In today’s economy, auto loan delinquencies are rising, leading to an increase in vehicle repossessions. However, many lenders fail to recognize a critical opportunity in the repossession process: recovering funds through the borrower’s existing insurance policy.

Without an efficient strategy for filing insurance claims, lenders risk absorbing unnecessary losses on damaged collateral, ultimately impacting the bottom line.

The financial impact of damaged collateral

When a lender repossesses a vehicle, they often assume the financial burden for any damage sustained while the vehicle was in the borrower’s possession. In cases where the borrower maintained active insurance at the time of repossession, lenders may have a claim that could offset repair costs or total loss payouts. Unfortunately, many servicers miss this opportunity due to lack of awareness, inefficient processes, or delays in documentation.

Without an effective insurance claims strategy, lenders are left with two unfavorable options:

—Selling damaged vehicles at auction for significantly lower values, reducing net recovery.

—Paying for repairs out of pocket, adding unnecessary expenses to an already costly process.

Common challenges in the current recovery process

  1. Lack of awareness: Many lenders don’t realize they can file a claim on the borrower’s active insurance policy, even after repossession.
  2. Missed filing deadlines: Insurance policies have strict filing windows, and delays in repossession processing often result in lost claim opportunities.
  3. Inconsistent documentation: Insurers require clear, timely documentation of vehicle damage, yet repossession workflows often lack standardized reporting.
  4. Manual processes: Many lenders track insurance, repossessions, and remarketing in separate systems, creating inefficiencies and loss of data.

A smarter approach: Integrating insurance claims into the recovery workflow

Lenders can improve their repossession recovery process and minimize financial losses by adopting a proactive, structured approach that includes:

  1. Automated insurance verification: Leveraging technology to verify whether the borrower’s insurance was active at the time of repossession.
  2. Standardized damage documentation: Ensuring repossession agents capture clear photos and condition reports to support claim submissions.
  3. Dedicated claims processing: Utilizing an insurance recovery service to file claims efficiently, ensuring deadlines are met and maximizing payouts.
  4. Seamless integration with repossession and remarketing: Connecting insurance tracking with repossession workflows to speed up claims processing and improve asset liquidation outcomes.

The bottom line

By rethinking the repossession recovery strategy, lenders can recover more funds, reduce charge-offs, and increase net proceeds from auction sales. A proactive and automated approach ensures that insurance claims are filed on time, reducing financial losses and making repossession a more efficient and profitable process. In a competitive lending environment, optimizing every stage of asset recovery is not just beneficial, it’s essential.

As lenders continue to navigate the challenges of rising delinquencies and an evolving auto finance landscape, maximizing repossession recoveries through better insurance claim management presents a compelling opportunity.

By embracing technology, automation, and integrated workflows, servicers can unlock new revenue streams while mitigating unnecessary losses, transforming repossession from a cost center into a more strategic financial advantage.

Amanda Fields is sales manager of van Wagenen, a division of One80 Intermediaries, which offers a repossession recovery program that can help lenders maximize their insurance claim opportunities while streamlining the entire recovery process. With decades of experience and expertise, van Wagenen can help lenders mitigate risk, recover losses, and improve overall financial performance.