Unlocking Efficiency: The Benefits of Virtual Credit Cards for Insurance Claim Payments

Highlights

Adoption of virtual credit cards is expected to increase by 44% between 2022 and 2025, according to the RPMG Research Corporation.

Post This
In an Association for Financial Professionals survey, 63% of respondents said their organizations had faced check fraud.

Post This

Virtual credit cards have emerged as a transformative tool in the financial sector, with adoption expected to increase by 44% between 2022 and 2025.¹ Particularly in the realm of claim payments, these digital solutions offer a host of benefits for both insurance carriers and the businesses that receive them.

Virtual claims cards act as direct, card-based payments sent straight to the payee’s inbox. As digital representations of payment cards, they can only be used for approved expenses or purchases related to the corresponding insurance claim. Each virtual claim payment card is securely emailed to the recipient and features a unique, 16-digit number generated for one-time use. This innovative payment method is designed to accelerate insurance claim payments while offering enhanced security for insurers and providers alike.

Advantages of Virtual Cards for Insurance Companies

Although more than 90% of organizations continue to process incoming checks,² the insurance industry can streamline operations, reduce expenses, and lower the risk of fraud by leveraging virtual credit cards for claim disbursements to vendors and providers.

Reduced Carrier Expense

One of the most significant benefits for insurance companies is the potential for cost savings. Traditional payment methods, such as checks, involve numerous indirect expenses, including printing, mailing, and processing fees. According to the 2022 AFP Payments Cost Benchmarking Survey, the median per-transaction cost of a check ranges from $2.01 to $4.00.³ The same survey found that digital payments offer a more cost-effective solution for insurers.

Improved Efficiency

As soon as a claim is approved and the adjuster initiates the payment, the virtual claims card is automatically delivered to the payee via email. This efficiency reduces the time and labor involved in managing claims, allowing insurance companies to reduce cycle times and focus on more strategic initiatives. Automation of payments through virtual cards also reduces the likelihood of human error, ensuring accuracy and reliability.

Moreover, integrating virtual cards seamlessly with a carrier’s current systems automates the reconciliation process to a remarkable degree. Some solutions can save up to an hour of manual effort per transaction.⁴

Enhanced Security

Virtual credit cards offer a higher level of security compared to traditional payment methods like paper checks. The unique number of each card significantly reduces the risk of fraud and unauthorized access. Digitally restricting the transaction type and limiting the amount used in each transaction are key security elements of virtual cards that checks simply can’t offer.

These features are particularly crucial in the insurance industry, where sensitive financial information is frequently processed, making virtual cards an ideal solution for insurers wanting to pay claims securely. But they’re also an ideal payment type for the businesses that receive them.

Why Businesses Like Receiving Virtual Cards

While there are many advantages of virtual cards for the carriers sending them, there are several benefits for vendor and provider payees, including improved cash flow, streamlined processes, and better security. These enhancements make virtual cards and enticing way to get paid by insurance companies.

Faster Payments

For businesses receiving insurance claim payments, virtual credit cards offer the advantage of speed. Traditional methods like checks can take several days to process and clear, whereas virtual card payments are almost instantaneous. This rapid access to funds can significantly improve cash flow, enabling businesses to continue operations smoothly without delays.

According to RPMG’s 2022 Virtual Card Benchmark Survey, among respondents who implemented virtual card acceptance, 83% stated the payment method enhanced their financial position, such as working capital.⁵

Reduced Paperwork

Handling paper checks involves considerable administrative work, including manual tracking, depositing, and accounting. Virtual credit cards minimize back-office work, as everything is processed electronically. Businesses can easily manage payments via digital platforms, accessing transaction details and histories with just a few clicks. This reduction in administrative tasks allows businesses to allocate resources more efficiently, focusing on growth rather than clerical work.

RPMG’s survey data revealed that 85% of businesses using virtual cards saw improved operational efficiencies.⁶

Lowered Risk of Fraud

Checks are one of the payment methods most susceptible to fraud. In a 2023 Association of Financial Professionals survey, 63% of respondents said their organizations had faced fraudulent activity via checks.⁷ Virtual cards, however, are highly secure, with just 3% of businesses in the same survey reporting fraudulent activity via this payment method.

The Next Evolution in Insurance Payments: Straight Through Processing

Straight Through Processing (STP) is beginning to take the digitalization and automation of insurance payments to the next level. Today, this technology is increasingly empowering carriers by further streamlining routine tasks to boost efficiency.

Instead of physically keying virtual card numbers into on-site POS terminals, STP automatically sends and reconciles payments into a business’ bank account. STP allows businesses to receive the funds from multiple carriers in aggregate as a part of the merchant services settlement process, keeping bank statements cleaner.

As with other forms of cutting-edge payments technology, this advancement is expected to become the new norm in the near future.

The Value of a Vendor-Provider Network

A robust vendor-provider network can make all the difference for businesses keen on fully embracing modern B2B payment methods. One Inc’s Vendor-Provider Network is an innovative system that stores contact information and payment preferences, expediting payouts upon settlement from our network of more than 890,000+ vendors and providers.

One Inc makes the transition from paper checks to digital payments easy with full-service vendor onboarding, self-service tools, adjuster training and support, and a dedicated vendor call center. The vastness of the network enables rapid digital vendor payment adoption upon implementation of the platform. One Inc takes care of vendors so insurers can focus on policyholders.

If you’d like additional information and insights on digitalizing outbound payments, download our whitepaper in collaboration with Mastercard, How Insurance Carriers Can Shred the Cost of Sending Paper Checks: Leveraging the Financial Advantages of Virtual Cards and Push-to-Debit Solutions.

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