2022 has been a turbulent year for many people, particularly when it comes to financing. The covid-19 pandemic was followed by a cost-of-living crisis that is affecting households worldwide. Navigating this crisis is different for everyone – while cutting back on unnecessary purchases may be enough for some people to get by, a staggering number of people are missing recurring payments. Naturally, missed payments can have significant repercussions for both customers and enterprises alike. This article explores how you can minimise missed premium payments’ impacts on your business.
We have all noticed the rising prices of products and services across industries. According to the Office for National Statistics, 93% of residents in the UK reported a significant rise in their cost of living from September 2022 onwards. Rising prices have made many of us reconsider and restructure our finances, how much we spend, and how much we save. But sometimes restructuring isn’t enough.
According to a study by Which?, approximately 2.5 million UK households missed or defaulted on at least one mortgage, rent, loan, credit card, or bill in January 2022. This number is drastically higher than the 1.7 million households that missed a payment in December 2021. Most missed payments happened in households with lower incomes. 14% of households earning less than £21.000 yearly missed a payment last month.
When your customers fail to pay for their premium policies on time, the consequences affect various business areas. To start with, many costs are involved with chasing up lost income, which erodes the bottom line. Firstly, insurance companies need to allocate resources to chase up these missed payments, preventing them from focussing on their core business areas. There are also time and cost factors, and they may be chasing up customers for a long time.
Missed payments can impact customer retention and general customer experience. For instance, customers may cancel their policies if they feel they can’t continue to make recurring payments or choose another insurance provider offering better customer experiences. Customer retention is crucial, as acquiring new customers is much more expensive than retaining existing ones.
Dunning is the practice of requesting customers for money they owe to the company. Usually, the dunning process starts after the customer misses a payment. Payments can be missed for multiple reasons, but two of the most common are:
Dunning is a challenging process that needs to be dealt with carefully to avoid upsetting customers or creating negative experiences. Customers may find it invasive, as they are essentially being chased for money not paid. Therefore, it is crucial to approach customers in an understanding manner.
Dunning processes can be automated and take various forms, including:
-Alerting customers via email or SMS
-Implementing smart retries for failed transactions
-Requesting permission to collect card information from providers
Usually, they take a lot of resources and time as you might have to chase customers for a long time until they finally pay for their premiums. In cases when the dunning process is taking a longer time, many companies even opt to outsource the process to third-party companies. While this may help alleviate some stress on internal resources, it does come with a price tag. As we will see in the next section, dunning can heavily and negatively impact your bottom line.
While insurers can’t avoid the fact that their customers may miss payments, they can take steps to remediate the situation and prevent further damage. Let’s look into some strategies that insurers can use to mitigate the consequences of missed payments:
How you approach your customers in the initial phases after a payment is missed will set the tone for all the other interactions. Customers that are struggling financially may require special attention. That is why it is crucial to ensure that you approach customers even more empathetically in these situations, and are clear and concise in your writing, whether via email, SMS, or call. In most cases, customers may not even be aware that they have missed a payment – so it is essential to show that you’re on their side and helping them throughout the process.
Following the previous point, an effective way to ensure that customers are being taken care of even in the most challenging times is to implement and provide customer support at all times. Whether providing an email or contact number that they can reach out to if they have any questions or ensuring that a customer representative is available to talk about their concerns, customer support is crucial. The dunning process can make or break customer relationships, so you need to provide all the support your customers need.
Lastly, insurers need to find easy and seamless ways to collect missed premium payments from their customers without any more friction. Remember that your customers may be going through challenging financial times, so offering them easy ways to pay is even more critical. This will also keep them from cancelling their premium policies or searching the market for other insurance providers.
You can use various payment options to make the customer payment experience as seamless as possible. Request-to-Pay, for instance, is a messaging service that enables the payee to request a specific payment from the payer. It is simple, safe, and frictionless. Plus, it allows insurers to get paid in real-time.
The Request-to-Pay process also gives customers much more flexibility than other payment methods. For instance, with RTP, customers can accept or decline requests, start a conversion with their insurer or choose to split the payment into various installments (as long as the total sum is paid off on time).
Paying in installments may help a lot of customers who are struggling to make ends meet and may need extra time to find funds to pay for their premiums. Another option you can easily adopt is Pay-by-Link – the easiest way to pay and get paid, and you can access it with Imburse. Let’s discover a bit more about Pay-by-Link below.
Pay-by-Link is a smart payment link that enables customers to pay for products or services via a simple click of a link. There is no more straightforward way to pay: customers are sent a payment link via email or SMS, and when they click on it, they will be directed to a hosted payment page where they can insert their payment details and finalise the payment. The hosted payment page contains how much the customer needs to pay. There are no lengthy website checkouts, document exchanges, or telephone calls to collect premium payments.
There are various benefits of using Pay-by-Link and offering this service to your customers, mainly when collecting missed payments. Let’s have a look at some of these advantages:
Collecting payments is a more relevant feature for this particular use case. With Pay-by-Link, you can more easily and frictionlessly collect missed payments, reducing checkout dropout rates. However, Pay-by-Link works for paying out too, and you can let your customers select their preferred payout method for an optimal payment experience.
Wondering how you can get in touch with your customers more easily? Meet them where they are and use their preferred communication channels. Pay-by-Link can be sent via email, SMS, and social messenger. It can also be embedded into a webpage.
Once customers click the payment link you sent them, they will be directed to a hosted payment page. The Imburse hosted payment page can be fully customised to match your branding, enhancing customer trust and loyalty to the brand. You can edit your logo, fonts, and colours within the theming section.
Each customer has their own payment preferences. Some may prefer to pay via credit or debit card, others via digital wallets or alternative payment methods such as PayPal. It is essential to give customers various options so they can choose their favourite and most convenient one. With Pay-by-Link, you can collect payment via multiple payment methods, including debit card, credit card, Paypal, and Direct Debit.
Collecting missed payments through Pay-by-Link will give you real-time visibility on the status of that transaction. This significantly reduces the associated costs of having to track the payment across multiple interfaces. It also informs you about whether the customer did indeed attempt to pay after the RTP / PBL had expired. This way, you can have a great insight on customer readiness to back pay and act faster.
Imburse is a cloud-based middleware connecting large enterprises to the payments ecosystem, regardless of their existing IT infrastructure. Through a single connection to Imburse, enterprises can collect or pay out using various payment technologies and providers around the globe.
In a world where consumers’ payment preferences and technologies are ever-evolving, Imburse works with insurers to future-proof their payment requirements. Regardless of the business area, market, or requirements, Imburse will connect you to your choice of technology and provider.
Reach out to our team should you want to discuss how Imburse can help you. Our team is happy to show you what our platform can do for your business and offer you a free demo.