The insurance space needs more payment options
When a natural disaster strikes, today's insureds expect immediate fund disbursements.
In 2018, more than 1.2M people were displaced by natural disasters.
Large natural disasters such as fires, hurricanes or flooding, sadly, can destroy entire communities, leaving many without a home or mailbox to call their own. These are the times that policyholders look to their insurance providers for immediate assistance and where insurance providers can create significant customer satisfaction and loyalty by their ability to instantly deliver funds to customers in their true moment of need.
Depending on the type of natural disaster and where policyholders have been evacuated to, it may not be possible for insurers to have agents in the field to print checks or provide prepaid cards. Automated Clearing House (ACH), such as direct deposit or electronic check, is a low-cost option to deliver funds electronically. But it can take one to two business days for the funds to be available in recipients’ accounts, and that’s only when policyholders remember to grab their checkbook as they are evacuating.
On-demand expectations
Even when a claim is not associated with a significant loss, many consumers and policyholders perceive that when they make payments, they’re made in real-time. There’s a growing expectation that when funds are owed to consumers, they should be made available immediately. In fact, consumers can become frustrated waiting for checks in the mail, which reduces customer satisfaction and leads to potential churn.
As a result, instant, real-time disbursements, which can deliver money to policyholders faster and straight to their mobile device, have seen phenomenal growth, quadrupling in the last three years. Push-to-Debit (Visa Direct, MasterCard Send), Zelle, PayPal, Venmo and The Clearing House’s real-time credit push are just some of the many instant, real-time disbursement methods that corporations are using to fund consumers and small business.
While this might seem like an overwhelming number of options, 73% of consumers want choice when it comes to payment options. However, 52 million consumers are still getting paid out via a check and 38 million receive cash. This highlights the need for more payment options in the insurance space.
Shifting financial landscape
In the case of the younger generations, policyholders may not even own a checkbook. More than half of consumers choose to use their debit card above other payment methods, according to Visa Debit Tracking Research 2017. So they’ll likely have it (either in physical or digital form) with them at the time of an evacuation.
It’s clear where consumers stand: 9.2 million of them say they would opt for push-to-debit if it was an option. This allows funds to be available in the recipient’s checking account in less than 30 minutes from authorization, and in many cases in as little as a few seconds. Several instant funding methods including Zelle and PayPal support alias-based (social) tokens such as email address or mobile number, which can be utilized to support real-time disbursements.
Instant, real-time disbursement can increase customer satisfaction by increasing net promoter score (NPS) and improved customer retention. In fact, 74% of consumers want immediate funding. The average cost per check (including the price of the check and shipping, plus the time employees spend writing, mailing, collecting and reconciling the check) is $6, so there are benefits from paper check cost reductions that go far beyond just the cost of printing the check.
Checks pose other disadvantages, including the inconvenience associated with the stopping and reissuing of checks, multiple customer contacts (for e.g. when a consumer hasn’t received a check they were expecting) and escheatment expenses, just to name a few.
As instant and digital payments become a mainstay in consumers’ lives, sending out disbursements to consumers within several days is no longer acceptable. And in a situation where a consumer may be displaced due to a natural disaster, these expectations will be non-negotiable from the consumer’s perspective.
As director of product management at ACI Worldwide, Mahala Johnson (mahala.johnson@aciworldwide.com) leads product strategy for real-time payments and disbursements, and drives innovation for billing and payment solutions. She has 20 years of product management experience in the financial services industry.
These opinions are the author’s own.
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