While digital payment experiences are common across most business sectors, the insurance industry continues to lag in terms of adoption. Yet there is an evolving reality that today’s C-suite needs to acknowledge: The era of real-time payment has arrived.
Consider recent findings that suggest 42% of consumers would be more likely to stay with an insurance provider that pays approved claims within minutes and that the majority of policyholders would change carriers to gain access to real-time payment. These expectations are especially shared by younger generations—age groups that are more accustomed to digital frameworks and rapid access to funds than their older counter parts. Yet, a recent VPay and Engine Insights survey found that 60% of consumers were still receiving claim payment by paper check.
Consumer expectations are an important part of the digital transformation equation, but there is so much more to the story. Today’s insurers, who must achieve economies of scale to remain competitive, stand to benefit in significant ways by adopting and expanding digital payment portfolios. Executives who have the foresight to “think big” and thoughtfully adopt comprehensive short- and long-term strategies can transform the claim experience while streamlining operations and positioning for future success.
The What-If of Thinking Big
While many insurers have made initial entry into the digital payment space through automated clearinghouse (ACH), most strategies fall short of realizing digital payment’s full potential. Moreover, some companies are still dealing primarily in paper.
The unfortunate reality is that most insurers are leaving money on the table when they cling to paper-based payment. For those companies willing to look at the bigger picture of a comprehensive digital payment strategy, opportunities exist that may not have previously been considered.
- a self-insured auto fleet could reduce car rental by days?
- a workers’ comp payer could digitize 40-55% of all service provider payments – OR – digitize 60-75% of all payments to injured workers?
- a property insurer could deliver same-day payment following a disaster?
- an auto insurer could implement a mobile workflow that handles both B2C and B2B payment?
Today’s insurers are laser-focused on reducing cycle times to improve operational efficiencies and net promoter scores. Yet many have not designed a strategy that addresses the holy grail of a digital claim payment strategy: turning a cost center into a revenue center. By eliminating print/mail costs, reducing treasury fees and management as well as reconciliation times, insurers realize net positive results—equating to savings of 1M or more each year.
First Steps to a Better Digital Payment Strategy
There is much to consider when devising a forward-thinking short- and long-term digital payment strategy. Those companies that already implemented digital payment pre-pandemic can attest to the fact that the time and resource commitment is now paying dividends as digital claim processes were—and remain—a key differentiator for business continuity.
Resource-strapped insurance companies that are overwhelmed by the “how to” of digitizing the claims process are wise to focus on specific areas where solutions can be implemented, executed and begin delivering benefits quickly.
First, insurers must look beyond ACH to identify what other payment types would best round out their portfolio of options. Choice is increasingly important to consumers, as illustrated by the recent VPay and Engine Insights survey findings, where 82% of policyholders said the ability to personalize payment experiences and choose a preferred model is an important factor impacting satisfaction. Solutions such as push-to-debit, virtual card and mobile payment options can complement ACH by more fully digitizing claim operations and speeding payment to businesses and consumers.
As part of a digital payment strategy, insurers will need to consider how to manage and store digital data as well as protect it. Notably, the National Automated Clearing House Automation (Nacha) implemented new data security requirements to better protect storage of bank account information—recognizing that greater use of ACH also increases the potential for cybersecurity incidents. Expectations are that increased regulation related to data protection of emerging digital payment infrastructures will also follow.
An April 2020 Celent survey found that two forces were working in tandem: Insurers are accelerating digital transformation while simultaneously outsourcing non-strategic activities, such as digital payment.
Navigating the complexities of effective digital payment adoption requires a level of expertise and resources that many insurers lack—overseeing enrollment, complying with regulatory requirements, managing policyholder experience and securing information to name a few. Consequently, the business case for engaging a third-party fintech partner is often an easy one to make.
As the insurance industry closes the door on 2020 and rounds the corner into a new year, it’s important to prepare for the next phase of growth. A distinct competitive advantage can be found in the right digital payment strategy—one that addresses the current market climate while also laying the groundwork for the future. “Think big, but start smart” should be the mantra for today’s C-suite as they take hold of the advantages of sound digital claim payment strategies.