a positive one. And I know that sounds silly, but there is a way to do it correctly and still give a positive customer experience even when I’m telling them you need to give me money. And it’s, it’s a, it works. So the analytics part, the voice analytics piece, we have in the system. We have not started using it quite yet. We’re still kind of tweaking it. It today picks up certain things and we get a report telling us, but it’s not quite where it needs to be. I need to get it, Chris, first before we dive in with that. Because yes, and there’s some, some customization that we need to do around terminology and that sort of stuff that we want it to pick up on. It already knows tones, invoices, so it can pick up if a customer is really upset, and it will flag that and it’ll come upon a report. It’ll be a red spot on my report. But I’m also wanting it to tag certain words that might be said, and so that’s kind of where we’re still customizing it and then we’ll flip it into full production.

[25:54] Audience 4:

When it comes to outsourcing, and disputes do you find the outsourcing team handled disputes as well as your internal teams can because I think, because I have a bit of both, and I find we have a struggle with not to the dispute mechanism with the outsource teams.

[26:13] Gail Mengeling:

Yes, I would agree with you on that. Insurance. And you know, we all think that our industry is the most complex, but I do think ours is pretty tough in some situations. Our customers, our big customers, we could talk about the Dallas Cowboys, let’s say because we’re sitting here, and they might have, you know, 10 to 20 different layers of coverage, which unless you’re an insurance, that probably doesn’t mean anything to you. But what I mean by that is if I trip and fall, I’m going to hurt my ankle, right? And my employer, the Dallas Cowboys might say, I’m going to pay a deductible. Every time someone on my team gets hurt, it hurts my ankle. I want to pay the first $50,000 and then if that ankle is so bad, I want to then hire another insurance carrier that I’m going to call a reinsurance layer that they’re going to pay the next hundred thousand. And then I might reinsure it again for the next hundred. And so there are just various layers that you can do. And so the disputes that happen can get extremely complex. And when you’re talking about a third party vendor, in our case anyway and offshore, when Tisha talked about, you know, having to train them, and the longevity of the person, if you’re not there to see that more than once. It’s going to be difficult when you’re on that next call to answer it. And so I think that’s where you could see that getting. Yeah, I’d walk longer to handle.

[27:44] Tisha Clausell:

Yeah, and then they’re pretty good about if they can’t handle it, let us know most of the time. Say I need help. So that’s why I like Gill’s team which consists of a whole vendor performance manager like myself, so she has a team of experts.

[28:01] Tisha Clausell & Gail Mengeling:

Yes, yes.

[28:03] Gail Mengeling:

Yes, I have a group of experts on my team that can help them and gets through those hurdles. And you will see that a little bit to where they’re resilient to come forward and tell us and then it bubbles and gets even worse, right and our poor customer experience is not good, but we try to tell them, please bring it forward rather work with you and help you through it, then you try to struggle and make that a bad experience. Good question, though.

[28:28] Moderator:

Guys. We’re just about time. Awesome questions, though. So yeah, a round of applause for Gail and Tisha.

[28:38] Tisha Clausell:

Thank you for coming.