Opportunity for new business: digital payment with insurers

For the past two decades, insurance companies have been racing to catch up to the digital needs of their customers. Legacy systems for portfolios, claims/benefits, and commissions have been (and are being) replaced by new solutions. It makes little difference whether this is done through in-house software or the use of well-established, licensed products and SaaS solutions.

While the use of modern technologies and fully automated processes is - and will remain - the state of the art in other fields, traditional insurance companies seem to have missed the boat in the B2C sector and are lagging behind other industries, despite the modernization measures they have taken to date such as digital claims processing and the creation of customer portals.

Drivers of change

However, increasing competition from tech start-ups and the experience of banks with digitalized processes are giving insurers food for thought and prompting them to rethink their approach.

Insurance companies are also reconsidering and reassessing the changing risk landscape - another factor that is pushing them to change. With the insights that are gained, companies are identifying new and contemporary business areas that cannot be offered without technical modernization.

Fast new business

The key term "near real-time processing" is at the heart of at least one approach for catching up to customer needs.

While this term (or what it refers to) can be applied to a wide variety of processes and process chains, we'll focus here on the benefits offered by the approach when using payment service providers such as PayPal, Amazon Pay, Visa, Klarna, etc. for insurance transactions.

Most insurance companies still use SEPA transfers via banks to process payments. However, some industry players have recognized the new trends and expanded their payment options to include digital wallets and/or credit cards.

The jungle of payment service providers

Insurers can choose from a wide range of payment services. In particular, they can now create direct connections to PayPal, Apple Pay, Google Pay, Amazon Pay, and credit card companies.
However, the integration costs for connections to specific payment service providers can quickly become expensive. A separate range of services must be used or integrated for each payment service. Furthermore, additional maintenance costs and the treatment of special cases must be taken into account to realistically calculate the expected costs.

Several payment methods...but only one payment service provider!

Payment service providers such as Pay One, Saferpay, Stripe, and Computop (to name a few) offer a convenient alternative to direct connections.
Generally speaking, these service providers serve as intermediaries.

By integrating their services, insurance companies can communicate with a large number of payment services from the portfolio of a single payment service provider. Most of the maintenance costs are borne by the payment service provider itself.
Nevertheless, the additional service and/or intermediary costs incurred by the payment service providers must also be taken into consideration.

If insurance companies offer payment processing via digital wallets (e.g., PayPal) or credit cards (Visa, Mastercard, etc.), they can increase the convenience and benefits of the customer experience.
Consumers have long since become accustomed to "instant cash" with extremely short delivery times. When it comes to insurance services, however, this approach is often still in the early stages.

New products for new business through "real-time processing"

If we take the example of an insurance policy allowing for the immediate payment of premiums via a direct insurance portal, "instant cash" can also result in "instant coverage." In other words, immediate coverage can be attained by means of a secure payment.

When the policyholder makes an immediate payment ("instant cash"), the respective payment service provider/intermediary guarantees receipt of payment as long as the customer's bank account has sufficient funds or is not frozen at the time of the payment. Once the bank account and its funds are confirmed, the respective payment service provider/intermediary guarantees the transaction, even if the account proves to have insufficient funds during subsequent bank processing.
Although such a scenario leads to a dispute between the payment service provider and the customer, the insurance company is in the clear and can guarantee immediate coverage.

An example of a use case for "instant coverage" might involve a customer failing to take out an international health insurance policy before going on a trip. With "instant coverage," the customer could take out a policy online at the airport shortly before departure and receive the policy with immediate coverage by email.
In addition, processes such as prepayments or payments for moped or other short-term insurance can be streamlined, and the costs for processing such payments reduced significantly.

Insurers benefit from cost advantages and simplified processes

What's more, since no separate SEPA mandates are needed, digital wallets and credit cards can save insurance companies even more time and administrative hassle.

Insurers spend lots of money to have payment transaction problems processed by clerks. Every day, clerks responsible for clearing up unresolved incoming payments must decipher incorrectly booked transfers and cryptic purposes of payment. This "detective work" is often time-consuming, and from the insurer's point of view, a cost factor that should not be underestimated.

From this perspective alone, it is worth considering payment service providers as the payment process is totally digital.

If we consider self-pay customers who prefer to have full control over their finances or who may be faced with a payment reminder, the entire process chain is mapped digitally by the payment service provider.
Self-pay patients receive a QR code in their invoice. Upon scanning the code with an app on their phone, the user is redirected to a payment page provided by the respective payment service provider.
The data required to process the payment is stored without modifications. This makes it easy to log incoming payments and allows for fully automated end-to-end processing.
This type of transaction chain completely eliminates the need for clerks to record incoming payments.

If we look beyond the borders of Germany, the following maxim usually holds true:
"Other countries, other payment methods."

In Switzerland (for example), credit cards, Twint, and e-bills are the preferred means for processing payments. By using the services of payment service providers, it is easy to meet the expectations of customers who are used to such methods.

In another use case, overdue premiums can be paid both immediately and securely. From the insurer's point of view, claims management processes can be terminated, while from the customer's point of view, coverage can be restored immediately.

However, these processes must also be supported by modern systems in the backend of the insurance company. Mainframe systems and traditional collection/disbursement systems are often unsuitable for this - or at the very least, require extensive updates or expansions.

Challenge accepted!

adesso insurance solutions understands the needs of the insurance industry and its customers, and has therefore allowed for alternative payment services to be connected to its in|sure EcoSphere.

If you would like to learn more about our insurance payment solution in|sure PayTras, please contact our expert Karsten Schmitt, Head of Business Development.