How Digital Insurance Claim Payouts Can Help Business Owners Weather Tough Times

Slow-to-arrive payments can have devastating effects on the bottom lines of small to mid-sized businesses (SMBs). These firms often operate on slim margins, meaning that any disruption in the flow of funds can seriously hamstring their operations.

Overdue client payments are a well-known source of strain for SMBs, but sluggish insurance claim payouts are also a serious pain point. Such payments are intended to make things right for small companies in their moments of need, but slow-moving disbursements can pile on the financial hurt.

Waiting on paper checks in the mail can cause problems and restrict firms’ abilities to maintain the same level of operations, explained Azuraye Wycoff, executive manager at Boston-based short-distance moving and storage services provider Small Haul.

The firm purchases a variety of coverage — including auto insurance, cargo insurance, general liability and workers’ compensation — but relying on check-based disbursements can add tension, uncertainty and delays to the process of collecting payouts on insurance claims.

“Pretty much anything would be more useful [than a paper check],” Wycoff said.

The Drawbacks Of Check-Based Insurance Disbursements

Small Haul relies on a fleet of eight vehicles to handle jobs like transporting college students’ belongings to their dorms on move-in days, helping renters move into new apartments and other small- and micro-scale moving jobs. Wycoff said the company suffered the loss of one of the Jeeps it used to move trailers roughly a year and a half ago, kicking off a painful insurance claims process. The firm’s insurance carrier offers only paper-based payouts, which — combined with an intensive claim-filing process — created a prolonged restitution timeline.

“The process of receiving insurance payments was very long and drawn out,” she said. “We had … a vehicle stolen, and going through the process [to] finally receive that payment was pretty time-consuming.”

Small Haul had to wait more than three months between filing the claim and receiving its payout for the stolen vehicle, Wycoff said. Such a delay can have a tangibly negative impact on a firm’s cash flow, and this is especially true for small companies. SMBs are less likely than their larger counterparts to have spare funds on hand to fix damage or absorb out-of-pocket losses, and many cannot comfortably pay upfront and wait for slow-moving insurance payouts to reach them later. This means that affected SMBs must often operate at reduced capacity until disbursements arrive.

“That’s pretty tough for small business owners,” Wycoff said. “One of those vehicles is really part of our livelihood and our business. Not having the capital to get a new vehicle and get your business up and running [at that same level] and having to wait is pretty detrimental.”

Wycoff said that Small Haul was lucky the stolen vehicle was used only to support its main operations during times of greater demand, rather than being one of the core vans essential to the company’s business. She said the slow claim payout was nevertheless a burden.

“Not having that vehicle or the money to buy a new one immediately was definitely a challenge and put us in a bind for a couple of months,” Wycoff explained.

The Perks Of Digital Payouts

Insurers’ payout timelines can differ significantly based on the disbursement options they offer, however, and shifting from paper checks to digital methods can significantly ease the strain on business owners.

“A direct deposit would be easier,” Wycoff said. “Any kind of digital payment [would be].”

Drawn-out processing and delivery times are not the only problems with checks, either. Wycoff said it is too easy for paper checks to go missing, which can add uncertainty into transactions. Small Haul’s clients sometimes pay by sending checks in the mail, and confusion regarding the firm’s address has occasionally led to mix-ups. She said it can be difficult to hunt down these payments or confirm their statuses.

“Doing things online is always way simpler, and [there’s] a lot less risk involved,” Wycoff said. “We’ve seen it happen in the past where checks don’t get received via mail, so we’d definitely opt for anything that’s more of a digital payment option.”

Wycoff noted that many of Small Haul’s clients have moved toward online payments during the pandemic, and it could be a good time for insurers to follow their lead by enabling digital solutions and payout options. The extent to which the insurance industry will embrace digital payouts in the future remains to be seen, but such moves could go a long way toward satisfying businesses of all sizes and keeping them loyal for the long haul.