Big Idea 2015: The Insurance Industry Needs to Catch Up to Its Customers

In this series of posts, Influencers and members predict the ideas and trends that will shape 2015. Read all the stories here and write your own (please include the hashtag #BigIdeas2015 in the body of your post).

It may seem strange that my Big Idea for 2015 is the ability to accept electronic payments. You’d be correct in thinking that this is a technology and process that has been available for many years and has become a commonplace method to pay for goods and services.

Except in the insurance industry.

The lack of a streamlined electronic payment process that allows the insurance consumer to pay their policy premium quickly is a significant problem facing the insurance sector. Consumers’ expectations are changing faster than the industry’s current ability to address them.

The most frequent contact and engagement between the insurance consumer and the insurance provider are the policy premium payment transaction. Payment transactions are 4 to 10 times more frequent than any other type of transaction.

Last September I wrote an article on LinkedIn detailing why the insurance industry must update their payment process. In this article, I shared the latest Federal Reserve Bank of New York’s most recent study of consumer payments — 85% of all bills are now paid electronically instead of paper checks being mailed.

Insurance companies introduced a direct bill payment process a number of years ago. For many insurance policies the premium invoice now come directly to the policyholder from the insurance company. The payment is then mailed directly to the insurance company, or the policyholder goes online to the insurance company website to make their payment. Because of this process, insurance agents have lost the ability to engage with their customers during the payment process.

Insurance agencies are currently cut out of a critical opportunity to maintain, strengthen, and extend their relationship with their client because they are not in front of the policyholder.

Because each insurance company has their unique method and process for accepting online payments, the agency client has to learn how to navigate the payment process for each insurance company. This includes requiring an individual user login and password. This is extremely cumbersome for the client, which does not create a great customer experience.

Personally I pay policy premiums online to two different insurance companies, each requiring a separate user login and password that I have to remember and maintain. How do you currently pay your insurance policy premium?

Many insurance agencies try to streamline the payment process for their clients by creating a payment page on their agency website. This page lists the various insurance companies represented by the agency and provides links directly to the insurance company electronic payment portal.

The current insurance payment process has several inherent flaws.

• Every insurance company has a different payment process with various account creation requirements.
• The agency client is taken directly to the insurance company, bypassing the ability of the agent to engage and interact with their client.
• Clients that have insurance policies from multiple insurance companies increase the complexity of the payment process.
• Because electronic payments are not made through the agency website, agency staff lose the ability to engage with the client and offer additional insurance coverages.

Payment Hub—A Possible Solution

The insurance industry has a long history of not being able to create a cooperative environment. It is unrealistic to think that insurance companies and insurance agency automation vendors will be able to create a seamless process to accept electronic payments.

As detailed in my white paper, the payment processing industry is complicated. Creating the necessary legal and secure environment to process electronic payments is not a core skill of the insurance industry.

A third party entity that specializes in the electronic payment process could create a “payment hub” or “payment portal” where the insurance consumer could go to make payments on their policy in a streamlined environment. This type of joint payment gateway would help create a much better customer experience.

The benefits of this type of payment portal include:

• The insurance agency or insurance company would not have to create a PCI Level 1 certified payment gateway.
• Because the third party would be a PCI Level 1 certified payment gateway, any agency or insurance company can pass payment data to the Payment Hub with full confidence and no effect on their PCI Certification. This is a unique situation.
• The payment hub would provide an insurance agency with a secure payment page branded for the insurance agency as part of their website.
• The payment hub would also provide the insurance agency with the ability to accept electronic payment for any agency billed invoices directly on their website.
• Clients would be directed to the agency payment page and would have no reason to leave this page or the agency’s website.

The actual payment process would look something like this:

1. The agency directs the client to the agency Payment Hub branded page from the agency website.
2. The Payment Hub would securely collect information from the policyholder about the insurance company, policy number, and any other required information for the selected carrier.
3. The Payment Hub would pass the data collected to the insurance company payment or back office system and request the amount due and date due to be returned.
4. The agency-branded Payment Hub web page would display the amount due and the date due for the client. Payment history would also be displayed if provided by the insurance company system.
5. The Policyholder indicates whether they wish to pay by ACH, credit or debit card, or prepaid credit card.
6. The Policyholder enters card number, expiration date, and other required information on the PCI Level 1 page branded for the agency.
7. The payment data is returned to the insurance company system or the carrier’s current payment processor.
8. The insurance company payment processor processes the payment exactly the same as they do now.
9. The processor or insurance company system returns a confirmation of payment accepted or a notice that the payment was declined.
10. The Payment Hub receives the response on the status of payment and displays a receipt for policyholder or the payment declined notice.

Benefits of a Payment Hub

Creating a common Payment Hub would have a number of benefits to the insurance industry including:

• The agency maintains and builds a presence with agency customers online.
• Because the client remains on the agency website after the payment is verified, the agency can display an up-sell or cross-sell offer. This offer could be customized for the client based on information contained in the agency management system.
• The Policyholder has a simpler, more consistent payment experience.
• The insurance company moves customer service calls from its call center to the agency.
• The insurance company only has to pass the same data to the Payment Hub they are currently passing to their existing credit card processor.
• The insurance company strengthens the relationship between its agency sales force and the policyholder.

The growth of electronic payment options such as the Starbucks app or the new Apple Pay highlights consumers desire for an easy on-line payment process. Ease of doing business does make a difference.

It is long past time for the insurance industry to make the policy payment process easy and convenient for the new online consumer. Creating a Payment Hub would not be complicated. The infrastructure is already in place. We simply need the will to make it happen. If we don’t, someone outside the insurance industry will see an opportunity and catch us off guard.

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Steve Anderson is an authority on insurance technology. He is a prolific writer and frequent speaker known for his knack for translating “geek speak” into easily understood concepts. Check out his free weekly newsletter “TechTips” and other resources on his website.

Photo credit: DepositPhotos.com | daoleduc