Optimizing Insurance Payments with Network Tokens

Online payments have been greatly expanding. Visa reports that worldwide ecommerce sales grew 27.6% in 2020.¹ And per McKinsey, 82% of Americans used some form of digital payment in 2021.² The pandemic, the increase in next-gen technologies, and the growth of more digitally native populations, have all greatly impacted the rise of digital payments, including insurance premium payments.

Online Insurance Payments and Security Threats

Just as the shift to remote work during the pandemic shone a spotlight on manual processes and the need for automation, the shift to online payments has brought to light some weaknesses with ecommerce. With more and more insurance premium payments occurring digitally, identity theft is a concern. When policyholders make digital premium payments, they transmit sensitive data. An example of this type of sensitive data is the primary account number (PAN) that identifies a customer’s credit card issuer and account.

According to the FTC³, the IdentityTheft.gov website received nearly 1.4 million reports of identity theft in 2020, almost double the number of complaints received in 2019. Due to these higher rates of fraud, online payments are considered less secure than in-person payments and can have higher card processing fees known as ‘interchange rates’. These ‘card not present’ transactions also have a greater chance of being declined.

Insurers want to offer their customers choice and convenience, but they also want to ensure that they protect their policyholders from any security threat. Tokenization is one important tool in this effort. Therefore, it’s important to understand its value.

What is Tokenization?

Tokenization is a security measure that replaces sensitive information, such as PAN data, with a unique code called a token. This is useful in the event the information is hacked, leaked or otherwise stolen. If a data breach exposes credit card numbers, the information may be used to make unauthorized purchases. If a data breach exposes tokens, the actual credit card numbers will still be safe, thereby shielding consumers from identity theft.

Tokenization allows the sensitive information like PAN data to be sent to a service provider who specializes in securely storing the original sensitive data. When an insurer needs to process a payment and reference that data, it makes a request to the service provider using the token, thereby reducing risk in the event of a breach.

For insurance companies, complying with the Payment Card Industry (PCI) security standards is a priority and tokenization has been recognized as an important security measure. In an article appearing in Payments Journal⁴, Narendra Sahoo, Founder and Director of VISTA InfoSec, explains that tokenization can help companies achieve PCI-DSS compliance by decreasing the amount of sensitive data stored in-house, which decreases compliance requirements and results in faster audits.

How is Network Tokenization Different?

With network tokenization, the merchant or third-party tokenizes directly with the card brands themselves (e.g., VISA, Mastercard, Discover, etc.). The card brands then validate the authenticity of the card directly with the issuing banks, helping to further increase authorization rates and reduce the chance of fraud. This extra layer of both reliability and security provided by network tokenization can enable lower interchange rates for insurers and greatly improve the policyholder payment experience.

The Additional Value of Network Tokenization

Normally, when a policyholder’s card needs to be reissued due to loss, theft, or expiration, it causes a level of disruption and stress. There is a period of time that occurs before old card information can be updated with new information. It can result in late or missed payments that can put an insurance policy into lapse status or even cancellation. At a minimum, it can cause more calls into an insurer’s service center. But with network tokens, card issuers can update tokens in real-time. They can even update them ahead of expiration dates to further ensure continuity and a frictionless experience.

Insurance Payment Optimization with One Inc

In a recent interview with Corporate Risk and Insurance, One Inc CEO, Ian Drysdale, emphasized the importance of next-gen technology and innovative strategies in helping insurers lower costs, increase revenue and improve customer experience.

He discussed the impact of interchange fee increases, the benefits of network tokenization, and the substantial savings insurance carriers can achieve by having the operational fluency of issuer tokenized payments.

“At One Inc we have been building our network to access that capability, not only in anticipation of interchange fee savings, but other benefits as well, including increased approvals and therefore sales”.⁵

We’re here to help. To discuss how One Inc can partner with you to optimize your payments, please call (822) 209-1688 or email inquiries@OneInc.com.