How Digital Insurance Payments Can Transform and Optimize Your Business
- The insurance industry is known for its conservative outlook and hesitation to embrace digital transformation. But focusing on customer touchpoints such as billing and payment processes and utilizing insurtech is a key strategy to stay competitive, enhance the customer experience, and create immediate impact.
- The reasons for adopting digital insurance payment methods are to provide fast, easy, convenient payment options, increase time/cost savings and reduce error, offer contactless payment options, and increase sales, customer loyalty and wallet share by enhancing customer experience.
- When partnering with a technology provider, points to focus on are insurance industry experience, integration cost and fees, and security compliance.
- Customers expect fast, convenient, and easily accessible digital payment options. Adopting and prioritizing digital insurance payments for one’s business is moving in the right direction.
Insurance is an industry well-known for being traditional and methodical, yet is enmeshed in real-life issues in an ever-changing, dynamic environment. The insurance industry has been slow to take the technological leap for many reasons. Some key reasons are strict regulations in the market, being shackled to legacy systems, and available working capital.
According to the research article Digital Disruption in Insurance: Cutting through the noise by McKinsey
“Regulation, product complexity, and insurers’ large balance sheets have kept digital attackers from insurers’ gates. That is changing, but in ways incumbents should embrace. They can flourish in the digital age – if they move swiftly and decisively.”
While the strict regulatory environment is unlikely to change, companies must move forward with strategic investment in digital transformation. Incumbents may have the advantage of more substantial working capital to bring about overall transformation, but newcomers can focus on customer touchpoints that can advance to the digital stage. The insurtech explosion is only burning stronger and faster with investments in the billions pouring in. Adopting these innovations for carriers should happen sooner rather than later, to remain relevant and competitive in today's market.
Why adopt digital insurance payments in the current landscape
Payment optimization for customers
It is safe to say that the end consumer not only embraces but expects digital interaction as a matter of course. This expectation of fast, easy, intuitive customer experience comes from their frequent interactions with tech giants Google, Amazon, Facebook, and Apple. Consumers demand that the payment and insurance billing process be seamless, faster, easier, and supported by desktop and mobile devices. One-touch payment processing, ability to pay with ACH, credit and debit cards and an intuitive, easily navigable display are now essential components of an engaging payment experience. There is no better time to revolutionize payment options as digital transactions are soaring in domestic and global markets.
According to ReportLinker.com
“The transaction value of global mobile payments market was USD 3,714.5 billion in 2019, and it is expected to reach a value of USD 12,407.5 billion by 2025, registering a CAGR of 23.8% over the forecast period 2020-2025.”
Digital payments save time and money
Relying on manual payment processes such as cash and checks are time-consuming, costly, and error-prone. The adoption of alternative methods can easily avoid the time spent on mailing, processing, depositing a manual check, and the admin cost and time to log, process, and deposit a check. The more established same-day ACH and Zelle to newcomers Mastercard Send, Visa Direct, and Real-Time Payment (RTP) all process at higher speeds.
However, the speeds may vary with individual payment options. For example, RTP is processed in real-time, but ACH payments may not process until the next day. Even with minor variations in processing time, the cost savings are evident compared to cash or check.
Benefits of moving from manual to digital payment methods from Deloitte AU
Contactless payment options for the current climate
The retail industry was quick to note the need for contactless payment options during the health crisis. In the same vein, insurance companies need to observe and analyze customer behavior and work to provide contactless payment methods. Most people will prefer not to leave home for a non-essential task such as banking if they have the option to perform the same task digitally. The psychological perception of handling cash may linger long after this crisis is over. In the aftermath of this issue, contactless payment options will be considered a basic need and feature for consumers.
Survey of consumers by Financial Brand:
Increase sales by enhancing the customer experience
Customer expectations are heightened by interactions with specific non-insurance industries that are light years ahead in this area. The term "customer experience" is complex and encompasses many minute details, but in the insurance billing and payment sphere, there are certain minimum expectations that need to be met. Customers want quality service options, flexible payment methods, easy access to their accounts, and 24/7 omni-channel support. They also demand digital payment options at a point-of-sale rather than relying on cash or checks.
Payment information needs to be captured and processed on the spot or by phone for down payments/pay-in-full accounts.
Providing these various offerings should result in a seamless payment process that runs like a well-oiled machine.
The payment and billing process is a frequent touchpoint with customers in an otherwise low touch industry. It is a readily available opportunity to boost customer self-satisfaction, which will drive customer loyalty, wallet-share, and the ability to cross-market other products.
Focus points to consider when partnering with a technology provider
Insurance Industry Experience
Digital transformation remains an ongoing process rather than a single event. While focusing on frequent customer touchpoints is a good start in the transformation process, carriers need to partner with the right provider for successful implementation. It is vital to partner with an industry-experienced vendor with popular and widely used software platforms. A vendor with years in the industry will have the necessary knowledge and analytics to understand the company's overall business goals and how to move forward in the right direction.
Integration Costs and Fees
When exploring any new technological integration, the implementation costs, and its subsequent cost of maintenance are significant consideration factors. A digital payment platform should be able to integrate with one's existing system easily, yet also be competitively priced, can satisfy return-on-investment needs, and meets the company's business objectives.
Financially, in the best-case scenario, insurance companies will be able to integrate an insurance payment platform with no setup fee, no account fee, no maintenance fee, and zero-dollar transaction fees to the company to receive payments. With this arrangement, the companies will be able to maximize profit while lowering their cost of operations.
Security and Transparency
While digital payments are faster, easier, and more convenient, it also means collecting and managing large amounts of sensitive customer data. If this data is not secured correctly, it can result in being hacked and utilized for identity theft and fraud, thereby destroying company reputation and hard-won customer loyalty. Any company that deals with customer credit cards are required to be Payment Card Industry Data Security Standard (PCI DSS) compliant. This refers to an audit that closely examines each department of a company that handles and interacts with sensitive data. While getting PCI DSS compliant comes at a hefty cost, achieving compliance prevents damaging non-compliance costs.
Non-compliance could damage the company brand and reputation, and the after-effects could linger on indefinitely. Partnering with a safe, secure provider who will take on the time and cost of maintaining PCI-DSS should be given careful consideration.
Prioritize digital insurance payments
Customer expectation and demand drive the insurance industry forward. Customers have spoken, and they want fast, convenient, and easily accessible digital interactions. Regardless of size, years in the industry, and available capital, companies can begin their digital transformation journey with the focus on improving customer touchpoints. Adopting and prioritizing digital insurance payments for one’s business and partnering with an industry leader are strategic steps in the right direction.
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- Tanguy Catlin, Johannes-Tobias Lorenz, "Digital Disruption in Insurance: Cutting Through the Noise," McKinsey, March 2017
- ReportLinker.com, "Digital Payments Market - Growth, Trends, Forecasts (2020 - 2025)", May 2020
- Deloitte AU, "SME Digital Payments,", 2018
- TheFinancialBrand.com, "How COVID 19 Has Changed Payments and Banking Behaviors Forever", May 2020