When disaster hits, access to cash is critical. While there are many reasons the insurance industry should move toward real-time claim payment models, it is in the arena of calamity where the greatest urgency exists.
Insurers recognize the difficulties people face during such unexpected events as a home fire or natural catastrophes such as floods, hurricanes and tornadoes. They help people navigate these challenges daily. Yet, the following anecdotal example is still an all-too-common experience for today’s policyholders:
A family is out of town, and an electrical mishap causes a fire in the home while they are away. By the time neighbors realize what is happening, the fire has progressed and destroys nearly everything the family owns. Upon return, the family must immediately secure housing and attend to physical needs such as clothes, food, and daily living supplies—not to mention the emotional trauma individual family members may be experiencing. Then, when they contact their insurance company, they learn it will take several days for an adjuster to visit the site and review their claim. After the assessment, it may take weeks to receive payment. Because the family is cash poor, they are forced to use credit cards and take out loans for expenses.
In a digital age, consumers expect better. A recent Engine Insights and VPay survey underscores these expectations: More than half of respondents said they would be willing to switch insurers to gain access to instant claim payment, including more than 90% of Gen Z and 68% of millennials. It’s why some leading insurers have already stepped up their approach by simplifying processes to require only a debit card and email address or mobile number for text to receive funds transfer within hours. In addition, technological advancement in the form of drones is emerging as a viable method for quickly determining preliminary damage estimates and initiating cash transfers quickly. Simply put, the era of real-time claim payment for disaster claims is inching ever closer.
These movements represent good steps forward, yet research suggests that most insurers’ approaches to digital payment—including payment for disaster claims—are still lacking. The J.D. Power 2018 Insurance Digital Experience Study found that while policyholders want more digital touchpoints with their insurers, the majority fell short, especially in the area of claim processing. Automating claim payment processing is a necessary element of digital claim transformation.
The last experience a policyholder has with an insurer is the one they will remember most. For this reason, the last mile of claim processing—payment—is a critical component of strategies aimed at improving policyholder retention and satisfaction. This becomes even more important when disaster strikes and policyholders need cash quickly to get their lives back on track. Here are three key considerations for modernizing claim payment offerings and developing a more immediate approach to disaster response.
- Offer more digital touchpoints and payment options.
The landscape of digital payment technology is rapidly evolving, and consumers increasingly expect access to a variety of options. From automated clearinghouse (ACH) payment to push-to-debit and mobile epayment, insurers are wise to consider strategies that draw on the advantages of multiple electronic claim processing offerings to expand their portfolios.
For example, ACH transactions, while popular, may delay payment for a couple of days and require that consumers provide bank account information. In contrast, mobile epayments are much faster, on average, with payment processed at the point of transaction and sent directly to a consumer’s bank account. Push-to-debit, which takes about 15 minutes or less, also ensures expedited claim payment through same-day electronic disbursement.
In addition, allowing policyholders to process claims from any mobile device following a disaster is essential, as they may lack access to other options for communication. Knowing the status of a claim in real-time can also go a long way toward giving consumers peace of mind during a crisis.
- Personalize the payment experience.
A bird’s eye view of insurance industry trends confirms that policyholders want to receive their claim payments faster, especially when faced with a crisis. In tandem with this expectation, though, consumers also want personalized experiences and control over how they receive their money. Consequently, insurers must recognize the importance of building trust through choice and acknowledge that payment preferences may vary greatly across generations.
When funds are available for distribution, a personalized payment experience allows policyholders or service providers to select their preferred form of payment, whether it’s a digital offering or paper check. With a text or email alert, consumers can quickly indicate their preferences, which can be applied to the current payment as well as all future disbursements, if desired.
- Optimize security strategies.
When it comes to electronic payment, insurers are well aware of the risks. Nearly half of insurers dealt with significant cybersecurity events in 2017, and the sophistication of bad actors is growing by the day.
When faced with a crisis, the last thing policyholders need to worry about is whether their personal or bank account information is compromised. Insurers should design comprehensive cybersecurity strategies that consider people, processes and infrastructure. It’s a tall order for today’s lean insurance environments, and many find that the business case for engaging third-party fintech partners is an easy one to make. Companies that focus all their energy on the payment process have the expertise to not only streamline administration of payment, but also optimally protect data.
Innovation in Times of Need
The age of consumerism has infiltrated the insurance industry in recent years, and few situations bring heightened expectations around payment to the surface more than a crisis. Outdated claim payment methods result in highly-fragmented policyholder experiences and low satisfaction. Forward-looking insurers are taking hold of the promise of innovative digital payment technologies to respond to consumer demands and improve claim payment processes when disaster strikes.