In recent years, just like businesses in almost any other industry, insurance companies have been focusing on improving the customer journey. They are increasingly adopting automated systems which help to streamline their service, offering policyholders an efficient, easily navigated and hassle-free journey from point of quote to purchase, to claim and on to renewal.
However, as can often be the case, payments have not been a priority and the solutions adopted by insurance providers have not kept pace with innovation in other areas. The customer and insurance provider already benefit from instant quotes, partly pre-filled application forms, instant fraud-detection and a holistic view of the customer to highlight relevant upsell opportunities. But payments of all types – local or cross border – can be slow and expensive. That is, collection of premiums, first party pay-ins to fund claim pay-outs, and the claim pay-outs themselves – whether direct to consumers or to suppliers such as airlines, vehicle bodyshops, medical facilities, veterinary surgeries or building contractors.
We recently commissioned research to identify the pain points facing the insurance sector in terms of payments reconciliation. The results, published in a new whitepaper, revealed significant opportunities for payment providers willing to step in to serve a new market.
Identifying the problems
The main issue which slows down insurance payments is when problems occur due to the payment reference number – either it is mis-keyed or left out entirely, causing severe delays in reconciliation. The matching rate for receipts is over 90% for 42.5% of the insurance provider respondents to our survey, but more than half have matching rates of between 50% and 90%. This highlights the inefficiencies in the current payment model, which is an ongoing drain on operational and financial resources, and on results.
Collecting premiums without direct debits is another real issue for insurance providers. Whether a direct debit has not been set up and payment not received at the time of renewal, or where the direct debit has failed to take payment, a quarter of insurance providers cited this as a problem they experience.
Insurance providers reported that their current processes are not as efficient as they would like. Just 19% feel their premium collection method is ‘Excellent’, and 53% feel it is ‘Good’. Paying claims is slightly more successful, but still only 28% rated these processes ‘Excellent’ and 50% said they are ‘Good’. Onboarding new partners is currently the least successful area of insurance payments. 40% rated onboarding processes as ‘Good’ and the same percentage rated them ‘Fair’. There is clearly scope for improvement.
In this highly competitive market, such inefficiencies can have significant consequences: a consumer experiencing slow claim settlement can quickly and simply switch to another provider and any loyalty is lost. Insurance providers are recognising that improving efficiencies and reducing the cost of payment management for both reconciliation and pay-outs will undoubtedly improve customer service and loyalty. This is a huge opportunity for insurtechs and payment providers.
It is well-known that payments are not often seen as a priority, and businesses may look at improving their processes only when they identify a major problem. Insurance providers we spoke to for our study have recognised that payments are causing issues and that it is now time to make a change. Their top priority is to implement quick reconciliation of payments and pay-outs. Having a single view of each customer is the next priority, then getting new propositions to market quickly, ensuring payments are transparent and targeting new markets. Payments are increasingly becoming a priority.
Seizing the opportunity
Just like traditional banks, a wealth of legacy systems is holding back insurance providers from updating and improving their payment processes. They do not have the resources to create payment systems in house, and this is where external partners can step in to provide streamlined, efficient solutions, capable of improving the customer experience, thus increasing loyalty and bottom line profitability.
Insurance providers must be able to reconcile with certainty – timeliness and accuracy are prerequisite. While existing automated solutions are incredibly efficient, there is still invariably a need for human intervention. Virtual accounts, such as those provided through Banking Circle Virtual IBAN, almost completely eradicate the need for account reconciliation.
Working with a payment provider able to offer virtual IBAN accounts, insurance providers can issue multi-currency IBAN accounts for partners and clients as well as brokers and intermediaries, in their own name and in multiple jurisdictions, increasing the ease, speed, and clarity of payments. Virtual IBANS can also be used for claims management pay-outs and can improve payments acceptance, settlement times and reconciliation.
Building on the already successful Banking Circle platform, Banking Circle Virtual IBAN completely eradicates the need for account reconciliation. Virtual IBANs enable insurance providers to segregate remittance flows with 100% accuracy due to the directly accessible nature of the virtual account. This means each virtual account can receive funds directly via Bank Transfer without the need for reconciliation via a master account. Virtual IBANS can also be used for claims management pay-outs. Payments are made in the name of the Virtual IBAN, improving payments acceptance, settlement times and reconciliation.
With insurance providers open to working with innovative payment providers, now is the time for payment providers, fintechs and insurtechs to step in and provide the necessary solutions to help insurance companies to stay ahead in a highly competitive market.