While they are among some of the world’s wealthiest corporations, insurance companies have nevertheless been clobbered by COVID-19, from travel cancellations to business disruption policies to a rising tide of property and casualty (P&C) claims.
For their part, policyholders aren’t thrilled with the speed of insurance disbursements at a time when having funds in their accounts can mean the difference between shuttering or staying in business.
Now, take a wild guess as to a chief culprit behind pandemic-era insurance payment delays.
“The biggest challenge with distributing P&C insurance claims boils down to the paper check,” Tom Reuter, director of digital payments at Deluxe, told PYMNTS. “Last year, [analyst group] Aite Group found that over 50 percent of claim payments were issued [via] checks.”
“Sending out a check requires policyholders to wait for a week, sometimes longer, to get much-needed funds after an accident or crisis. New digital payment methods provide faster fund availability and a better claimant experience, but digital transformation typically requires significant disruption to carriers’ claims processes and accounting systems. We have been working closely with large P&C insurance carriers to uniquely meet their needs and [those of] their policyholders,” Reuter said.
Modernization of claims payments is a key theme of the June 2020 Digitizing B2B Payments Tracker®: Taking the Paper Check Digital, done in collaboration with Deluxe. While the pandemic has supercharged a shift to digital, many organizations will need to take a blended approach, dealing with both paper checks and digital payments as transformation proceeds.
An Appetite for Innovation
Much bandied-about notions of digital transformation have penetrated the monolithic insurance sector more slowly than adjacent verticals. Insurers are aware of their legacy problems and are partnering more readily now with payment services providers (PSPs).
“The P&C industry at large appears to be examining how … emerging technologies could revitalize their businesses, even during the COVID-19 pandemic,” the June Tracker states.
“One recent study noted that 95 percent of personal line insurers — those that insure individual property — currently have not made any changes to their technology budgets because of the pandemic and are still moving forward with plans to innovate their systems. Seventy-five percent of commercial line insurers — those that, broadly speaking, insure businesses’ properties — said the same. This indicates that the industry’s appetite for innovation remains strong,” according to the latest Tracker.
The fact that insurers are not dialing back digital plans that were greenlit pre-pandemic is a good sign – but it’s also a reckoning of sorts as that industry plays catch-up.
“Insurance, much like the banking industry, routinely handles some of the largest and most sensitive payments. Both industries are also caught up in similar innovation cycles as they seek to enhance these payments, with each attempting to upgrade legacy systems to keep up with today’s global digital economy,” according to the Digitizing B2B Payments Tracker®. “Today’s policyholders are much more tech-savvy and use digital solutions in much of their daily lives, meaning insurers must find innovative ways to send funds.”
Considering that research by PYMNTS found that over 52 percent of insurance claims disbursements remain in the form of a paper check, the modernization gap still yawns.
“Paying claimants as quickly as possible has always been integral to insurance operations, but it has gained importance in recent years as the P&C industry [has] swelled to new financial heights,” according to the June 2020 Digitizing B2B Payments Tracker®.
“The space recorded a 66 percent increase in net income, hitting $60 billion in 2018, for example, and the first half of 2019 saw individual insurer Lloyd’s report a $2.8 billion profit. The need to easily manage those payments means experimentation with emerging payment methods is ongoing, with interest in ACH, eCheck and debit or credit card payments expanding as policyholders start to see their FIs offer digital tools,” the new Tracker states.