Sheila is shopping online for a new auto policy. Marketing has done its job to get the ball in play. Sheila made a few simple choices. She received a timely quote. Underwriting catches the pass. Like running down the field with the football in hand, the full insurance team has taken the ball to the goal line and is ready to issue a new policy…and then…fumble.
Sheila wants a usage-based policy for her second car, a convertible that doesn’t get driven in the winter. Fortunately, her insurer will allow her to turn on and off her insurance with the click of a button on their website. Unfortunately, she pays semi-annual premiums, which means that she doesn’t actually see her savings “catch up” until months later, creating a massive inconsistency in her billings. When she tries to switch to monthly billing, she realizes that she loses her pay-in-full discount. The modern insurance product and the fantastic UBI capability are of no value because the carrier’s billing system isn’t aligned to its capabilities and her expectations.
Sheila pauses and considers shopping around. This is the point of fumble. Who is going to recover the ball? Whoever can match the customer’s billing needs to the customer’s billing expectations.
There are a hundred different scenarios we can replay in this situation, but many of them end in similar results. Billing is important enough to the business that it requires a future-focused strategy. Billing innovation and transformation with a customer-first strategy pays for itself.
Majesco released a joint thought-leadership paper with Deloitte titled, Insurance Billing and Payments: From Back Office Calculators to Channel Growth Accelerators, based on an executive round table with industry leaders. The paper examines how and why billing’s operating model is changing within the insurance organization — seen through the eyes of insurance executives. It also makes an excellent practical case for a quick, sustainable and valuable ROI.
“Put me in, coach.”
Rapid digital transformation across industries is pulling billing and payments off the bench and into the game. Once considered to be back-office financial functions, billing and payments are now at the center of the digital customer relationship, along with innovative products and services, and they are as adept on offense as they are on defense. Billing is a key component in any growth and innovation strategy. A redesigned billing experience can anchor an insurer’s future success and survival. The reason? Billing sells!
Data from venture capitalist Mary Meeker indicates that over 60% of transactions are digital, ranging from mobile payments, messenger apps and contactless payments through online commerce sites and buy buttons. Yet most billing systems are not prepared to meet the higher challenges of service expectations and customer success. Billing is a universal touch point for insurers. Customers may never deal with claims. They may only deal with underwriting once. Billing, however, will follow them into the future with frequent communication. The time to rethink the billing and payments foundation is now, before billing’s technology and service gap becomes insurmountable.
Billing plays offense. Billing plays defense.
In billing and payments, insurers will find that they need to think in terms of defensive tactics and offensive strategies. Today’s billing is versatile enough to be on both sides of the team.
Making the big plays to outperform the competition is the role of the offense. These are the billing model innovations that will excite the business because they enable the whole organization to think big without billing constraints.
The defense reacts to market necessities, responding to what is current and holding the ground already gained. This would be akin to maintaining service levels, tracking information for reports and keeping omni-channel service strong during moments of stress, such as internet outages or high call center volumes.
The offense adapts to new business demands and strives to leap ahead of the competition. The defense maintains operational effectiveness, executing today’s business. Front-office opportunities are handled by the offense. Back-office optimization is pure defense. Today’s rapidly changing market requires that both are done with excellence, but, more importantly, that they are executed with balance.
“We are constantly playing defense because of the legacy technical debt that we are burdened with. It generates an enormous amount of friction. There’s significant value when you focus on the offensive side with new things that can be done to drive customer retention, satisfaction and more." — Round Table Participant
See also: Myths on Reference-Based Pricing
Billing on Defense – Optimized Operations and Customer Engagement
Insurance billing sits at the intersection of cashflow and customer engagement, so it can’t be ignored.
The foundational elements of billing and payment solutions are task-oriented:
- Set up payment plans
- Calculate payments due by customers (including fees)
- Produce invoices
- Create reports for management
- Record premium payments made to customer accounts
These tasks are important in providing effective billing processes that deliver quality of service, support financial operations and encourage customer and distributor relationships.
But these are just the operations that will keep the insurer on the playing field, not what will catapult them over the competition. More than optimized operations and customer engagement are needed to meet the digital demands of today’s customers.
Billing on Offense — Innovation and Customer Experience
Billing is more than a financial arrangement. It has a significant role to play in the overall customer experience. Billing encompasses significant events, such as renewals and claims. These are trust building opportunities — times when insurers follow through on the brand promise of protection and service.
