Insurers increasingly are choosing to direct bill insureds. But that can pose communication problems between insurers and agents.
The insurer/independent agent relationship has long been an important one, and when you add an insured to the mix, miscommunication and challenges are sure to arise. Such is the case with the billing process. Historically, agents were the ones who took responsibility for billing - as part of a larger customer service effort, agents were the insurer's face and ears to the insured. The past couple of years, though, have brought more sophisticated technology and complex products and combinations to the billing process. The industry reacted with direct bill, which changed the insurer/agent relationship.
Direct bill grew in personal lines and, ultimately, in commercial, according to Mike Fitzgerald, senior analyst at Boston-based Celent. "The insurer has been taking on more of the administrative activities around billing where it makes sense," he says. "Agents began to welcome that because the carriers could do it much more efficiently, and it wasn't something that was much of a value-added service."
Deciding to direct bill or allow the agency to bill can be tricky, especially if the insurer wants to account bill - billing multiple accounts on one statement - or if the product is complex and of higher value.
"Agents may not want the carrier to direct bill if they are running a program with many different coverages being underwritten by a number of different companies, but may want to present one bill to the insured," says Scott Curran, lead for Bermuda-based Accenture's North American Insurance Billing Practice.
However, Curran says, agency bill involves a great deal of back and forth between the insurer and the agent, figuring out who owes whom how much, and that can get expensive. "Now, because of the high cost of billing, it's becoming more and more apparent that if an agent can have a carrier do the billing and trust that the billing is done well, the agents are allowing the carriers to do more of the billing." Curran points to another direct bill benefit: The agent is often paid the commission up front, where in the agency bill model, the agent is taking the commission off of every insurance payment.
However, a challenge with direct bill is keeping the agents informed. "If there's a cancellation being issued, the agent should know about that before any notice of cancellation goes out to the insured," Curran says. "The agent can intervene, and help the insured get the payment in on time."
LEAVING LEGACY BEHIND
The needs of agents were paramount when Albuquerque-based New Mexico Mutual Group (NMMG) decided to replace its legacy billing system. "Our system was not Web-based; it was an AS/400," says Lynn Krueger, NMMG's billing and collection manager. "Our statements were pretty out-of-date."
Before deciding on a billing system solution to enable its direct bill, NMMG queried its independent agents to find out what they required. They wanted to be able to see the billing statements and statuses online, Krueger says. "They are very involved in the billing process," she says. "They see all notices of cancellations. We send duplicate forms to insured and agents."
NMMG ultimately opted for BillingCenter from San Mateo, Calif.-based Guidewire. The new system enables an end-to-end billing process, including payments, collection agency management and agent commissioning, and is in use by 40 internal users, across the billing, underwriting, accounting and claims departments.
These capabilities are necessities to many insurers. Insurers have learned over the last couple of years that policyholders - companies or individuals - aren't comparing insurers' billing capabilities against other insurers. They are comparing the bills from insurers to bills from the cable company, or the phone company, Curran says. "From an insured's perspective it's not that different, but we all know there are many things that make insurance billing more difficult than other industries."
The insurers' old billing systems, often combined with policy admin systems, can't support necessary functions. Other industries have greater capabilities because they don't have to work with outdated systems holding such vital data, according to Curran. "With a combined billing/policy system, making a billing process change would be a big development effort," he says. "But insurers now are looking for systems that the business can configure. If the business wants to use billing to differentiate itself, they can configure the system to support the differentiating capability. In the past, the older systems got in the way of bringing out new payment methods, even sometimes new lines of business."
This is yet another driver for implementing a new billing system, according to Kim Morton, global product marketing director at Guidewire. "It's great to have a system to launch new products, but if you can't bill for it, you can't launch them," she says. "Multiple bill plans can't be done on legacy systems," she says. "And that's a headache for agents."
When ICW Group upgraded its multiple lines of business onto one platform, the San Diego-based insurer implemented industry-specific solutions from SAP, Newtown Square, Pa., for claims, payments, billing, financials and corporate performance management.
"We have a comprehensive five-year growth and transformation strategy," David Hoppen, COO, ICW Group said in 2008. "Therefore, we needed to look beyond short-term fixes in our claims, payments and billing operations to the enterprise at large. SAP solutions gave us the functionality required to meet our current and anticipated needs, and the framework to improve our operational efficiencies. Since customer satisfaction is of paramount importance, we needed an integrated platform so our customers will be better served."
Accenture's Curran points out that billing is the No. 1 touchpoint with policyholders. "Most insureds won't have claims, but every insured receives a bill," he says. "You have to make sure you get it right."
Billing systems are evolving into incorporating more customer service tools, according to Celent's Fitzgerald. "Billing systems for years were just about how to get a bill out, and how to record it in the general ledger," he says. "Now, billing is moving to a more customer service focus. Many of the vendors have made that move and introduced that functionality into their systems and some haven't finished."
Some of the billing systems include download to agency management systems; some do it according to ACORD formats, such as AL3, Fitzgerald says.
Modern billing systems more easily interact with agency portals. NMMG built out its agency portal at the same time it implemented BillingCenter. The portal has been heavily used by agents since it went live in January 2009. "The agent can go into the portal and see all of the invoices we've sent them in the past, and they can see what's planned in the future," Krueger says. "They can see the current policy, and see what their planned installments will be."
Access to billing information is what agents want, according to Fitzgerald. "The agents want to solve or answer a question for a client. They don't want to get back into the business of billing; they just want visibility to it."
Though this visibility into billing is not yet ubiquitous, Accenture's Curran sees this changing. "I'm working with a client right now, and we're coming up with a way for the agents to be able to set up payment plans, payment methods, due dates and other things that are important for the individual insured," he says. "The agents are going to be able to drive that themselves, versus the way it used to be when a certain product had a certain billing method, and you were stuck with it. In the future, carriers are going with more flexibility that is defined by the agent as part of the billing process."
Fitzgerald agrees that flexibility is key, and adds that you can't ignore the impact the financial crisis has had on consumers' abilities to pay bills. "Consumers are going to demand more flexibility and service around insurance billing than ever before," he says, pointing to the need for changes in payment plans and methods. "This is a time when insurers can really differentiate themselves with tools to allow both insurers and agencies to improve the way they respond to consumers' billing questions."
Find more about legacy billing systems by searching "Green Screens Fade Out" at www.insurancenetworking.com.
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