How P&C insurers can use digital payments to improve customer experience

Few industries are more competitive than insurance. Witness the massive advertising campaigns waged with Progressive’s Flo, Geico’s gecko, Liberty Mutual’s emu and Allstate’s Mayhem, just to name a few.

Clever mascots aside, there’s good reason these leading brands (and their mid-sized counterparts) spar so openly for customers. Analysts value the property and casualty (P&C) industry at $1.6 trillion. With so much at stake, there’s little room for complacency, particularly when it comes to customer experience.

Payments form a major part of a business or consumer’s perception of their insurer:

• Can policyholders “set it and forget it” with automatic withdrawals for premiums?
• Can policyholders easily track account and claims status?
• Is the claims process modern, convenient and mobile-friendly?
• Are claims payments available in immediate, electronic formats?
• Can policyholders choose their preferred method for reimbursements?

For P&C insurers to remain competitive, the answer to all these questions needs to be an overwhelming “yes.”

A risk-averse industry embraces digitization

Yet while most insurers understand the advantages of convenient electronic payments and a sleek digital experience for their customers, few have truly transformed their operations to meet these goals. Some of the hesitation stems from the cost and effort of converting from paper processes and legacy systems. P&C is also an inherently risk-averse sector, placing innovation lower on the priority list.

Checks, for example, still form the backbone of claims payments at the majority of P&C insurers. According to recent research:

• More than half of all claims payments occur via paper check.
• Just 1 in 10 claims payments take advantage of instant electronic payment methods that deposit funds directly to a bank account, credit card or digital wallet.

The arguments in favor of checks include customers’ familiarity with them, and how deeply embedded they are in P&C insurance workflows and systems. The detailed remittance data that typically accompanies a claims payment represents another impediment to change, as many electronic payment methods cannot facilitate the necessary level of information.

In short, there remains a mindset stubbornly asking, if the current model still works, why modernize it?

Customers want payment choices and fast availability of funds

COVID-19, however, has revealed the industry’s achilles heel. Overnight, the pandemic forced claims adjusters to abandon long-standing business practices built on in-person visits to homes, businesses and collision repair facilities, often with a check in hand or soon to follow. Likewise, social distancing mandates kept office staff working from home, without access to check stock or check printers. For many P&C executives, it was a wake-up call.

Policyholders shared the frustration, with businesses unable to retrieve check payments on a timely basis or make physical trips to their bank for deposit. Consumers faced similar issues.

The business case for adding digital payment options is strong. These new methods can help P&C insurers:

• Improve customer satisfaction by making choice a key part of their claims experience.
• Reduce the manual workload associated with processing checks.
• Offer next day and even same-day funds availability for policyholders.
• Accommodate flexible working arrangements and social distancing protocols.
• Decrease customer service calls related to payment delays and missing checks.

It’s a direction that appeals to business and consumer customers. Recent research reveals:

• The majority of policyholders have no say in how they receive a claims payout.
• Thirty percent would prefer to receive funds in an instant payment method.

Responding to customer preferences provides a critical competitive differentiator in a crowded market. Offering faster, more convenient reimbursements for claims helps position P&C insurers as modern and innovative, and stand out with business and consumer policyholders.

Tokio Marine digitizes its claims payment options

COVID-19 caused Tokio Marine North America Services (TMNAS) to fast-track a retooling of its claims payment options. Like many companies, the P&C insurer needed to pivot quickly from traditional ways of doing business to efficient electronic workflows, in order to protect its staff and customers.

In addition to supporting its own P&C lines through Tokio Marine America, the company also operates as a shared services organization, supporting insurers such as First Insurance Company of Hawaii and Philadelphia Insurance Companies.

Face-to-face visits by claims adjusters and going into the office to physically process checks were two high-priority areas that needed immediate alternatives, according to Michael Kelly, Vice President of Finance and Treasurer at TMNAS.

“Clients need and want that cash flow, and they do not want people traveling or going into the office to get and process checks. People are requesting electronic payments as much as possible,” Kelly explained in a recent interview with PYMNTS.com.

Kelly’s search for secure digital alternatives led him to discover eChecks. An eCheck is similar to a regular check, but sent and received in just seconds using email rather than postal mail. There’s no additional software or technology required and anyone with an email address can receive an eCheck.

“eChecks allow us to make payments quickly to [clients and vendors] who prefer checks,” he told PYMNTS. “We have some small business vendors and clients who do not feel comfortable giving us banking information for [wires or ACH payments], but they would like to get their payments more quickly. So, we can offer them an electronic check that they can receive right away, but they can still control the receipt, processing and depositing of that payment.”

Paying claims in seconds from the office or the field

This simple solution now powers a number of vendor payments and claims disbursements for TMNAS and its P&C customers. One of the biggest advantages is the ability to transact with digital efficiency—yet maintain many of the workflows originally created for paper checks. It’s a hybrid approach that works exceedingly well in the current environment, because insurers can be up-and-running within 24 hours. There’s no need for extensive system integration or IT resources.

For example, with eChecks:

• Staff can authorize and disburse eChecks using the company’s current processes and systems, either in batches or individually.
• Insurers do not need to obtain or store sensitive information like bank account numbers.
• Recipients who opt for eChecks receive an email notification when their payment is available, eliminating the need to print or mail physical checks.
• Policyholders can deposit their eCheck just as they would a physical check, including via an ATM, Remote Deposit Capture application or at a branch of their bank.

For TMNAS, the platform keeps their claims payments on track and elevates a critical portion of their customer experience. Kelly and other company stakeholders appreciate the ability to deliver next-day and even same-day disbursements.

“eChecks offered us that capability,” he told PYMNTS. “We would speak to someone about their claim, we could agree on an amount, we could ask them if they were willing to accept eChecks, and if they said yes, the sell was, ‘We can get you your payment end-of-day today or tomorrow’.”

Kelly also appreciates the flexibility inherent in eChecks. While wires and ACH transactions offer similar speed of delivery, they can be cumbersome to set up. Wires in particular are sometimes cost-prohibitive, particularly for smaller-dollar consumer payments. eChecks allow TMNAS to match the right payment method to the specific needs of each policyholder and claim. It’s another small factor that adds up to big results in customer satisfaction and staff efficiency.