Insurance is a risk management business, so it’s understandable that “doing no harm” is the default setting for most carriers and MGAs. Yet with digital disruption creating innovative new models and services for policyholders, doing nothing is no longer the lowest risk option. In fact, it will end up leaving some insurers falling behind as the rest covet partnerships and evolve their offerings.
Nowhere is the risk of doing nothing arguably greater than in payments. The good news is, it’s also the easiest area to fix, if insurers embrace modern digital platforms to optimise the claims experience via streamlined supplier payments.
A consumer’s relationship with their insurer typically revolves around simple moments of truth like purchase, renewal and claims. This relationship is usually time bound, with multiple restrictions around usage.
However, new models are emerging to offer coverage on an “as-needed” basis. You can now insure your car per mile you drive, your golf clubs when you hit the links, or only pay for your bike insurance if you need to claim. These new services are frequently offered at the touch of a button and can be toggled on and off at the swipe of a finger, via mobile apps. They provide the flexibility and customisation modern policyholders are increasingly demanding, because it’s how they manage other aspects of their lives.
Time for change
Thanks to a boom in insurtech, the market is now bursting with proven capabilities for all moments of truth in the customer journey. They offer an enhanced user experience for the policyholder and open up new commercial possibilities for the insurer. Thus, it is change rather than doing nothing that now equals “doing no harm” — because failing to replace legacy offerings may leave providers worse off than before. Major insurers are taking note. Just consider this upcoming keynote address by Admiral CEO, Cristina Nestares, titled, Facing the ‘Amazon-moment’ head on: succeeding in the age of innovation.
Deloitte predicts that 33% of premium income will come from brand new propositions by 2024, for example. Its report argues that the winners of tomorrow will be those firms best suited to forging alliances with innovative insurtech start-ups, as well as those that consolidate with their peers.
Focus on payments
For those incumbents keen to tap the appetite for digital transformation, claims payments are often a major barrier. Insurers need to be able to pay a range of companies — from emergency dentists to veterinary clinics and garage mechanics — seamlessly in order to provide the kind of on-demand end-user experience modern policies must have. Yet legacy payments like cheques and bank transfers add extra cost, complexity, friction and risk. Dominated by manual processes, they’re riven with human error which can lead to misdirected or incorrect payments and even fraud.
It is estimated that 50p in every £10 of attempted cheque fraud is successful, for example. And even if the fraudsters don’t get their hands on a payment, cheques can take up to two weeks to arrive at the supplier. Bank transfers are no better, last year there was a 21% rise in cases of B2B push payment fraud. The cumulative effect is to damage key supply chain relationships, which ultimately impacts the customer experience. A car repair garage may withhold a policyholder’s vehicle until they’ve received payment, for example. All of a sudden that personalised pay-as-you-go insurance offering starts to look less appealing to the end customer.
Time to go digital
However, it’s an easy problem to fix. Digital payment platforms exist that can optimise the supplier payment process to support new agile insurance offerings. Virtual account numbers (VANs), for example, are 16-digit, single use card numbers that can be automatically generated to pay suppliers quickly, easily and securely. Extra data can be added to each transaction to improve auditability, reduce fraud risk and ensure reconciliation is automatic and immediate. Most importantly, it’s a seamless process that supports rather than undermines new app-based insurance models.
Without change, traditional insurers may become increasingly marginalised. But by getting the payment piece right, they have a great opportunity to tap the appetite for new ways of consuming policies — and in the process, cut costs, increase revenue and drive customer loyalty.
Do you want to learn more about how virtual account numbers can solve common B2B payments problems, such as, supplier relationship management, a lack of automated processes and the risk and inaccuracy of payments? Download our eGuide Do You Have a VAN Plan?