Insurance organizations striving to maximize revenue and streamline processes may choose to implement modern billing systems. Billing has traditionally been seen as a back-office function; that assessment is no longer true in today’s digital world. Billing is one of the most frequent and important customer touch points. However small or simple an implementation may look, it’s critical to get the implementation right to ensure that the overall cost of operation is reduced and that customers and agents are happy
This paper is focused on carriers that have selected a billing application from one of the product vendors like Duck Creek, Guidewire, Majesco or Insurity and initiated their transformation journey
Here are the top 11 things to keep in mind for a successful billing implementation:
1. Requirement Management — Billing traditionally is managed by the finance team, but looking at billing only as a finance function will not yield the right benefits. Sales needs to be involved because billing plans sometimes play a key role in selecting a policy. The agency management team should be involved because billing and commission management influence the choice of carrier by independent agents. Underwriting and the actuarial team should be involved to understand the kinds of fees and costs that will affect the overall revenue collected under the policy. We recommend an internal survey before starting the implementation of billing changes.
2. Billing Configuration — Modern billing systems provide flexibility of configuration. However, carriers must understand the complexity that comes with configuring an application with too many payment plans. They also need to understand the downstream problems of defining too many receivables. Carriers should plan for all transactions, like endorsements (and the impact of these endorsements on future revenue) and reinstatement (ensuring that invoices are restored and past premium collected).
3. Exceptions and Customization — Every insurance company wants to customize the business rules and functionality to maintain its unique characteristics. Depending on the application, some business rules can be configured for easy exception (by line of business, state, agent, etc.). Some may require customization in code. It is important that insurance companies take appropriate decisions related to the benefits of customization vs the cost of maintaining those changes. The more they customize the code, the harder it will be to upgrade the system.
4. Accounting and Reconciliation — The billing system receives premium from the policy administration and servicing (PAS). The premium is subsequently broken down to receivables and installments. The payments received by the customers are used to settle bills. All these transactions are posted as double entry in the accounting module. Carriers should invest time to understand the various transactions and tie the account back to invoicing and payments. Carriers should also work with partners to create a good reconciliation application to ensure that all financial transactions tie back and have an audit trail.
5. Reports — Billing manages the receivables and payments from the point when the policy is sold, but multiple activities can happen during the lifecycle, like delayed payments, write-offs or suspense money. So, management needs to design reports on top of the billing system, which can help reduce financial leakage.
6. Integration — Billing implementation involves limited but very important and complex integration points. While most applications are within the control of the carrier, it is important to involve external parties like payment gateways and banks right from the beginning of the implementation.
7. Payments Options and Notification — Customers today are looking for multiple payment options from insurance companies. While traditional options like direct debit and check/lockbox are still quite popular, customer preference is changing toward quick online payment options through payment gateways via web/mobile.
See also: What Makes Insurance Invoicing Different
Customers' satisfaction soars when they are promptly notified about payments in advance and also when they have missed the payments. Defining the right delinquency process reduces the lapsing of policies.
8. Commissions — If agents are not happy, the insurance company suffers, and many complaints relate to commissions. While implementing a billing system, carriers should ensure that commission statements are generated on time and that commissions are paid promptly for direct bills. Carriers should also ensure that they provide for prompt resolution of discrepancies.
9. Testing — Billing is a series of transactions that happen over time, but most insurance billing applications do not cover enough scenarios, which can lead to bugs in the production environment. Testing should be one of the most important pieces of your billing system implementation.
10. Migration — Migrations of billing data can become tricky depending on the quality of data in the historical system. Carriers can adopt a strategy of: a) rollover runoff on renewal, b) open book migration or c) full migration. Carriers should decide early so they can estimate cost and implementation time accurately.
11. Change Management — Many organizational transformations fail because management doesn't get enough buy-in from stakeholders. Insurance companies should develop a comprehensive change management plan, involving internal teams like operations, sales, call center and finance, as well as the vendors of the IT systems that will interface with the billing system. Carriers should also set up a plan for communicating with agents and customers about the changes they will encounter.
Conclusion: Billing applications are transaction-heavy and should be carefully discussed and analyzed. Implementation should include in-depth analysis of all scenarios. An up-front investment in detailing requirements can reduce production support challenges.