It is no surprise when I hear my daughter describing things as "cool", even though it was used to death in the 1960s and early 1970s. After all, "what goes around comes around".

But the world of motor insurance is also seeing the return of a popular expression this time from the 1980s: "leakage".

I am talking about the money that leaks out from insurers' coffers through failure to monitor and control repair costs and a failure to recover monies due to them from responsible third parties or their insurers.

I want to concentrate on the recovery of money. There seems to be an apparent failure on two counts. The first is not recovering sufficiently quickly so that interest is lost on money paid; the second is a failure to recover anything on a high percentage of cases.

The background we are working against helps us to get a perspective on matters: The industry has virtually no "knock for knock" agreements left.

Repair costs are rising and years of falling premiums have resulted in a fall in profits.

Insurers can help their bottom line by recovering money in a timely fashion and not writing off so many debts. In other words, turn to "leakage" and do something about it.

There are two possible solutions:

Internal
There is no doubt that the recovery of a debt is a specialist function, and a dedicated unit within an insurer is a must. Centralising recovery work means that accurate statistical information can be gained, the right staff found to do the job, and proper incentives given to get the money back.

Simply mixing recovery work in with other types of motor work such as injury, credit hire and liability, will not help to maximise money coming in. What will happen is that the handlers will not have the time or motivation to do the work properly.

A dedicated unit will be able to to gain the vital insurance information as soon as a claim is reported before the third party goes to ground, and continue to chase by telephone until the cheque is received.

External
Many insurers simply do not have the capacity or facilities to have a central unit. Indeed, they may not see recovery work as a core competence, preferring to stick to what they do best such as dealing with injury claims.

So to outsource is often the answer. This way, the claims manager is taking positive action to deal with the problem, and taking pressure off his hard working staff.

There are a number of specialist recovery companies in the marketplace (indeed, ACM offers this as one of its services).

How does our claims manager know he is getting the best deal, and going to get the best results?

Here is a list of things to do or look out for:
- Visit at least two external suppliers to compare what is on offer
- Check the quality of file handling. Do not be frightened to ask to audit a sample of current workload. Check whether these files reflect what you are being told about the quality of service?
- Can the supplier demonstrate that it has the right control systems in place, and is well organised? Diary system and quality of internal statistics will help
- Cost must be ascertained in depth. Ensure that all is clear, nothing hidden, and that there is some reference to service standards
- Reporting and statistical information from the supplier to the insurer must be nailed down at the start, together with how often.

What you are looking for from the supplier is results, and remember that the cheapest is not always going to be the one that helps create a positive effect on the company's bottom line. After all it is the amount of money recovered that counts.

The third way
There is a third way to all this which is a combination of the internal and external solutions. This is a partnership between the supplier and the insurer. In other words, the insurer deals with as much of the recovery work as possible, but during times of heavy workload, new or existing cases are outsourced, and the more difficult cases are sent to the supplier on a regular monthly basis.

The advantage to this way of working can be high for both sides. The supplier has a regular source of income, the insurer knows that help is available when needed, and that it is not writing off what it thought to be difficult debts.

So the old expression "leakage" is still cool and recovery of money on motor claims is essential. All insurers must look at the way they are dealing with this type of work and find a solution which works for them.

It might well be that "the third way" is the best way, in that the supplier is working as an extension of the insurers' own department, and best use is being made of resources in both areas.

Whichever solution fits, do not delay in taking positive action.