Modernizing the Insurance Claim Experience with Digital Payments

The insurance industry is rapidly recognizing the need for a digital transformation of the claims process. However, significant opportunities for innovation remain, especially in integrating payment processes.  

In an SMA survey, only 37% of commercial carriers and 32% of personal lines carriers included payments in their digital transformation plans.¹ 

Clearly, there is cause for improvement. The claims experience represents a vital 'moment of truth' for policyholders, directly influencing customer satisfaction and policy renewal rates. About 50% of policyholders who are satisfied with their claims experience are likely to renew their policy, compared to just 33% of those who are not satisfied.² 

In all, up to $34 billion in annual insurance premiums could be at risk due to poor claims experiences.³ 

Enhancing the claims process through digital solutions is essential to fulfill insurer promises and boost client retention, marking a crucial step in a comprehensive digital strategy. 

Why Digitizing Claim Payments Benefits Insurers 

A streamlined and user-friendly payment system allows carriers to elevate customer satisfaction, lower expenses, boost operational effectiveness, and ensure the security of disbursements against interruptions. 

Keep Up with Consumer Preferences 
The payments landscape has evolved significantly in recent years, and consumer preference for traditional methods like checks and cash continues to decline.⁴ To ensure they are meeting and exceeding policyholder expectations, insurers can provide the same expedited payment process for claims as customers experience with other transactions. 

Reduce the Cost of Claim Payments 
Checks are not only outdated, but they are also costly. According to the 2022 AFP Payments Cost Benchmarking Survey, the median per-transaction cost of a check ranges from $2.01 to $4.00.⁵ 

Some treasurers are going further by looking to monetize payments. About 50% of insurance claim disbursements are made to businesses and vendors, and paying them with virtual cards can represent a multi-million-dollar opportunity for some carriers.⁶  

Optimize Processes to Lower Combined Ratio 
Checks must be handled manually. And manual processing and reconciliation is time-consuming, expensive, and susceptible to human error.⁷ Digitizing claims payments can also reduce the volume of status inquiries as instant payments are settled instantly, as the name implies, reducing the likelihood of claimant inquires. 

Guard Against Payment Disruption 
Natural and catastrophic disasters challenge the traditional check payment method, especially when infrastructure is compromised, or homes and businesses are destroyed. Digital payments offer a resilient alternative, ensuring continuous operations even when disaster strikes. 

Understanding the Challenges of Digitizing Claim Payments 

Despite the substantial advantages of digitizing claim payments, insurance companies face numerous obstacles stemming from both internal and external factors.  

Internal Obstacles of Digital Insurance Payouts  
Digitizing outbound payments presents internal impediments for insurers, primarily in customer support and operational training.  

Customer service representatives often lack access to real-time payment data, resulting in frustration when queries about payment statuses cannot be promptly addressed. Enhancing service levels requires integrating payment status updates into customer service channels.  

Additionally, insurers must invest in training adjusters to effectively manage digital payments, a task complicated if these payments are not seamlessly integrated with the company's core claims system.  

Addressing and overcoming these hurdles are essential steps for insurers seeking to modernize the claims payment process effectively. 

External Forces on Insurance Disbursements 
Key among the outside forces challenging insurers is managing an array of emerging payment methods like real-time payments and digital wallets, which require careful handling of customer preferences and fraud precautions. These new payment types also cause downstream impacts complicating reconciliation and accurate reporting.   

Low vendor enrollment remains a hurdle as well because digitizing business-to-business payments necessitates a robust network. Additionally, complex insurance cases involving multi-party recipients often drive insurers back to traditional paper checks, demanding tailored solutions to navigate these intricacies.  

Regulatory compliance presents another challenge, with varying state mandates dictating specific payment methods and timelines. Safeguarding sensitive data while adhering to stringent security standards is paramount, especially when storing payment information internally. 

Strategies for Digital Payments Success 

Insurers must digitize claim payments to stay competitive and meet policyholder expectations. Selecting a provider who can integrate payment systems with core operations and efficiently manage a variety of transaction types and channels is essential.

An insurance-centric payments provider can further accelerate digital payment adoption through its network effect — with an extensive, digitally enabled network able to make the greatest impact in the shortest amount of time. Carriers should also seek a payments provider with insurance industry expertise to help with regulatory compliance, ensuring adherence to applicable mandates and standards that can vary from state to state.

In today’s digital era, digitizing insurance claim payments is no longer an option but a necessity. Partnering with experts who understand both payment processing and insurance industry challenges is crucial to a successful transition.

If you’d like more in-depth information and insights about modernizing claim disbursements, download our whitepaper in collaboration with J.P. Morgan Payments, Create a Better Insurance Claim Experience with Modern Payment Technology. 

Delivering More 

Are you ready to modernize your payment offerings to do more for your customers? One Inc provides a cloud-based, scalable payment platform that enables innovation and growth. By leveraging our next-gen technology and ecosystem partnerships, we deliver a simplified, seamless, and elegant customer payment experience. With One Inc by your side, continually adding value, cloud-based digital payment success is achievable. Learn more. 

SOURCES 

1 Strategy Meets Action (SMA) – https://portal.resourcepro.com/advisory/researchReportDetails
2 Bain & Company – https://www.bain.com/insights/how-to-improve-customer-retention-in-property-and-casualty-insurance-snap-chart 
3 Accenture – https://newsroom.accenture.com/news/2022/poor-claims-experiences-could-put-up-to-170b-of-global-insurance-premiums-at-risk-by-2027-according-to-new-accenture-research 
4 Federal Reserve – https://www.frbservices.org/news/research/2024-findings-from-the-diary-of-consumer-payment-choice  
5 AFP – https://www.afponline.org/training-resources/resources/articles/Details/choosing-the-right-payment-method-the-pros-and-cons-of-each  
6 One Inc Internal Data 
7 AFP – https://www.afponline.org/training-resources/resources/articles/Details/choosing-the-right-payment-method-the-pros-and-cons-of-each