With the emergence of electronic payment processing (EPP) and growth of consumer confidence in the technology, paying electronically has become a mainstream practice for both consumers and businesses. The electronic network has brought many benefits to all aspects of the payment process, and industries everywhere -- from the IRS to retail stores -- are taking advantage of what electronic processing can offer. It only makes sense to integrate this convenience into the daily settlement of claims.
More industries over the past few years are recognizing the dramatic savings and improved control EPP offers compared to the traditional check payment process. Yet many insurers and their claim operations in particular have not yet implemented strategies to take full advantage of EPP opportunities. When compared to traditional check processing, electronic payments increase control over finances, reduce fraud, free up adjuster time, and can increase claimant satisfaction. In addition, returns from EPP can be significant, as claims are closed faster and costs are lower.
From the insurer's perspective, efficient and effective claim management is as fundamental to claimant satisfaction as it is to profitability. When using EPP, there are multiple benefits that contribute to and have a definitive impact upon an insurer's bottom line.
Enabling Straightforward Payment Flow
What is the real cost to you for waiting? This refers to waiting for a check to go out for payment -- waiting for it to be cashed and approved. Check payments can significantly increase processing time and expense, which, in turn, slows down the claim process, thereby increasing costs and the likelihood of mistakes to enter the equation. Claims are processed starting with the adjuster's approval, which is then initiated through the carrier. With EPP, an electronic single-use account is generated by a bank -- such as Wright Express, for example -- and the information is then submitted to the vendor. The vendor charges the account through the MasterCard's network, and the payment is settled by the bank.
By switching claim-processing practices to an electronic means, insurance companies will undoubtedly save time and money. Moreover, with no upfront software fees for implementation or ongoing fees, it would seem that there is virtually no reason not to go in this direction.
Reducing Fraud
Single-use payment programs substantially minimize the risk of fraud by reducing the amount of time that an account is open. Single-use accounts employed to pay vendors are generated instantly and only stay open for a certain number of days. Also, as an added layer of protection, the single-use accounts have a claim number with a maximum transaction amount that cannot be changed to prevent overcharges. Because this single-use account, by definition, is only used once, the vendors an unable to maintain an account "on-file" for future transactions or add-ons that are not approved.
Easing Payment
Insurers stake their reputation on the quality and efficiency of their claim operations. By using EPP to accelerate claimant payments, insurers can boost satisfaction levels. For example, EPP can allow claimants to have quicker access to the repaired vehicle. One question remains: if electronic payments are becoming standard within almost every industry, then why are most insurers still using check payment methods? Oftentimes, with an inefficient process, claims can be delayed for 90 or 180 days, and during this period the insurance company gets to keep the money from that claim for that additional time. It could be likened to an interest-free loan, and is a major profit generator for insurers that are still using checks. What many of these companies do not realize is that EPP reduces vendor payment time without reducing float time, meaning that insurers can still reap the benefits from an "interest-free loan" while satisfying the vendor with timely payments. It is a win-win for both sides.
Increased control regarding payments and processing saves you money. Studies have shown that the all-inclusive cost of processing a claim check -- printing, mailing, processing returns, escheatment management, processing inquiries, reconciliation, and fraud costs -- can run from $5 to $15 per check, compared to the average cost of 15 to 25 cents per electronic transaction. In today's economy, insurers are looking for ways to do more with less. In order to lower operating costs, however, these companies must first improve the claim process.
What is clear from the availability of these solutions is that over the next several years, almost all paper can be eliminated from the payment process. Not only insurance companies but also their claimants will feel the benefits of electronic claim payment processing.
