It seems hard to believe there is an area of the insurance business that has escaped the scrutiny of technologists, but premium payment solutions might fall into that short list. Celent recently conducted a survey on the subject, and Craig Weber, senior vice president for the research and consulting firm, explains the genesis of the survey was the idea insurers may not have been paying much attention to the technology around payments.
But count Weber among those who believe insurers need to get every last ounce of value out of every single interaction with their customers. "And that's where payment solutions may make sense even if your costs are not out of line," he says.
Payment solutions have taken a back seat to other core systems for insurers, according to Weber, not because of costs but mostly due to how the process is viewed in executive suites.
"It has long been viewed as a process that is not badly broken," says Weber. "But as the economic crisis has unfolded, [Celent's] take is carriers are looking for every possible lever to pull as a differentiator. Payments is in the sweet spot in that it is both a service differentiator and potentially a cost item for carriers."
The Celent survey discovered most insurers are looking at payments in the correct way. Sixty-six percent of insurers described their own payment operation as both a service and a financial function, with 24 percent viewing it as primarily a service function, and just 11 percent describing it as primarily a financial function.
"Payments is one of those issues that spans the enterprise," says Weber. "Someone in treasury cares about payments, someone in operations and service cares about payments, and distribution cares about payments."
The important point, though, is people from various parts of the enterprise believe it is a function that needs to be done well. "That is an emerging holistic view that is much healthier than the view of payments either as a financial transaction or as a service transaction," says Weber. "It really should be viewed as a little of both."
The survey found paper checks remain the largest form of payments received by carriers, with 54 percent reporting this is the major way they receive premium payments.
This number has been creeping downward in recent years, Weber points out. "There is a persistence of paper, and that really goes against everything carriers are trying to do in terms of automation, self-service, and generally, the shift from paper to electronic," he says. "I think it's a healthy sign in the industry people view anything paper based as problematic."
Outsourcing of payment processing is not seen as important to insurers, with 47 percent of those interviewed saying it is unlikely they would ever outsource this operation.
"I think the perception [carriers] have is it's not a huge investment in hardware and staff to open envelopes, extract payments, and get them applied," says Weber. "From my thinking, it's the perfect application to outsource because it is very transactional."
A third party with best practices and doing things at a tremendous scale could deliver the same service cheaper, continues Weber. "It's the perfect application for an outsourced approach," he says.
Beyond sourcing, the biggest innovation insurers are likely to see is alternative payment methods, such as mobile technology, which currently are not high on the popularity list.
"There is recognition today customers are doing things by e-mail or by text on their cell phones, and it is best positioned as an efficiency for the carrier and a convenience for the customer," says Weber.
The trick, as he sees it, is positioning such service in a way that feels like a service to customers but generates efficiencies internally. "In some cases, you are reacting to customer needs, and in others, you are priming the pump to make customers understand why this is a good thing," says Weber. "[Payments] probably is one of those items that cross between the two. I don't think you are likely to get a little old lady submitting her premium via cell phone, but anybody who is middle-aged or younger is a good target for that."
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