We have all had a hunch that 2011 would be one of the worst years on record for catastrophic losses. Now, the numbers are in to prove it. Swiss Re reported in September that natural catastrophes and man-made disasters across the globe are projected to cost the insurance industry around $70 billion in the first half of 2011. That figure makes 2011 already the second-costliest year in history for catastrophic losses, and we’re not done yet with Q3 and Q4 losses yet to be calculated. Hopefully, we are done with major disasters for this year, but when all of the losses are tallied for 2011 we could surpass the 2005 record when catastrophe claims reached $120 billion.
With the tornadoes, hurricanes, and wildfires having battered many regions of the U.S. this year, we have all witnessed the aftermath of these disasters as communities and residents struggle to get their lives back to normal. Awaiting settlement payments is one of the most common frustrations insureds experience. The good news is that there are new payment solutions available today that can accelerate the process, improve customer satisfaction, and reduce carrier costs. Specifically, innovations for replacing paper settlement checks with pre-paid debit cards are gaining traction among leading carriers and dramatically improving performance across the board.
Contents payments provide the most straightforward use-case for debit-card use. Removing barriers and inefficiencies in contents claim payments can dramatically reduce friction for insureds and carriers while also reducing carrier operating costs. The traditional method of issuing paper checks for contents claims is rife with hidden costs and inefficiencies. All-in, each check issued can cost carriers anywhere from $10 to $19 per check. In many cases, multiple checks must be issued throughout the payment and contents replacement process. Debit cards can be pre-loaded and reloaded at a fraction of the cost of paper checks, saving carriers as much as 80 percent of the cost of issuing and reissuing checks.
Contents replacement is a retail activity for insureds. You get your payment and it is time to go shopping to replace what you have lost. Most consumers today are accustomed to using debit cards. Unlike paper checks, pre-paid debit cards provide a record of every purchase and the insured’s balance, so the contents replacement process can be easily tracked and monitored by the cardholders from first to final purchase.
Many of the benefits of pre-paid debit cards for the insured also apply to carriers and agents. What could be more convenient for an agent than arriving onsite with a stack of cards that can be loaded and activated for immediate use by insureds? Carriers realize immediate savings in direct costs of checks such as paper, printing and processing fees. Industry averages for paper checks range from $10 up to $19 per check. Cards cost much less than that. Cards are more secure than checks, helping reduce accruing costs due to fraud, lost checks, return checks and check replacement. In addition to these tangible benefits, carriers benefit from higher levels of customer satisfaction and increased customer loyalty of insureds who take advantage of all of the conveniences and rewards cards have to offer.
Topline benefits for carriers, include: