Financial services leaders should treat these instances as a predictable part of portfolio management rather than an exception
Financial services organizations have become incredibly sophisticated at almost every stage of the customer lifecycle. Between investing heavily in acquiring customers, underwriting them, servicing their accounts, identifying risk, managing delinquencies, and recovering losses, it's a complex, but well-oiled machine.
But there is one part of the lifecycle that doesn't always receive the same strategic attention: “What happens when a customer passes away?”
While that may sound like a narrow operational question, it's actually a much broader leadership question. Simply put, customers will inevitably pass away. It is a natural part of life. And while the customer relationship changes, the financial obligations and administrative responsibilities associated with an account don't simply disappear. This is a predictable part of managing a consumer portfolio. So, with that in mind, why do we still treat these accounts like exceptions?
Complexity isn't a good reason to accept a poor process
One explanation is that resolving accounts following a customer's passing can be complicated, and that's a fair point. An organization may need to determine when the customer passed away, whether an estate has been established, who is authorized to represent that estate, whether a claim can be filed, what deadlines apply, which jurisdiction rules govern the process, and more.
The regulatory framework recognizes that this is different from ordinary collections. For example, Regulation F treats an executor, administrator, or personal representative of an estate as the person who can act on behalf of the estate in relevant debt-collection communications, according to the Consumer Financial Protection Bureau. There is a lot to get right, but Complexity motivates us to understand the process better and is not a reason to stop improving.
When something is difficult, the natural organizational response is often to push it into an exception queue:
"Someone else will handle it."
"We'll review it when it becomes delinquent."
"We'll research it manually."
"We'll deal with it when we have time."
Eventually, some of those accounts become write-offs because a reactive process never identified them or attempted to collect on them in time. That's an important distinction, and it's also the underlying problem.
Estate accounts aren't simply a collections issue
It’s arguably a mistake to view accounts following a customer's passing strictly through the lens of collections. While there is certainly a financial component, legitimate obligations don't disappear simply because a customer has passed away. The process also involves data, technology, compliance, operations, and the customer experience.
Most importantly, it involves people who may be navigating one of the most difficult periods of their lives. The goal should never be to treat a grieving family member like an ordinary delinquent customer. The goal is to identify the right party, understand the estate, follow the applicable requirements, and resolve the account correctly. That distinction is crucial with estate accounts. It is possible to protect the financial interests of an organization while treating surviving family members and estate representatives with respect. We do it every day at DCM Services; performance and compassion are both measures of whether we've designed the process correctly.
Technology should help us see what we can't see manually
Today’s technology can make a meaningful difference with artificial intelligence and automation. Much of it focuses on replacing manual tasks or reducing headcount. There is another, sometimes more valuable, application of technology revolving around the discovery of important work opportunities that humans would otherwise never see.
Consider a traditional estate-recovery process. An organization may know that some of its customers have passed away. But knowing that isn't enough. The organization needs to identify the relevant estate, determine whether recovery is appropriate, understand where that estate is in the process, and act within applicable timeframes.
That can become extremely difficult to do by hand, much less scale. Technology can change the equation by making identification more systematic. At DCM Services, for example, our technology is designed to automate date-of-passing verification and identify probated estates using a nationwide probate database. That allows organizations to move from manually searching for opportunities to systematically identifying them.
But technology alone isn't the answer. A bad process automated is still a bad process. The real opportunity comes from combining technology with specialized expertise, tight project management, compliance controls, and training employees to understand how to handle these situations with care.
A 7,500% lesson in operational thinking
We at DCM Services recently saw a particularly striking example of what can happen when an organization changes the way it approaches this problem.
A mid-size credit union client using DCM Service's Probate Finder OnDemand® technology generated $1.86 million in probate claims during its first year and reported a 7,500% return on their investment. One partial month of settlements was enough to cover a full year of the service. Those are impressive numbers, but the most interesting part isn't the results themselves, rather the ideas, processes, and technology that made the numbers possible. Read the full case study here.
Every organization has processes that have become so familiar that people stop questioning them. Everyone knows they're manual and inefficient. Everyone knows there are probably missed opportunities. But because the process has always worked well enough, it doesn't make its way to the top of the executive agenda. That is, until someone changes the process and discovers how much value was sitting behind it.
The executive questions financial services organizations should be asking
Not every financial institution needs to build the same estate-recovery operation, but but every organization managing consumer accounts should understand what happens when their account holder passes away.
And that starts with asking some basic questions:
"How quickly do we know when a customer passes away?"
"What happens to that account after we know?"
"Who owns the process?"
"How do we determine whether an estate exists?"
"How do we identify the right representative?"
"How do we make sure we're acting within the applicable requirements and deadlines?"
"How much recoverable value are we currently writing off because our process doesn't identify it in time?"
Working through these questions will likely surface gaps in your organization's workflows and technology. That's often the stage we find clients in when they first reach out to us.
A more complete view of the customer lifecycle
The front end of the customer lifecycle has become increasingly sophisticated over the last few decades, understandably. But there is still a process to manage, value to protect, and compliance requirements to meet. And of course, there are still grieving people on the other side of the process who deserve to be treated with dignity and respect. Organizations that approach these accounts with that mindset will be better positioned to manage risk, protect revenue, and deliver a more thoughtful experience. How an organization handles the difficult and sensitive moments in a customer relationship often tells you how mature its overall operation really is.
So the next time your leadership team reviews the customer lifecycle, add one question to the agenda:
"What happens when one of our customers passes away?"
If the answer is complicated, that's okay. Complexity isn't the problem. The question is whether you're willing to build a better way to manage it, with the right balance of technology, expertise, performance, and compassion. If so, contact us today and we’ll get you what you need to significantly boost your estate collections revenue!