Consultancy: Reinsurance

Author: Krishane Patel | 29/05/2024

Background

The problem brief

Imagine the sinking feeling upon discovering a letter from a debt collection agency in your mailbox. It's a moment that often triggers a wave of negative emotions, from anxiety to frustration. Recognizing the importance of reshaping this initial contact experience, a national leading debt recovery company embarked on a mission to rebrand itself. Their goal was clear: to enhance response rates from debtors and foster a more positive and effective debt recovery process. This project wasn't just about rebranding, it was about fundamentally reshaping the way debt recovery companies communicate with debtors. Early repayment are as a win-win scenario for both creditors and debtors. Not only does it stabilize creditors by enabling them to allocate resources more effectively into operational or investment projects, but it also mitigates financial costs such as administrative expenses and legal fees. However, beyond the fiscal implications, there are also intangible costs at play, including the emotional toll experienced by debtors and the strain caused by aggressive collection practices. With a keen understanding of human behavior and motivation, the debt recovery company set out to delve into the intricacies of debtor response patterns. By examining these factors through a behavioral lens, they sought to uncover actionable insights that could not only improve response rates but also foster a more empathetic and constructive approach to debt recovery.

Approach

Using behavioural science to diagnose, optimise and evaluate

This project consisted of a behavioural audit of communication along with an evaluation of an online experiment of various brand names, to understand the impact of different brand names along with improvements made to the communication strategy.

Behavioural audit and optimisation: The customer journey was understood to identify when and how debtors were contacted. Secondly each piece of communication was examined through a behavioural lens to identify good and bad practices. Such as layout, tone of voice, cognitive load and assumptions of rationality. Each observation was provided with repair options for the client to take forward.

Evaluation:

The client had previously looked to rebrand themselves and generated new brandnames. This gave the perfect opportunity to test the top brand names and comms letters in a factorial design of an online experiment with real debtors. Participants were randomised to one of six different treatments (see Table 1 below).

Table 1. Overview of the experimental treatments and associated letters
Group	Letter content
Control	Standard letters
Control	Behaviourally informed letters
Brand Name₁	Standard letters
Brand Name₁	Behaviourally informed letters
Brand Name₂	Standard letters
Brand Name₂	Behaviourally informed letters

Outcome

The experiment showed how the combination of behavioural optimisation with a novel brand name was able to reduced friction in repayment, improved response rates by 3% and increased NPS by 8%.

The experiments revealed how simple changes in the customer journey were able to improve the customer experience, increasing Net Promoter Scores by 8% .

Furthermore improving response rates and thereby debt collection rates by 3% . By adopting a more customer-centric view, the client was able to better understand the needs and concerns of their customers. This in turn translated to a better customer journey and experience.

By adopting the insights generated from the behavioural diagnosis and the experiments the client was able to generate a more streamlined customer journey, removing friction and uncertainty as much as possible whilst managing expectations.