Each year carriers dole out hundreds of billions of dollars to settle claims, typically by cutting checks. But insurers increasingly are turning to stored-value debit card systems.One of the latest companies to do so is Portland, Ore.-based Standard Insurance Co., which will begin offering Visa-branded cards as an alternative to checks for group long-term disability claims presented after Jan. 1. Among the reasons insurers are embracing stored-value cards is to increase the speed at which funds get to policyholders.
Just another option
Standard Insurance believes the cards will increase customer convenience and help the company in its marketing efforts. The insurer, though, plans to continue offering checks to claimants as a payment option.
"We don't want to force the card on anybody," says Kim Doyle, Standard Insurance director of product development. She declined to estimate how many debit cards Standard Insurance likely will distribute this year.
Because long-term disability claims can take 90 days to process, the first cards are not expected to be distributed until the second quarter, Doyle says. The cards can be used to initiate purchases at any Visa merchant location worldwide. Cardholders also may initiate PIN-based purchases at Interlink merchant locations and ATM withdrawals at Plus ATMs.
Insurers can offer different types of debit cards based on their needs. Sunrise, Fla.-based WildCard Systems Inc. offers four card products to insurance companies, says Gary L. Palmer, WildCard Systems chief operating officer. "A stored-value card is a better way to get payments to customers more rapidly," he says.
WildCard Systems' stored-value insurance products include a Visa- or MasterCard-branded card that is mailed to individuals after a claim is reported, a PIN-based debit card, and a customer-identification card.
A fourth product is a special Visa-branded debit card that is not embossed with the cardholder's name. Instead, the card, which is being tested in several pilots, stipulates in embossed wording that the individual is a policyholder of the sponsoring insurer.
The product, which uses special authentication protocols, is designed so that an adjuster can offer a universally accepted debit card to disaster victims so that they may immediately check into hotels, buy clothes or other necessities, Palmer says.
ID cards with stored-value functionality also are gaining momentum. A large insurer-which Palmer declines to identify- plans between April and September to distribute such cards to its 1.8 million automobile and homeowner policyholders.
When customers file claims, the adjuster can load the payments onto their cards, eliminating the need to wait for a check, Palmer says.
Paying dividends to policyholders
The ID debit cards also will be used by several mutual insurers to pay dividends to their policyholders, which own the companies, he adds. Among the WildCard Systems' insurance company customers are Columbia-based Missouri Employers Mutual Insurance Co., Providence, R.I.-based Amica Mutual Insurance Co., Sarasota, Fla.-based Florida Select Insurance Co. and Hartford (Conn.) Financial Services Group.
In January, The Hartford announced plans to issue a Visa-branded insurance claim card. The prepaid debit card is designed to provide access to funds within 24 hours of a claim approval. The claim card is being tested in 25 states. A nationwide rollout is expected by the end of this year.
Jeff Green. This article originally appeared in ATM & Debit News, a Thomson Financial publication.
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