THE UNRECOGNIZED IMPACT OF RETURN MAIL ON INSURANCE

Each month, stacks of mail stamped “return to sender” by the United States Postal Service (USPS) are sent back to the company or mailing organization and shoved into a forgotten corner. With an estimated 155 billion processed mail pieces annually, over 6.6 billion are identified as undeliverable as addressed (UAA) by the USPS. Despite this statistic, return mail is not often seen as a problem that impacts the bottom line.
 
While the entire business world is affected by return mail in some capacity, insurance and healthcare are second in line behind the finance industry in combined return mail volume. Pitney Bowes conducted a study that determined insurance and healthcare companies account for 20% of all return mail, or over 300 million pieces per year. That’s one fifth of the whole return mail pie! For Insurers, returned mail must then be securely disposed of because it contains sensitive information.
 
THE CAUSES
One leading driver impacting the amount of return mail is the lack of control over the address data when, for example, the data comes from employers or government agencies. This can be caused by the following:

• Errors during the creation of a policy holder’s profile. When creating a profile, a policy holder or CSR can accidentally enter the incorrect postal code, mistype a number or street name, or leave out suite or apartment information. When this information is not checked at the point of entry, all future correspondence suffers, resulting in a poor policy holder relationship and unnecessary costs. As the USPS requires complete and accurate addresses for mail delivery, the best place to remedy an incomplete or incorrect address is at the point of entry.
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• The policy holder moving and not providing a forwarding address. Many well-intentioned consumers will visit their local USPS office or go online to provide forwarding addresses upon moving residences. However, a majority of individuals still do not realize that even though they have completed this task, they still must directly notify each organization they regularly receive transactional documents from. What happens when an insurance organization mails a document to one of these policy holders? It is forwarded from the USPS to the correct address for twelve months, unbeknownst to the organization sending the piece. After twelve months, mail pieces are stamped “Return to Sender,” adding USPS penalty fees to the mix, as well as unforeseen operational costs. Typically, if the policy holder receives documents electronically, they do not see the need to notify an organization if they are not receiving the paper version.

 
THE NEGATIVE CONSEQUENCES OF A BAD ADDRESS
While exact costs vary by application and product line, each piece of return mail costs the sender $3-$5 in operational costs alone. One bad address means wasted time and money, as well as a damaged reputation. It goes far beyond the cost of postage, envelopes and re-sending documents— increased labor costs, reduced cash flow, and delayed payments all impair policy holder relationships.  It also raises the risk of noncompliance, and adds other unseen problems throughout an entire organization that cut into operational efficiencies and margins:

1. Double Production and Mailing Costs
Consider the entire cost of the original mail piece. Because the returned mail piece was not delivered as intended, the original costs of processing and mailing have been lost.   Once returned by the USPS, the entire mailing process must begin again with composition, printing, and insertion into an envelope, with the potential of being sent at non-discounted postage rates, because of the volume and density of the regenerated mail. If the return mail item contains a check, an organization can experience up to a $25/piece cost because they must cancel, re-authorize and re-issue the check.

2. USPS Fines for Return Mail
By USPS mandate, organizations claiming discounts and Standard Mail™ must update their First-Class Mail with customer move information within 95 days prior to the mailing. If an organization’s mailings do not reflect current customer addresses, the USPS can fine the company. Furthermore, as explained in a 2014 OIG report about UAA mail, the USPS has a policy that says if a mailer fails to meet a 70 percent address accuracy threshold as part of the move update, a 7-cent-per-piece surcharge is assessed on the portion of the mail that exceeds the 30 percent tolerance.

3. Collateral Damage
Undeliverable invoices that are returned interrupt cash flow—the invoices that never reach the policy holder are simply not paid and in default.  The billing organization then adds late fees with the possibility of a policy cancellation,  which fuels policy holder dissatisfaction and increased call center activity from inbound complaint calls. The costs incurred through CSR support and additional incentives to attempt to salvage a policy holder’s business loyalty are difficult to quantify, but do take a major toll on the bottom line. Once your policy holders are dissatisfied, it is very hard to change their attitude.

4. Compliance Risks Become Greater
The longer an organization sends UAA mail, the greater the risk of noncompliance becomes. Attorney fees, time and labor spent in tracking down the policy holder’s transactional document history and settlement cash are all factors to strongly consider when looking at the bottom line. Additionally the Red Flags rule of the Fair and Accurate Credit Transactions Act (FACTA) spells out compliance requirements associated with change-of-address fraud.

5. Data Breaches
Thieves and scammers are well aware that, on average, mail takes 45 days to be returned. Taking advantage of an organization’s inability to detect a bad address over that length of time, they will continue to use personal data and mail offers still being sent to an old address. By not tackling the problem of undeliverable addresses immediately, an organization may be keeping the door open for data breaches that will harm the policy holder, as well as their own brand reputation.
 
CONCLUSION
Return mail is often overlooked and requires an organization’s full attention by partnering with a secure, trusted and known address management vendor. With nearly one in every nine Americans changing their addresses every year, insurance organizations are faced with a continuing need to update policy address lists. They can either continually correct the problem after each mailing, or they can do it before a mailing is prepared, thereby saving time and money, satisfying compliance standards and strengthening policy holder relationships.
 
To learn more about address management and partnering with Lanvera, contact our team at lanverainfo@lanvera.com.
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