Insurance, Payments, Tech

How is the payments market innovating insurance?

New technology providing full transparency and visibility back to insurers so they can proactively manage their liquidity

Historically, global payments from insurers have been moulded to fit into a ‘one-size-fits-all’ approach. However, the pandemic has caused insurance organisations across the globe to consider what this looks like, especially due to certain types of claims increasing tenfold following the disruption. Whilst many companies will stick to the status quo, in fear of ruining any loyal relationships, it’s been a key component for others to stay ahead of the curve and progress with their payment processes. 

By examining what is a key feature in how insurance payments are made, one of the components to the complex puzzle is customer satisfaction. Whilst this can be achieved by offering quick and fluid solutions, insurers still want to be confident that the money will arrive at the right place, and rightly so. From the customers’ perspective, they want this transaction to be as quick as ordering from their favourite fast food restaurant or purchasing their next pair of shoes. Unfortunately, this is where the problem lies. 

Finding funds is fundamental

There was always an inherent problem due to the disconnect between the insurers and the Third Party Administrators (TPAs) with regards to the adequacy of Loss Funds. With poorly managed Loss Funds comes a variety of hold ups and negative knock on effects, such as:

  • Insufficient funds in account to pay claims means claimants receive their claim payment late, often following multiple chasers to the TPA/insurer. Reputational damage to the insurer affects potential renewal of policy which could lead to their customer switching to another insurer next year.
  • The TPA/insurer has to report any complaints ‘expression of dissatisfaction’ to Lloyds and the regulators which is time and resource heavy to report such events and to manage the resulting questions both internally and externally. 
  • Often insurers’ funds wouldn’t be reconciled or even, in extreme circumstances, never be identified. This results in insurers having to write off often large balances in their books. Not to mention the high costs of forensic accountants and auditors.
  • Over funded accounts, surplus funds, duplicate accounts – due to the cumbersome market processes, some funds are overfunded meaning insurers funds would be sitting in an account, often not even known about. For example, we have seen some Loss Funds dating back to the late 90’s with millions of dollars in.

Insurers have been relying on their systems right up to the present day, sitting on payments and insisting that claims take up to two weeks to arrive back with the customer. This is a gap that is being filled by challenger brands. 

Innovation in real-time

Today, many advancements have been made to steer the global insurance industry towards a new age. With progress made in parametrics cover and other sophisticated systems, insurers are now able to deliver a swift or real-time claim decisioning solution. In order for this to be truly useful and effective, the actual claim payment must also be swift and in real-time. There’s little use in instantly or even proactively confirming that a claim will be paid for the funds to take days to reach the claimant. Combining these two aspects that, traditionally, most insurers haven’t been able to achieve, puts those who utilise them in an advantageous position for the future. 

These new approaches to insurance indicate how the industry is slowly regaining momentum to catch up with the fast-paced nature of the rest of the world. One of the most innovative creations that is proving very popular right now is the use of satellites to track weather patterns. These monitor if an increase in wind will cause a surge in claims, therefore pre-empting the need for any payouts. This level of intuitiveness will be a key factor for customers as they look where to best invest their money for insurance, and many organisations are predicted to follow the lead within their own respective fields moving forward. 

With an increase in payment choices for the insured, such as e-wallets and the ability to send funds directly to a customer’s card – not just the age old paper cheque that inevitably doesn’t ever get banked – this gear change is a welcomed and much-needed introduction to insurers everywhere. 

What does the future hold?

Whilst there is still a long way to go, the steps that have been taken are integral to what the insurance industry looks like in the future. For example, security and transparency still require some refinement to allow for a seamless transition to this new age, but many organisations are now recognising the necessary steps to help advance such components. 

Technology is addressing the issues by enabling straight-through processing of claims settlement, from FNOL (First Notification Of Loss) to payment via API connectivity. With real-time payments, in multiple countries and currencies, this ensures the full amount of the claim is received instantly. This improves the experience of the customer, creates less complaints and increases retention.

New technology is also providing full transparency and visibility back to the insurers so they can proactively – not reactively – manage their liquidity levels and make funds available to those who need it, whilst also bringing balances back and reducing their cost of capital.

Vitesse is determined to make these steps as efficient as possible, and we are already delivering a solution that saves time for each involved party – decreasing the payment time from two weeks, to sub one minute. 

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