Paper or plastic? Changing the way carriers pay
Digital claims payments are saving insurers money and letting payees receive their money faster.
No one likes to wait for payment when they’re owed money — not vendors, insurers or policyholders. A new report from the Aite Group, Checking Out: Emerging Digital Innovations in P&C Claim Payments, finds that technology is giving insurers more options to make digital claims payments, and policyholders are embracing the change.
Today’s consumers are familiar with using their cellphones to purchase insurance, file the first notice of loss, provide details to their insurance company and follow their loss through the claims process. It seems only natural that they would expect a digital payment process. According to the Aite study, 70% of consumers would or definitely would select an instant payment option for their insurance claims payments. They like the convenience and expedited payment process, and they believe that instant payments are a safe way to receive their funds.
“The popularity of digital payment tools like Venmo, Square and others has shown that policyholders want to have a seamless digital experience when both making and receiving payments,” shares Jeffrey Brown, president of VPay.
For insurers, the report identifies some issues that might be enough to dissuade them from considering the use of electronic payments. First is the exposure of personally identifiable information, which could be compromised in the event of a cyberattack on their systems. Second, carriers may be concerned about processing large payments digitally or having to make multiple payments for a complex claim. Third, carriers could be concerned about making the payments through different software systems, but since the digital payments are made by a financial institution to a payee, communication with a bank on payment instructions should not be an issue.
“Gauging comparability between paper checks and digital payments is not an exact science, but the directional comparisons are pretty clear — when it comes to immediacy, operational efficiency, and perhaps most importantly, choice, digital payments are far superior to paper checks,” says Jay Sarzen, senior analyst at Aite Group in a press release.
Instead of sending physical checks or having an adjuster cut an actual check and deliver it to a payee, electronic payments are saving insurers time and money while building goodwill with policyholders who don’t have to wait for their checks to arrive and then deposit them into the bank. Once payments are approved, they can be in a payee’s account the same day.
“By providing digital claim payments to policyholders, insurers can increase customer satisfaction while decreasing payment and administrative costs,” adds Brown. “In fact, it can cost 10 times more to send a paper check than to make an epayment.”
The Travelers Companies recently announced that its auto, property and general liability customers can now receive payments through PayPal, which provides a quick and seamless payment process.
“The sooner our claimants are paid, the sooner they can recover from a loss and get their lives back to normal — PayPal will help make that happen as quickly as possible,” explains Ellen Rizzo, senior vice president of claims at Travelers. “This is the natural evolution of our claim payment processes, and it is one more way we’re making the entire claim experience easier.”
Using the PayPal platform allows the creation of a digital wallet to make it easier to move money in and out of the account. It can be used for purchases anywhere that PayPal is accepted and money can be deposited into the account on the same day it is issued by Travelers.
Brown advises that “when implementing a digital claim payment system, it’s important for insurers to offer a personalized approach by providing a variety of ways for policyholders to receive payments such as automated clearinghouse (ACH), push-to-debit or check. This same system can be used to pay service providers as well.”
One thing to keep in mind when making the transition to digital payments is the importance of partnering with an experienced fintech provider. “This can help offset the regulatory and security challenges insurers face when it comes to digital claim payments,” explains Brown. “Insurers should check for credentials like Payment Card Industry (PCI) Security Standards certification, Service Organization Control (SOC) 1 and 2 compliance and Nacha certification. There’s a lot to consider when it comes to digital claim payments, but the benefits are worth the time invested when you choose the right solution.”
Just like many other aspects of the claims process are changing due to technological advancements, how insurers pay claims will be evolving as well.
Related: What to consider when picking a digital claim-payment partner