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One day I noticed a customer coming in to make a payment and that their car had been in an accident. Or, should I say my car that they were driving had been in an accident? I saw the damage and immediately asked why they hadn’t repaired it yet. They guy told me he just hadn’t gotten around to it yet. After some simple research and a couple of quick calls to the agent, I discovered the insurance company had already been notified about the accident and in fact, paid a claim to the “insured,” my customer, in the amount of $3,283 for repairs that were never even started, let alone completed. My head was about to explode! I just knew the money was long gone, and it was. The customer had already spent it.

After looking into this problem further, I quickly discovered something that bothered me even more. There were several customers who wrecked their cars, got a check, cashed it, and never fixed their (my) car! And, to make matters worse, when we began calling the agencies we got the same response every time: “It is company policy to pay the insured directly.” I was furious! I was the lien holder and this was my collateral! I don’t think these insurance companies actually understood why I (we BHPH dealers and finance companies) require the customers to carry full coverage insurance. It was to protect the collateral and my investment, not to fund a good time or pay bills for customers, the insured, whenever they had a fender bender.

Our persistence paid off though. We kept calling through all the nay-saying gatekeepers until we reached someone with the ability to say yes. Every one of these managers also told us about their company policy and said no to reissuing a check made payable to the lien holder. However, as soon as we bring up the court system and threaten to take legal action, we receive payment within just a few days. Insurance companies do not like to go to court, especially when their policy can be found to have wronged another legitimate business.

Whenever a customer files an insurance claim and a check is issued, the check should be made payable to both the insured and the lien holder, but that is often not the case. Many customers who receive money directly from insurance companies to repair their vehicles never fix their cars and have difficulty avoiding the temptation to cash the check and spend the money for something else. This is especially true for BHPH customers. I have had customers forge the name of the dealership, or even worse, deposit a check with the dealership’s name on it but without our endorsement. Either way, the bank is at fault and they will resolve the problem as soon as you discover it.

Since we first learned about this common insurance practice, we immediately put some stop measures in place. As part of our routine follow-up with BHPH customers, a collector now verifies the insurance currency of every account at least quarterly and asks if the vehicle has been involved in an accident. If ever an accident is discovered, the next call is made immediately to determine if a claim has been filed. If a check has been issued, we then begin the calling process to find a person in charge so we can correct their mistake. If the bank makes the error and accepts a check for deposit without our endorsement, we quickly correct their mistake too. You have to stay on top of things and pay attention to every single account.

This simple procedure has increased our monthly BHPH collections by eight to nine percent, and I am confident if you take a closer look at your customers’ insurance claims, you will find an immediate boost to your collections too. The key to it all is to know what’s going on, and as soon as you discover a problem, fix it. It takes persistence! Don’t take no for an answer from the insurance companies. This money is supposed to be used to protect your collateral and repair it in the event of an accident or theft. That’s why we require full coverage insurance, to protect our investment, not to provide windfall money for the “insured.” Mistakes by insurance companies and banks should not cost you money and won’t, if you are persistent in your efforts to catch it.

It is also important that at the time of sale you take multiple pictures of every vehicle sold and perform a thorough condition report. That way, if there is ever a dispute or if you actually find yourself in a courtroom, you will have no trouble building a case. I would hate to estimate how many thousands of dollars slipped through the cracks and into my customers’ hands since I financed my first BHPH deal. I probably couldn’t sleep if I knew the amount. The good thing is, we found a problem that was easy to overlook, corrected it and now receive more than $100,000 per year in additional collections that otherwise would have been lost forever.

People in business make mistakes every day, insurance agents and bankers too. By paying close attention to what is going on, especially when it comes to collections, you can minimize the mistakes being made inside and outside of your company and increase the money you collect. Don’t let the mistakes made by other companies or your customers’ accidents cost you money. Pay close attention to the condition of the vehicles on your BHPH accounts, and when you discover that an accident has occurred, make sure your collateral is repaired or you are paid.

Vol 5, Issue 10