Not only is paper check payment much slower (5-7 days) and more expensive (10x more) than digital payments, but it also comes with four inherent insurer payment challenges: multi-party payments, lienholder payments, mortgagee payments, and vendor payments. In this four-part series, we’ll discuss these insurance payment challenges and how digital transformation addresses them. We’ll provide an overview of multi-party payments in part 1, further delve into total loss lienholder payments in part 2, learn about the complexities of mortgagee property claim payments in part 3, and finally take a look at the world of vendor payments in part 4.
Improving the customer experience has been a driving force for digital transformation in the Property & Casualty insurance arena for years. So much revitalization has been happening that it’s difficult to keep up…mobile apps, chatbots, two-way texting, AI …the list is endless. And with so many change initiatives happening simultaneously, it was no wonder that claim payment transformation fell behind. Most insurers had it on their digital roadmaps, but not necessarily at the forefront. Then COVID-19 changed everything. The pandemic forced a remote workforce and made anything that required manual intervention - especially check processing - not only inefficient and burdensome, but unsafe.
In a matter of only weeks, the COVID-19 pandemic greatly increased the adoption of digital payment methods among all generations. Customers now expect the same flexibility, convenience and control with claim payments as general digital payments provide. Customer retention now depends upon it and insurers have had to quickly pivot. SMA research shows that not only are 81% of personal lines insurers now focused on outbound payment digitization, 14% have accelerated their plans. Why? Because not only does the paper check payment process require manual intervention, but it is also much slower (5-7 days) and more expensive (10x more) than digital alternatives. It also comes with inherent insurer payment challenges: multi-party payments, lienholder and mortgagee payments, and vendor payments.
Multi-party claim payments have long been a pain point for both insurers and claimants because of the authorization, cashing and deposit process. Since many insurance policies list more than one person as the insured (e.g. joint owners, spouses, etc.), insurance claim checks are very often made out in the name of both parties. This becomes challenging when the word ‘and’ exists between the party names. In that situation, it’s then required that each party endorse the check before it is allowed to be cashed or deposited.
Complicating the process further, most banks will require that all payees be present together at the bank to endorse the check, especially for larger check amounts, with each person presenting a government-issued photo identification to safeguard against fraud. If this step cannot occur, then the check may need to be re-issued, initiating the check payment process all over again. As one can imagine, this can not only be tremendously inconvenient and frustrating, but it can also turn into a coordination nightmare, and surely does nothing to improve a customer’s experience.
So how can these claim payment challenges be resolved? The complications and delays involved with the paper check process for multi-party payments can be eliminated with the right digital payment solution. Selecting a comprehensive digital payment platform designed for property and casualty insurers can greatly simplify the authorization and reconciliation processes, as well as give all payment recipients complete payment flexibility. All payees, whether policyholders, claimants or third-party vendors, can provide digital payment approvals and select their preferred payment method, greatly accelerating the process and allowing for immediate digital payment.
Selecting the right outbound digital payment solution is critical to improving the customer experience, reducing operational expenses, and ensuring a successful transformation. Simplicity, speed and flexibility are key factors.
Check out Part 2 of our Claim Payment Challenge Series - Streamlining Total Loss Lienholder Payments - where we take a deeper look into the pain points of lienholder payments, what’s involved with the auto total loss process, and the benefits digitization can provide.