The insurance industry has demonstrated both flexibility and resilience over the last few years. As digital technologies mature, more digitally forward businesses in the sector have looked to equip themselves with new capabilities to drive both operational efficiency and transformation. Deloitte’s 2023 Insurance Outlook suggests that insurers should “maintain an ongoing culture of innovation while making customer-centricity the focal point of the industry’s standard operating model”. However, while responding to regulatory requirements and economic challenges remain at front of mind for many insurers, delivering a seamless and customer-centric payments experience for disbursement and collections has often fallen by the wayside.
What are the key payment challenges?
There are several challenges surrounding payments in the insurance sector that can make it difficult for insurers to efficiently process and manage payments. Namely the complexity of the insurance industry itself, requests for increased transparency, evolving customer demands and the phasing out of legacy systems. A focus on fair value rather than the payment methods used by customers has preoccupied many players. The traditional acquirers that serve the industry have delivered payment options which are limited to one-off ecommerce payments, mail order and telephone order solutions for call centres and direct debit payments.
Many of the payment providers working with insurers are under servicing their customers and failing to deliver new payment products in good time. From a consultative perspective, the industry is also underserved in terms of support solutions for ongoing account management, in addition to providing the data analytics and reporting needed to maintain a customer-centric payments strategy. As other sectors have introduced alternative payment methods such as open banking and digital wallets, the insurance sector has lagged behind. Without these more streamlined payment options to offer customers, it is challenging to provide the improved level of payment experience now seen in sectors such as consumer lending.
Phasing out legacy systems
The phasing out of ill-equipped legacy systems is a reaction to the market shift towards convenience and connectivity, particularly when it comes to making and receiving payments. The increased use of digital technology in the sector has led to a rising number of online payments and electronic transactions. Gartner found that legacy modernisation is a high priority for insurance CIOs, with 55% of organisations surveyed currently undergoing a modernisation project of their back end or core systems.
As digital transformation in the sector continues, working with a combination of modern and legacy insurance core systems can make the day-to-day management of such systems challenging. The larger players in the sector are slow to adapt to change due to a combination of strict regulations and complex governance processes. These organisations cannot react quickly enough to keep up with evolving customer demand in comparison to organisations in other sectors, and extensive time-consuming pilot schemes are often required before widespread adoption of any new feature changes.
The evolution of technology has also brought about a change in customer expectations. The ability to deliver fast, secure digital claim payments through payees’ preferred channels and methods is becoming a key differentiator for the sector. Insurance businesses that rely on manual claim pay-out processes and are unable to offer a streamlined payment experience that matches rising customer expectations risk falling behind in a climate of increased competition.
Delivering for a varied customer base
Connecting and engaging with policyholders is critical to providing a convenient and seamless payment experience. With insurers often serving a varied customer base which includes individuals of all ages and payment preferences, the ability to offer a variety of payment methods including digital wallets, mobile apps, payment links and open banking can help appease a multi-generational customer base. Many policyholders may also have strong preferences regarding one-time payments or recurring payments, so ensuring there are payment frequency options is also important. When it comes to perfecting the payments journey, satisfied customers translate into higher win-rates for insurers.
Leveraging the latest payment technologies
One way to solve payment challenges in the insurance sector is to leverage technologies which streamline and simplify the payment process. This can include the use of online payment platforms and mobile apps that allow customers to easily make payments and track their transactions. It can also include the use of data analytics and other tools to better understand customer behaviour and payment preferences, and to tailor the payment experience to their needs.
The Acquired.com Hub is designed specifically to improve business’ efficiency and enable highly informed decision-making when receiving and collecting card payments. With a single integration, our customers are able to access all of their payment activity on one platform. Real time gateway transactions and exportable reports support actionable insights about customer payment preferences, so that business can be highly reactive to optimising processes where possible.
Maintaining up to date customer payment information
It is critical that insurers maintain the most up to date customer payment information so that recurring payments can be efficiently collected, and avoid costly failed payments as much as possible. Manually contacting customers to update their card payment information is both time and cost inefficient. It is also worth noting that Consumer Duty regulations state insurers should identify any ‘friction points’ that could benefit the firm to the detriment of the customer. The need for long telephone hold times or complex forms for customers to update their payment information during the renewal process would fall into this category.
An Account Updater service which automatically requests and updates customer card information using data from card issuers is an ideal solution to this challenge. If new details are available, the tokenised card information is updated and when the next payment attempt is due to take place, the request should be successfully authorised. Ensuring the steady processing of transactions every month promotes longevity in the customer lifecycle and reduces work from an operations perspective by removing the need to manually update customers payment details.
Finding a customer-centric solution
Although the challenges surrounding payments in the insurance sector can be significant, by selecting a payments provider who can offer a variety of payment methods and deliver automated tools to improve efficiency, insurers can help to ensure a smooth and efficient collections and disbursement process for their customers.
If you would like to know more about how Acquired.com can work with you to co-create a bespoke payment solution, get in touch with our team.