COVID-19 has moved digitization to the forefront, and property and casualty (P&C) insurance is no exception. Insurers are looking to protect employees, answer policyholder demands for improved payment experiences, and reduce costs. To do so, they are turning to push-to-card solutions as a way to offer a new level of flexibility and speed to insurance payouts.
To learn more about the P&C space and why the time for digital transformation is now, PaymentsJournal sat down with Silvana Hernandez, SVP of Mastercard Send, North America at Mastercard and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.
Register for the upcoming webinar, Transforming Property & Casualty (P&C) Insurance Claims, for a more in-depth discussion.
Debit push payments are gaining traction for insurance payments
Faster payments in the market are gaining traction in the U.S. across a slew of industries. The markets seeing the most success are those that have benefits for multiple players during the payments experience.
“One of the most successful use cases that we’re starting to see are insurance payments,” noted Grotta. Insurance companies still largely rely on checks, but there is now traction toward debit push payments. Push payments are a significant improvement for both insurance companies themselves and their clients.
Grotta attributed insurers’ move to debit push payments to four key reasons:
- They provide a better customer experience.
- They can be dispersed to a broader range of consumers.
- They offer cost savings over non-digital payment forms.
- They enable a quicker resolution of insurance claims.
In the COVID-19 era, consumers want peace of mind…
Consumers have had to rethink their behavior across nearly every aspect of their lives. “The pandemic has impacted the way we work, the way we dine, the way we go to school, the way we go to the doctor, and the way we interact,” said Hernandez.
“When it comes to payments, consumers have had to really quickly move to methods of paying and being paid that make them feel safe and allow them to observe social distancing and shelter-in-place measures,” she added. What people want more than anything is peace of mind during these unprecedented times.
COVID-19 has also brought economic uncertainty to consumers across the globe. As a result, cash flow management, access to cash, and the ability to receive payments instantly have become even more crucial than before.
…Further legitimizing the necessary shift away from manual processes
The insurance industry still relies heavily on manual and paper-based processes, methods that become difficult and counterproductive to execute in situations like COVID-19. Mailing checks, shipping delays, and unreachable recipients become barriers when paper checks are the only option.
Digital, near real-time push-to-card disbursements are essential in a world where people need easier and faster access to their money anytime, anywhere. When navigating COVID-19 and other natural disasters, having real-time push-to-card payments can make a huge difference in time, security, operating costs, and customer satisfaction.
An overview of the property & casualty insurance market
Property & casualty insurance, a broad and growing category that represents around one-third of premiums in the insurance market, protects and covers what people own. “It includes personal lines, like car insurance, home insurance, or even travel, but it also includes commercial aspects,” explained Hernandez. This includes “property insurance for small businesses or workers, workers’ compensation, business continuity, and certainly professional lines, like malpractice and coverage for directors and officers.”
Processing costs account for 28.5% of operating costs in the P&C sector. Just like other areas of the insurance industry, P&C still heavily relies on inefficient non-electronic payments. A recent survey by Mastercard partner VPay found that among surveyed consumers, 60% reported receiving their last claim payment by check.
The survey also found that 50% of those consumers had to wait three or more days to access their money. These experiences are no longer acceptable in a world where consumers are surrounded by convenient, immediate digital experiences. It is apparent that it’s time for the P&C insurance vertical to embrace digital transformation.
How P&C companies benefit from a digital transformation
Even insurance companies that have been slow to adopt digital processes are now beginning to embrace them. This is partially due to sheer necessity. Insurers who relied on in-office employees to print and mail physical checks before COVID-19 were negatively impacted during shelter-in-place orders. Insurance companies with real-time digital payment capabilities, however, could provide policyholders with their funds whether their employees were in-office or remote.
There are also other compelling advantages of going digital. “The insurance companies that go through these [digital] transformations are going to see not only better consumer satisfaction and more loyalty—which are important—but will also see cost efficiencies that will allow them to better navigate the economic uncertainty and challenges,” said Hernandez. Further, digital payments enable improved security measures like tokenization as well as easier access to and usage of data.
Beyond operational advantages, digital transformation helps insurers keep up with consumer demands and remain competitive. Another VPay study found that more than 80% of survey respondents said that ease and convenience of claim payment, speed of payment, and quick funds accessibility are all factors that impact their satisfaction with their insurer. In fact, 90% of Gen Z and 68% of millennial respondents said they are willing to switch insurers to gain access to instant insurance claim payments.
Near real-time push-to-card payments meet consumer expectations
Push-to-card payments via a mobile platform are a clear opportunity for P&C insurance companies to improve their claim processes times, reduce costs, improve operational efficiencies, and better serve customers. Mastercard Send, Mastercard’s push-to-card solution, is one avenue that interested companies can take to do so.
Mastercard Send “allows an insurance company to be able to send funds to any debit card in the U.S., consumer or small business, and deliver those funds in real time,” explained Hernandez. Mastercard Send has already partnered with VPay to modernize payment solutions by eliminating the significant costs of issuing claim checks and transforming the customer experience.
“Another winner in this process would be debit card issuers,” said Grotta. “Financial institutions are going to want to ensure that their consumers and businesses have debit cards not just for typical payment transactions, but also to ensure that they’re able to receive these types of payments.” Hernandez agreed, adding that issuers have already done the work to enable their cards to receive such payments. With the infrastructure in place by issuers, it’s insurers’ turn to take action.
COVID-19 is the tip of the iceberg when it comes to opportunities for near real-time payments and push payments, which can transform industries like P&C insurance.
On October 29, 2020 at 1 PM ET, PaymentsJournal will be hosting a webinar featuring speakers from Mastercard Send, VPay, and Mercator Advisory Group. During the webinar, the speakers will have an in-depth discussion on the insurance claims payment ecosystem and the benefits of push-to-card payments in the P&C insurance space.