The insurance community is well-versed in the industry’s modernization challenges of the past decade. More and more, we hear stories of carriers that have succeeded by acting fast, liberating themselves from the confines of outdated systems, paper and pencil and other manual processes. We’ve seen this across claims, underwriting, distribution and more. Many core insurance functions are well on the way to keeping pace with the modern consumer.
Payment is next in line.
Unfortunately, it is far from keeping pace with evolving consumer preference. According to a recent research study, 40% of insurers fail to provide the payment options that customers prefer. In many cases, insurers are ignoring the elephant in the room.
It is time for change.
Customers have a wide-ranging preference for payment choice.
There are a few major factors at play here: how consumers prefer to buy insurance, how they prefer to pay for it and how they prefer to receive disbursement--and those preferences change from household to household, from state to state and from country to country. Insurers must sell, collect and disburse to digitally native teens all the way through to older generations who grew up on cash and check. This means a combination of apps, calls, websites, direct mail, in-person and more. On top of that, varying degrees of speed and security required for each individual collection or disbursement, as well.
This is fluid and evolving in real time. For example, a Duck Creek Technologies Global Consumer Insurance Insights Survey revealed that 52% of consumers felt that buying insurance through an app represented the most secure method, up from just 13% in 2022. That’s a big change.
Within North American respondents, more than 50% said they are interested in insurance on-demand for short-term rentals. So, the digital movement is well upon us for a growing segment of insurance’s customer base.
See also: What Makes Insurance Invoicing Different
A diverse customer base demands diversity in payment and disbursement options.
Leveraging and connecting to payment services can be a stumbling block for insurers.
If insurers want to have skin in the game, it’s not enough to offer delightful selling experiences and making insurance easy to buy – it must be just as easy, secure and confidence-inspiring to pay or disburse, or customers face a nightmare.
According to EY, Gen Z leads the way in adopting digital payment methods, preferring quick and easy payment experiences while being less concerned about data and privacy. Furthermore, insurance claim disbursement studies showed that more than 80% of consumers would like to work with organizations that offer quicker disbursement through push-to-card. And when it comes to customer satisfaction, more than 50% of claimants say missed expectations were the result of settlement payments taking longer than they thought they should have.
That said, it would be a mistake to assume speed rules over all decision making. Because on the other end of the spectrum lie consumers who want a more reliable (whether perceived or true) way to pay or receive disbursement as opposed to in real time. One study found that consumers’ concerns include the fear of funds being deposited into the wrong account (34%), followed by the security of funds, lack of trust in certain payment service providers and the potential for high fees. The result? A third of customers state a preference to not pay extra for or choose the speed of real-time payments.
Moral of the story: Customers expect (and rightly so) carriers to do it all.
Consumers want to be able to select their payment or disbursement option and have it delivered with speed while also ensuring the security of funds. As the world around us moves, insurers need to be nimble enough to follow where consumer preferences go.
In today’s cloud-driven insurance technology ecosystem, they can, and they should.
Carriers DO NOT have to go at this alone.
Good news. This task doesn’t have to be daunting. Payment technology providers are entering the insurance space quickly.
Connecting to payment services has historically been time-consuming and resource-intensive. This meant choice was often limited in favor of simplicity -- and insurers were not maximizing the potential the payments ecosystem had to offer. By leveraging cloud-based payments platforms, carriers will find a faster, simpler, more secure means to offer payment choice.
Regardless of current IT infrastructure, carriers can quickly and easily connect to the banks, payment technology and payment service providers that their customer base, finance team or geographic compliance demands. Better yet, integrations can take place in minutes, not months.
If not for consumers, carriers should modernize payments for themselves.
Insurers should also look internally to uncover the benefits of payments technology. In talking with carriers, we see the gaps in payment capabilities seeping into the operational side of the business, as well. Payment complexity trickles into finance, reporting and reconciliation efforts when data is ununified, when formats are unstandardized and when rules for different geographies are unaccounted for. Not only is this confusing, but it is time-consuming and risky, which often leads to financial leak, and the leak can be costly.
Organizational drivers within insurance include regulation/compliance, operations, growth and innovation. When things get tight, cuts start. Every financial challenge or mismanaged fund or leaked dollar is opportunity lost to innovate for customers and grow the business.
On top of the obvious loss of funds, plugging holes in payment workflows is expensive. Time lost for finance and IT teams, dollars lost for having to reissue or redo transactions, delays from not collecting on time... and the list goes on. As imperative as it is to meet consumers where they are, the benefits for carrier workflows are arguably even greater.
See also: Enhancing Claims Via Digital Payouts
Where do we end up?
Carriers want simplified control, visibility and compliance. Consumers want choice, convenience and comfort. Can both sets of goals be met? Yes, and that’s why you’re seeing payment technology penetrate the insurance technology ecosystem.
It’s time to address the elephant in the room.
