In an era where smartphone experiences shape customer expectations, the insurance industry stands at a crossroads in claim disbursement processes. While paper checks have long been the norm, digital solutions are rapidly gaining ground, offering improved customer experiences and operational efficiencies. I recently wrote about the outbound payments landscape in the Datos Insights report, Stop the Checks: Deliver on Brand Promise with Outbound Payments.
The Current Landscape
Despite evolving consumer expectations, most claims payments are still made via paper checks. However, digital claims disbursement is growing in popularity, with 73% of companies reporting a transition to digital payments. This shift is driven by several factors:
- Customer Satisfaction: Digital payments can reduce average payment time by up to 5.5 days, significantly boosting customer satisfaction scores.
- Operational Efficiency: Digital solutions help carriers do more with fewer resources, addressing concerns about staffing and talent retention.
- Fraud Prevention: Paper checks are subject to nearly twice as much fraud risk as other payment methods, with $1.3 billion lost to check fraud in 2022.
Benefits of Digital Disbursements
- Enhanced Customer Experience: Claimants want an easy, retail-like experience with fast access to funds.
- Operational Efficiency: Digital payments reduce costs associated with printing and mailing checks, positively impacting expense ratios.
- Improved Security: Digital solutions help mitigate fraud risks and comply with security standards like PCI and NACHA.
- Flexibility: Carriers can offer a variety of payment channels to handle different types of claimants and third parties.
The Digital Solution
The payments market consists of many players, including traditional banking entities, industry-agnostic payment gateways, and insurance-specific solutions. Modern payments solutions are expected to have, at minimum, capabilities such as virtual cards for vendor payments, call center support, recurring ACH payments, push-to-debit, and account reconciliation.
Some vendors offer differentiating capabilities such as the ability to include attachments, digital multiparty payments, text, and customer and carrier portals. Next-generation capabilities that few vendors offer include real-time payment processing, digital wallets, and mobile payment services.
Conclusion
Insurers should evaluate consolidated outbound payment gateway solutions to simplify vendor management and enhance customer experience, as well as to offer policyholders more payment choices and mitigate security compliance requirements. Insurers should also consider how digital solutions can reduce claims disbursement costs, improve cycle times, and increase customer satisfaction. Leveraging APIs from core system vendors and payment gateway providers can simplify integration and minimize upgrade challenges.
By embracing digital disbursement solutions, insurers can meet evolving customer expectations, streamline operations, and stay competitive in an increasingly digital marketplace. Read the full report.
