During COVID-19 lockdowns and other related challenges, many insurers began realizing the more urgent need to automate parts of their businesses to increase efficiencies and profitability. In fact, one such function that has received intense focus is transforming manual billing systems to digital payment platforms.
While the pandemic was not the sole catalyst that kickstarted the need to automate or digitize, it surely helped advance it. Last year, KPMG’s annual CEO Outlook Survey found that 85 percent of insurance CEOs said COVID accelerated the digitization of their operations. It also noted that 78 percent ramped up the creation of a seamless digital customer experience. As such, more are moving to automated, easy-to-use digital payment platforms to provide customers with greater convenience and options.
Why should insurers digitize claims payments?
Payments form a part of a customer’s perception about their insurance provider. While preference for electronic payments is up considerably over the past five years, the use of physical checks is only down 10 percent during the same period. Nonetheless, by incorporating digital payment offerings, insurers can meet customer demand for faster payments, improve claimant experience by providing payment disbursement choice and remain competitive.
According to a PYMNTS.com study, customers value choice and speed when receiving payments. For example, 73 percent of those surveyed want and demand choice in how they get paid, and nearly 72 percent said payment speed was important when receiving disbursements. Moreover, 74 percent of customers wanted their funds immediately available and safe to spend.
While most insurers understand the advantages of convenient electronic payments and a sleek digital experience for customers, few have transformed their operations to meet these goals. Hesitation stems from the cost and effort to convert paper processes and legacy systems. In addition, insurers are inherently risk-averse, placing innovation lower on their priority lists. Thus, adoption remains slow when checks, for example, still form the backbone of claims payments for many insurers.
PYMNTS.com found that more than half of all claims payments occur via paper check, and just 1 in 10 claims payments take advantage of instant electronic payment methods that deposit funds directly to a bank account, credit card or digital wallet.
However, the case for creating more robust digital payment platforms remains strong, especially when accounting for how the pandemic forced many insurers to abandon longstanding manual business practices overnight. For many executives, it was a resounding wake-up call. Policyholders also shared in the frustration when unable to retrieve timely check payments or make physical trips to their bank for deposit.
To that end, the opportunity exists, now more than ever, to implement frictionless, secure and prompt payment technologies to claimants. To implement a digital payment program in a compliant and easily accepted manner, insurers should consider the following six capabilities:
- Payment anytime, anywhere.
Let claimants take control over payment methods that meet their needs, circumstance and comfort level. Insurers can improve customer satisfaction with increased payment choices and speed without collecting claimants’ sensitive banking information or sacrificing security.
- Payment notifications for claimants and third parties.
Develop customizable notifications with definitive payments that include clear communications to improve claimants’ experiences.
- Documentation and compliance.
Accompany payments with detailed claim documentation and explanation to provide claimants with critical context—in a centralized location (i.e., an online platform).
- Multiple payment methodologies.
Provide a flexible, innovative payment exchange, with multiple payment options, to meet claimants’ diverse preferences and needs. While new payment options will improve customer experience, it is important the upgrades do not adversely impact insurers’ mission-critical core systems/operations.
- Prebuilt integrations with modern claims systems.
Consider the benefit of applying a prebuilt integration system to shorten development times and expedite the implementation process. It provides a win/win situation for the carrier, as project risks and timelines are reduced.
- Preparing for new payment innovations.
Select a proven innovator for your payment provider partnership that ensures access to new payment options and emerging technologies that enhance customer satisfaction and business efficiencies. Insurers’ partners should also benchmark the platform’s set-up and performance against industry best practices, stay current with all regulatory changes and account for constantly evolving cyber threats, such as ransomware.
In sum, COVID serves as a stark reminder that an overreliance on manual processes (including payments) can bring insurers’ operations to a halt. With the threat of COVID variants and other potential business challenges on the horizon, now is the time for insurers to transform antiquated payments systems into highly automated, efficient operational infrastructure to remain competitive and keep customers satisfied.