Where Insurance Claims Payments Break Down (and How to Fix It)
By Rob Eberly
VP, Insurance
The underlying promise of insurance is that of peace of mind. Policyholders rely on the safety net provided by insurers, with each policy payment reflecting an inherent trust that should a need arise, the insurer will be quick to react.
The challenge for many policyholders is that both the premium payment and especially the claims payout experience can be high-stress, emotional events. The delicate nature of these interactions necessitates a transformational shift from a one-off, transactional model to that of a service-oriented approach in the form of Service Commerce.
For insurers, Service Commerce is the answer to the $2.6 billion in monthly revenue put at risk of payment delays due to billing and payment dissatisfaction.
Diagnosing the Breakdowns: Common Insurance Claims & Billing Experience Challenges
Property and casualty insurers believe their billing and payment experience aligns with policyholder expectations, however new research from our recently released Service Commerce Performance Gap report highlights several friction points throughout the policyholder relationship.
Gated Flexibility and Forced Call Center Friction
40% of policyholders indicate that they must call customer service to resolve billing issues or request payment timing adjustments. A lack of self-service creates a wedge between policyholders and insurers, leading policyholders to delay payments or take no action at all rather than call a live agent.
Claims Disbursements Bottlenecks
A reliance on paper checks is costly in both time and money. This critical moment of truth is when trust is tested and relationships are won or lost. Mailing checks and asking those enduring a hardship such as property damage or a car accident to wait 5-7 days to receive their money is a non-starter in today’s digital world.
Paper checks send a clear signal that an insurer has built its disbursements process around its own needs, not its policyholder’s.
The Billing & Payments Perception Gap
To put a fine point on the frictions facing property and home insurers regarding the billing and payments experience, 58% of consumers judge an insurer’s service quality by the payment experience. And yet, carriers consistently rate billing and payments near the bottom of churn drivers.
Given carriers’ perception of the importance of the billing and payment experience, it’s understandable that investments in the policyholder experience may flow elsewhere. The data proves, however, that policyholders increasingly value a quality billing and payments experience. A lack of modernization in this area increases the frictions experienced by policyholders.
How Insurance Billing and Payments Frictions Impact DSO and Churn
Friction within the insurance billing and payment experience has real-world costs that go beyond brand perception. Payment disputes or delayed payments due to lack of preferred options push the insurance industry’s days sales outstanding (DSO) to 35 days, risking policyholder lifetime value losses of approximately $65,000.
To reiterate, that’s an entire month of cash flow being disrupted by a payment dispute that generally revolves around a lack of clarity within the bill, an unexpected charge, or a lack of self-service mitigation options.
DSO is not only a monthly cost, it’s a churn predictor. Withholding payment is the first recourse. Switching providers shortly follows. And this trend becomes more pronounced within Gen Z—policyholders with the longest bill paying runway ahead of them.
Out of every adult demographic, Gen Z is the least satisfied as it relates to property insurance billing. For that reason, 71% of Gen Z policyholders say that they will switch carriers if limited to clunky, non-digital payment options. This necessitates a commitment to modern payment options such as Apple Pay®, Google PayTM, and Venmo, as well as instant disbursement payouts.
As stated in the report, “what (Gen Z) experience(s) next will shape provider loyalty for the next two decades. The providers who close the distance first, in competitive and captive markets alike, build an advantage that compounds over time.”
Applying the Pillars of Service Commerce to Insurance Billing and Payments
The pillars of Service Commerce revolve around dedicated partnerships, applied intelligence, personalized billing experiences, and dynamic simplicity. For insurers, it is essential to develop experiences that bring these pillars together in a cohesive and comprehensive way.
For starters, insurers must partner with vendors that view billing and payments through the lens of relationship builders as opposed to one-off transactions. Paymentus has always prioritized relationships over transactions. In the complex world of insurance, working with partners that intimately understand the unique regulatory challenges you face, as well as the demands of premium billing, grace periods, and claims payouts, is essential in delivering the experience demanded by today’s policyholders. If your current billing vendor still speaks in transactions, they’re missing the bigger picture.
Applied intelligence enables insurers to take advantage of the valuable data contained within everyday transactions. This is retention fuel. Data allows us to form powerful insights that can flag policyholders who may be at risk of churning, prevent coverage lapses, or even automatically trigger reminders and self-serve options to reduce call center volumes.
Personalization is another key, especially for younger policyholders. Each of your customers has different needs, realities, and preferences—all of which can change over time. Committing to personalization means leveraging the intelligence gathered throughout a policy lifecycle to make every touchpoint more purposeful and service oriented.
Finally, insurance backends are notoriously complex, often involving legacy core systems, policy administration software, multi-state regulations, fragmented workflows, or continuous back-end upgrades and enhancement. Each carrier's backend system strategy and investment should not be a barrier to continuous payment innovation. These exercises can be done in parallel. The end goal is a smooth, seamless tech platform that empowers choice and personalization without necessitating multi-year IT overhauls.
Immediate Actions Insurers Can Take Toward Payment Modernization
Paymentus recommends the following actions that can help insurers turn every interaction into a relationship building experience:
- Audit existing claims disbursement and premium payment channels for self-service capabilities. Include everything from updating information to requesting payment plans or extensions.
- Implement instant digital payout rails to drastically lower claims cycle times and administrative overhead. It’s also important to enable disbursements to be sent to debit accounts and digital wallets.
- Benchmark your performance against the Service Commerce Performance Index (SCPI). Discover the hidden frictions impacting satisfaction scores and see where carriers most often fall short to help your organization avoid these pitfalls.
Access the full Service Commerce Performance Gap report today. You can also contact us to request a personalized assessment from a Paymentus Insurance expert.
