Insurance Collection Executives Optimizing Accounts Receivable Management

1. Insurance Collection ExecutivesOptimizing Accounts Receivable Management Date: October 23, 2007

2. Discussion Agenda • Introduction • Strategy • Tactics • Questions

3. Introduction • Receivables Management is a Tough Job ! AR Managers: • are like referees • manage most company revenue and 99% isn’t good enough • are a service touch point for all customers • must promote revenue but control risk • are accountable for AR results without controlling all the determinants (upstream processes, economy, etc.) • practice as much art as science • must do it all for one to two tenths of a percent of revenue • You’ve all been successful, but improvement expected • How will you do it?

4. Introduction • Today’s Objectives • Challenge your current thinking and practice. How are you going to improve? • Convince you to consider strategy (and tactics) proven effective in difficult collection environments (independent, regional, and national insurance agencies, hospitals, distributors, construction trade, etc.) • Share experience in improving collections for over 100 companies in a wide range of industries • Ask yourself: would these tactics work at my company?

5. Introduction • Objective of Collections • Convert premium to cash as quickly and efficiently as possible • Ensure an uninterrupted flow of services to your customers • Benefits of Effective Collections • Increased investment income from enhanced cash flow • Higher underwriting capacity from lower non-admitted assets • Reduced revenue leakage/concessions on disputed retro adjusted, loss sensitive, etc. premium • Increased subrogation and reinsurance recovery • Lower cost of collection function • Lower bad debt expense Collections can deliver huge cash and profit improvements

6. Strategy – the Three Levels • Corporate strategy for receivables • Financing customers as competitive advantage • Maximize cash flow • Minimize bad debt • Least cost to manage • Undefined • A Shared Corporate Vision for Receivables • Payment expected on due date • Disputes are customer satisfaction issues first, AR issues second • Vision shared by C level management, Sales, et al; not just Credit as a “voice in the wilderness.” Strategic alignment required to optimize the huge investment in AR

7. Strategy – the Three Levels • Portfolio Strategy • Different approach for different customer categories, just like the Marketing segmentation approach • Agents and Brokers vs. Direct • Commercial vs. Personal • Workers’ Compensation • Major account vs. small account • Line of business – retro adj. vs. “straight” premium • Government vs. private sector • Credit risk rating • Allocate staff resources to each segment - # and skill set • Align metrics where prudent One size does not fit all

8. COLLECTION INTENSITY MATRIX % of # of LevelA/RAccts A 70% 559 (>$50K) B 19% 705 ($20-50K) C 11% 2278 (<$20K) Proactive Calls Frequent Calling Periodic Meetings Escalate Collection Calls Proactive Calls on Large Invoices Escalate Collection letters series Collection Calls Escalate Credit Hold Invoice Date Due Date Due Date +30 Due Date +60

9. Tactics • Key account (preferred broker/agency) approach • Premium customer financial service • Maintain account in good standing to ensure uninterrupted flow of services • Proactive collection reminders – drive cash flow • Skipped invoice, dispute resolution • Account maintenance (“clutter”) • Face to face meetings • Relationship hierarchy – escalation protocol • Payer profile 10-20% of customers who generate 80% of revenue deserve greater proportion of time and best staff

10. Key Account Approach Key accounts can also create disproportionate problems if not managed properly

11. Tactics • Lower value accounts • Well defined collection timeline (treatment) • High volume contact • Sooner rather than later • Automatic • Automated • Lower frequency billing • Incentives for credit/procurement card payment, direct debit • Policy mandates for accelerated, secure payment based on volume or delinquency High volume, fast, standard approach required

12. Tactics • Metrics • Actual DPO vs. Best Possible DPO • Past due amount (1-30 or 11-30) and %, especially > 90 • Credit risk rating of asset • “Clutter” or dilution • Actual cash collected vs. target • Incentives – can be tricky but are powerful • Based on actual vs. target cash collected • Quarterly measurement and payout • Meaningful amount (15% of base) Accountability and incentives for the right metrics will enable staff to drive results

13. Tactics • Dispute Management • Cross functional, shared responsibility • Cleary defined workflow, roles & responsibilities • Standard resolution timeframes • Categorize by type – price, retro adj., etc. • Route to person “best positioned to resolve” • Track through to clearing – internal dunning • Automate workflow, document images, reporting • Metrics: • #, age, value by responsible party and in total • throughput • Ultimate outcome – collected or credited • By type = causal analysis Dispute management is critical to AR and customer satisfaction success

14. Dispute Management – Cycle Times Illustration of Dispute Resolution Improvement 240 238 216 200 160 Days from Inv. Date to Clearing 100 120 80 86 40 0 January March June September Past due >90 decreased 48%, Customer Sat. Improved

15. Tactics • Continuous Improvement of Billing Accuracy • Measure it – Billing Quality Index • Utilize dispute data to direct efforts • Redesign upstream processes – Lean, Six Sigma (cross functional) • Ensure invoice format is helping, not hurting • Redesign reconciliation processes: retro adj., loss sensitive, preliminary vs. final invoice, premium trust account, etc. • Probability of recovery prioritization • High speed procedures with decision points • Automation tools – faster, less work Billing accuracy is the Holy Grail of AR management

16. Tactics • Technology • Automate repetitive functions and data collection in: • Cash application – auto-cash and “hit rate” improvement • Collection prioritization, workflows, contact, follow up • Predictive and auto dialing • Credit vetting & scoring • Document storage, retrieval, and routing • Reporting • Reconciliation tools • Essential in direct billing environments and Personal lines • Direct debit – one client collects 20% of revenue this way Technology is absolutely required to achieve peak effectiveness and efficiency

17. Conclusions • New or different actions required to get better • Strategy • Define and align • Everyone on board • Portfolio – segment, targeted approach, align resources, execute • Tactics • Metrics and incentives • Dispute resolution – workflow, imaging, automation • Billing accuracy • Reconciliation productivity • Technology Good luck !!

18. Questions • Your questions now • I’ll be at entire conference to answer your questions later

19. John G. Salek 862-703-6532 john.salek@genpact.co Thank You www.Genpact.com Confidential. All trademarks appearing herein belong to their respective owners.