Claims payouts are the moment of truth for customer experience in the insurance process.
In this article we explain why payments is mission critical for insurance. There are multiple reasons for this, however, everything ties back to the most important reason of all: completing a successful payout according to the customer’s preference is crucial for a satisfying customer experience.
The insurance industry is often cited as a latecomer to digitalisation. When it comes to technological advances surrounding payments in particular, e-commerce has been at the forefront for years. In e-commerce, customers make a payment and expect something in return. Here the focus is on the payment journey and the product.
However, for insurance the product is the claims payment, so if it isn’t seamless and tailored to customers’ needs, at a time of high emotion, the impact on customer satisfaction will be huge.
In the last few years, especially with the impact of the pandemic, insurance payment processing has been increasing in sophistication, with the end goal to improve the overall customer experience, however, insurers still have room to improve for handling payments. Due to the insurance proposition starting and ending with a payment, this area must be given a higher priority.
Apart from payments being crucial for the customer experience, a lot of insurers looking to grow are faced with very technical problems when it comes to the payments space. This means that as they’re planning to launch new products, add new claims payout mechanisms, enter new markets, or drive some OpEx or CapEx savings, payments is a vital part of the insurance value proposition.
Despite the collection of premiums and payment of claims being ‘mission critical’ to the insurance value proposition, this area is not considered a core competency. This is a risk for insurers because projects are much more likely to fail, take longer to deliver, and vacuum up resources for something that is not seen as core competency.
Most business models fail to identify where the payment function sits, which means leaders are unable to overcome their payment challenges.
Does payment responsibility sit in operations, IT, finance, or customer services?
Is it a centralised or decentralised function?
Is it a function that should be seen as a separate entity altogether?
Uncertainty around these questions and this lack of ownership brings lower investment into dedicated payment resources, payment teams, technology, ongoing maintenance, and support structures. With no central area of responsibility, there’s often a fragmented IT architecture unable to support a single view process.
So even if the front-end of the business may be digital, initially meeting customers’ needs, the back-end operations tend to lag behind, causing problems at those key pain points; making and receiving payments.
Over the past few years there’s been a huge growth in payment options – Google Pay, Apple Pay, Pay Pal, cards, vouchers etc. For example, the option of ‘buy now, pay later’ wasn’t available three years ago. The graph below shows how much Klarna (the main BNPL powerhouse) has grown in use over the last three years in multiple countries. In the USA they started from nothing but in 2022 got ahead of Google, a global giant.
Above information sourced from Globaldata
The growth in payment options means differing solutions need to be managed across lines of business and potentially global groups, but as this increases operating expenses and capital expenditure, few insurers recognise payments as a core competency and build teams to streamline and extend customers’ options.
With digitalisation, data analytics, and legacy and ecosystem transformation vying for IT budget, building and running a payments team is not always seen as priority. This in turn results in missed payments, causing a loss of customers/churn/customer retention, which erodes top-line results. And the cost to chase up lost income erodes bottom-line results.
Customer analytics platform, CallMiner, says the UK insurance sector is among the top three for customer churn, costing insurance companies over £50bn per annum. Although price remains the top churn contributor, it’s closely followed by being fairly treated and rewarded for loyalty. Factors the insurance sector typically does not rank well for.
PwC confirms customers rank easy payments as the third most valuable asset when it comes to the customer experience, and in its future ready payments 2030 report, PwC, in collaboration with UK Finance, says its vision for 2030 is for customers to benefit from the most modern, resilient and safe payments systems in the world, enabling competition, innovation, choice and opportunity.
We’re a cloud-based insurance payments software that connects to all the PSPs and acquirers in the world. This single point of access enables insurers to speed up and improve the payments experience for customers. This is particularly important when moving into new markets; the payment world may look different when launching new products, impacting other areas such as operations and reducing paper-based costs.
With an insurance payments platform like Imburse, large insurers futureproof their business and benefit in the following areas:
It cannot be understated how important payments plays as a key value driver for the insurance businesses. It is mission critical to any enterprise to deliver cost savings, increase speed to market, enhance coverage, and enable innovation. To maximise the value to the enterprise, the right strategic technology partner, with the right competencies, is needed to deliver the connection and value deployment in sustainable and timely manner.
Imburse focuses on simplifying how companies connect to the global payments ecosystems for collections and payouts, making payments a key value driver for any enterprise.
If you would like to discuss improving the payments experience, reach out to our team.
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