The insurance industry continues to aggressively pursue digital transformation and customer experience optimization but is still overlooking some of the fundamentals. This is exemplified by payments, which remain fragmented and needlessly complicated.
A key goal of digital transformation is to provide customers with streamlined, consistent user experiences. PYMNTS, a data, news and insights firm, reported that 67% of insurance carriers view digitizing payments as an important part of their digital upgrade plans. Yet large brokers and insurance carriers may have upwards of 40 payment providers with potentially hundreds of payment contracts—each with different reporting, pricing, capabilities and accounting interfaces. While this creates a challenging environment, improving this part of the business doesn’t require a significant investment.
Whether you’re a carrier, broker, MGA or just about any entity in the insurance ecosystem that accepts and makes payments, it’s important to prioritize your payments strategy and create a unified experience to better meet the needs of customers and internal teams.
Domain Expertise Is Key
Why have payments in insurance become so fragmented and inefficient? There are hundreds of payment providers, but very few have the insurance domain expertise and offer the services to adequately serve a complex, regulatory-heavy B2B2C industry like insurance. Oftentimes, they only provide an application programming interface (API), forcing carriers or brokers to build workflows or other capabilities on their own and take on the responsibility of maintaining highly customized integrations and interfaces. Further, some payment processors enlist third parties to underwrite transactions, which can lead to clunky customer experiences like having to re-enter credit card information and navigate multiple screens. Or, some brokers might rely on multiple payment processors, each offering different ways to accept premium payments.
For these reasons, it’s crucial to work with payment providers that have a deep understanding of insurance management systems and offer core technology and services such as payments underwriting, credit approvals, fraud prevention, administration and policyholder support.
On the operations side, insurance companies using multiple payment providers and workflows invite inconsistent pricing and reporting. For example, agency branches with different payment processors will pay varying fees for the same type of transaction. In other cases, outsourced billing firms have software on the front end but humans performing manual invoicing on the back end, which leads to higher transaction overhead.
Consolidating payment processing helps standardize the workflow, the reporting and the costs. Of those surveyed in the PYMNTS report, 64% say those upgrade plans are motivated by their desire to be less dependent on paper checks, and 53% are looking to reduce their internal expenses. And the cost savings can be staggering. Bank of America has estimated that paper checks can cost approximately $4 to $20 per check based on the check price and postage, which doesn’t even take into account the labor costs of writing, mailing, collecting and reconciling the check, not to mention the increased exposure to fraud.
See also: Using Payments to Improve the CX
Customer Experience and the Bottom Line
In general, customer experience drives retention, new and expanded business and Net Promoter Scores, but when it comes to payments, the customer experience can also accelerate (or impede) cashflow. For an insurer, money that gets in the door faster will be invested faster. A complex digital payment experience can result in delay or abandonment of the process, as questions get answered or as the policyholder regresses back to sending a paper check. These are outcomes that not only delay the payment but add cost.
Digital insurance payments are a key part of the customer experience and yet often get overlooked. Nothing will change if payments are viewed as “checking off a box” rather than a critical component of the business that demands oversight and strategy. Many insurers and brokers are stuck in the first phase of digital payments, where the market had forced its adoption. Now it’s time to enter the next phase, where insurance organizations become more adept at managing their payments, and, as a result, reduce costs, streamline operations, improve cashflow and provide a seamless experience to customers.