Collections in Insurance cover all aspects of collecting outstanding receivables from preventive dunning to late stage collections. This is achieved by taking advantage of FSCD collection strategy capabilities that have been available since many releases with ERP 6.0.

The needs of the hour for Insurers has been flexibility in determining the right activity for a customer and providing additional functions for the Collections Manager to manage the work in his / her area in the most efficient way and use new functions for the Collector to process work through work lists and views to accelerate.

There has been a shift in the approach for dunning to cater to this requirement.

In the traditional dunning process the dunning procedure assigned to each contract account which determines the number of dunning levels and the respective dunning activity sequence. This determination of the next dunning level is primarily based on the days in arrears and the amount of debt as shown below.

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With the introduction of dunning by collection strategy the determination of the dunning activities in the dunning programs takes place using the Business Rules Framework (BRF) / BRF +.

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Here we see that dunning by collection strategy is based on business rules that are evaluated at runtime. Therefore new dunning activity that can create work items of various types for processing by Collectors can be carried out efficiently

Moreover this allows for a flexible evaluation of a broad range of parameters in collections. A collection strategy is assigned on master data level. Contract accounts (or Insurance object) can be treated individually or can be grouped together for collections. The evaluation of the business rules within the strategy return the next collection step (as well as related activities) to be carried out.

Hence there is not necessarily a fixed sequence of steps to be carried out one after the other. It is more to do with the specific circumstance of an account that determines the next collection step.

The data that can be evaluated in the rules engine include the dunning data, dunning history, credit risk data and many more (including customer-specific tables) as shown in the above screenshot.

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SAP Organizational Management can be used to determine responsible teams and/or agents for dunning activities. Rules can be set up based on a variety of criteria to determine which activity shall be carried in which organizational unit and by whom.

Thus it is possible to automatically assign a collection team or an agent/collection Specialist according to a company’s specific business rules.

Based on the new capability to determine responsible teams and/or agents, it is possible to see how much collections work (i.e. dunning/collections activities) will be created. Before final creation of the work, the Collections manager can do a capacity balancing.

For e.g : Collections department may have a limited capacity of collection agents doing outbound calls, therefore the Collection Manager can limit the number of work items created for these Collection Agents and instead have SMS sent to those policyholders that shall not receive a call from the Collection Agents.

The integration with BI to analyze collections can provide Insurer a good view about the collection success and plan better to increase collection efficiency.

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  1. Jochem Schueltke

    Dear Sagar,

    Many thanks for publishing these details about SAP Collection and Disbursement (FS-CD) regarding ‘Collections Management’ and in particular ‘Collection Strategy’ in SAP SCN. That’s really appreciated. In addition I’d like to provide some basics about the classical FS-CD Dunning.

    From several insurance companies that are using FS-CD productively for some years, I’ve got some feedback about ‘Collection Strategy’ I’d like to share. The freedom and flexibility of this alternative named “Collections Management” is not just seen as a great advantage. For them it is, at the same time, very challenging to implement a Collection Strategy with limited effort – compared to the classical “Dunning by Dunning Procedure for Insurance Companies“.

    Many insurers have clearly predefined ways to create and send payment reminders or dunning letters, to remind policy holders (or alternative premium payers) of overdue open items (e.g. premium receivables) and to request payments with various – addtional – activities. Some of them are given based on law and justice. Therefore the classical ‘Dunning Procedure’ could be more efficient to configure, and to maintain adverse to a Collection Strategy.

    I was told that the Dunning Procedure configuration (Customizing) – means using dunning procedure types, dunning levels, dunning activities, and dunning variants – is recognized as well thought and very powerful, but flexible; means it fulfills really all requirements in this regard, especially related to ‘regulated’, ‘retail’ or ‘mass’ insurance products. In such cases, of course considering customer segments (e.g. ‘VIPs’), an insurer doesn’t service defaulting policy holders or premium payers on an individual ‘custom-made’ basis. Please see “The Dunning Process in Collections/Disbursements“.

    In context of a claisscal Dunning Procedure the power and impact of a Dunning Variant shouldn’t be underestimated. Please be aware that this control parameter is an attribute of the insurance object business partner relationship Master Data, or alternatively of the contract account business partner relationship Master Data.

    Please see Insurance Object and Insurance Object-Partner Relationship – SAP Library. And please see Contract Account and Contract Account Partner Relationship.

    By defining meaningful Dunning Variants, some of them following one after the other (e.g. based on law and justice), you can implement with very little effort a chain of subsequent classical dunning procedures. Therefore only the dunning variant itself needs to be changed selectively. Such a change can be carried out fully automated by a certain (customer-specific) dunning activity. Additionally the original Dunning Variant can be placed back, when a Dunning End Run is carried out, and a configured Dunning End Activity is executed (also fully automated).

    For ‘extraordinary’ Policy Holders (or alternative Premium Payers) specific Dunning Variants can be defined, and determined automatically, based on Business Partner Master Data, when an insurance object  business partner relationship is created, or a contract account business partner relationship is created. These steps are usually processed also fully automated, triggered by feeder systems. But: for such customers it could worth the effort to change their ‘default master data’ manually in SAP Business Partner (CA-BP, FS-BP) or in SAP Collection and Disbursement (FS-CD), of course only by several users that have appropriate authorizations.

    Thus, the classical FS-CD Dunning Procedure should be taken into account carefully, before all the possibilities of a Collection Strategy – for instance supporting integration into SAP CRM on premise – are thoughlessly preferred. Implementing Collections Management may cause significant unnecessary extra initial project and long-lasting maintenance effort. Additionally Collections Management doesn’t support all Dunning Procedure Categories and Dunning Group Categories, compared to the classical FS-CD Insurance Dunning. Furthermore Collections Management doesn’t include a Dunning End Run out of the box, which could be crucial for some insurance products in various countries.

    Best regards,

    Jochem

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    1. sagar tasgaonkar Post author

      Thanks Jochem for being generous in sharing your expertise and experience. The information you offer here ( and for all your posts) is tremendous and am looking forward for more.

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