Experience also encompasses e-commerce, a concept far removed from yesterday’s electronic payments. The payment portion of the transaction is now a component of an integrated digital value chain that includes search features, bundling, recommendations, quotes and complex schedules. It necessitates the free streaming of data in and out with numerous integrations.
Innovation within insurance products and services is causing insurers to offer new transaction types and new payment methods that may be unlike anything they have ever seen or that can be handled by traditional billing processes. Embedded insurance makes a great example. Can an insurer’s billing and payments processes easily communicate with a partner’s transactional channel? What steps does an insurer need to take to prepare for billing innovations that are the trickledown from a new product or service?
One way an insurer can play offense is to integrate only enterprise billing solutions that have been designed with the future-focused, front-office approach in sight, rather than considering a legacy replacement of a back-office transactional process.
The growing demand for new payment methods, billing plans and access to real-time billing information can transform digital capabilities. It can improve communication and fuel growth to leap ahead of the competition and capture new markets while growing existing markets.
The Billing Operating Model — A Strategic Enabler for Growth
A billing operating model shift allows insurers to keep one eye on the customer and another on the company.
Insurance operating models have traditionally been functional (policy, claims, and billing) and product-focused (commercial/personal). This has resulted in distribution and servicing technologies that mirror the priorities and limitations dictated by traditional strategies.
The evolution of traditional operating models has been incremental and directed toward centralization to deliver scope and to scale benefits. Today’s billing models will still need to meet internal demands, but they will also need to account for customer desires and trends in billing and payment capabilities.
Every insurer must undergo an introspective analysis if they hope to maximize value from their functional and technology transformations. They must look at themselves in light of reality and determine what it will take to reach their customer-focused transformational objectives.
“Billing is not just a cost center anymore. There’s significant value in moving to a new, different operating model that opens up possibilities for business growth — scaling to adapt and use new enabling technologies and creating new experiences.” — Round Table Participant
A customer-first approach requires a deep understanding of the carrier’s customer base as well as the various interactions that will make a meaningful difference. Furthermore, "customer first" operating models are not an evolution of the current state and are not limited to customer interactions with insurance carriers. Amazon, Google and Apple experiences are pervasively re-defining CX. The impact delivered by new experiences will accelerate, not only because of these major tech players, but also in response to the smaller tech/fintech/insurtech firms that are seeking a competitive advantage.
Matching the agility and speed of the startup
Startups have a billing advantage. They can engage customers from the outset, unencumbered by technical debt or the need to convert data. This allows them to play offense, developing customer-first operating models powered by tech/data capabilities to deliver insights that will shape interactions. For example, startups can begin with optimized workflows to automatically create best practices in retention. A modern workflow with embedded "next best action" can be crafted to prioritize each customer interaction through the lens of retention analysis.
Startup insurers are often able to sort, rank, rate and predict with efficiency and clarity. Customer effort scoring is a crucial improvement metric that startups would find much easier to implement than a traditional insurer. This is just one example of hundreds, but it makes the case that the world of customer experience is moving quickly, and insurers need to move with it.
Large carriers are still focused on assimilating changes in customer behaviors with limitations imposed by their operations and legacy technology debt. The traditional contact center is a prime example. How adept are carriers at mixing customer service channel methods in the midst of an omnichannel revolution? Insurers are grappling with perfecting service in light of shifting customer expectations.
Billing’s Role in Communication — Making the Touchdowns
Communication with customers is where the whole thread comes together. It’s where the touchdowns are scored. Previously, all of the aspects of billing were more clearly separated from channels of service and communication. Today, however, insurers are giving agents and customers faster and easier access to those portions of the billing system that will assist them to accomplish their goals.
Streamlining communications in an omni-channel age has many hurdles. Billing, because it is so customer-service heavy, has to stay in constant contact with communication management. For example, during the last two years of pandemic, contact center staffing has been a concern. Insurance is the third-largest user of call centers, ahead of even healthcare and telecommunications. Any point of difficulty with this portion of the omni-channel communication strategy needs to be offset by technologies that can help to pick up the slack — integrated with billing.
Carriers need to consider the details (What alternative user support channels can we use for billing and payments?) and the larger concerns (How do we use intelligent routing that balances the optimal customer experience with our staffing and resources?).
A redesigned operating model for billing will consider the impact and future-focus that may include greater agility, reprioritization, replacement of siloed operating models and the leveraging of ecosystem partners. These greater efforts will pay off in many ways, not the least of which will be customers who quote, buy and stay because their carrier allows them to do business in the way they want.
Today’s blog is written with Ajay Radhakrishnan, managing director at Deloitte Insurance.