Like CFOs in any vertical, insurance sector finance leaders are always looking to cut costs, increase margins and drive profits. Today’s economic backdrop and political uncertainty is making that increasingly challenging. These problems have been further exacerbated by unwelcome news from the government: a change to the Ogden rate which is likely to increase costs further.
Fortunately, there’s a way to claw back profits and steal ahead of the competition: by focusing on B2B payments optimisation with innovative new platforms that also offer rewards on each transaction.
What it means
The Ogden rate governs the discount that insurers receive when paying out claims for life-changing injuries – deducted from the total sum to be paid. The government’s decision to raise it from -0.75% to -0.25%, rather than an expected 0%, has drawn criticism from across the sector, which is already burdened with the lowest discount rate in the western world. Insurance leaders have claimed they will be forced to pass the increase in costs on to customers in the form of higher premiums.
“The government’s failure to change the discount rate to a balanced level will only serve to increase the cost and, therefore, affordability of certain types of insurance,” said Zurich’s chief claims officer, David Nichols.
For insurers, it’s an extra financial burden which will require them to pay out more than expected to those suffering serious injuries. That makes it more important than ever to find ways to trim costs from elsewhere. But it can be difficult knowing where to start. One often overlooked area is B2B payments.
Driving value through digital change
Legacy payment processes including cheques and fund transfers create unnecessary extra costs through bank charges, human error and manual processes, not to mention increased security and fraud risks. Yet for too long they have been seen as the only game in town. Fortunately, this is changing.
By migrating to digital platforms, insurance CFOs can cut costs and even drive extra revenue from supplier payments. Optal Virtual Account Numbers (VANs) are 16-digit, single-use card numbers that insurers can use to pay suppliers in a highly cost-effective, streamlined manner. They eliminate administrative overheads and costly human error by automating the payment process from end-to-end. According to our research, reconciliation alone costs FTSE 350 firms on average £560,000 annually.
Even better, Optal also offers rewards on each transaction. That means, instead of costing you money on each transaction, your business could actually be earning a revenue share on B2B payments.
By turning a traditional cost centre into a revenue generator with digital payments, insurers can soften the blow of the Ogden rate change. That means you can choose to keep premiums lower than the competition, delighting customers and creating a clear market differentiator.
It’s time to see how Optal VANs could transform your business. To find out more, get in touch today…