Remember the old days of paying an electric bill or making a car payment-writing out a check, putting the bill and check into the provided envelope, slapping a first-class stamp on it and tossing it in the mailbox? Thanks to technology, much has changed, and the insurance industry is changing right along with it.The process of paying bills online has been catching on for consumers over the past few years. And, according to a recent Computer Sciences Corp., El Segundo, Calif., survey conducted by Columbia, S.C.-based MarketSearch Corp., car and homeowner insurance customers would be willing to pay their insurance bills over the Internet.
Along with any change comes new issues, concerns and challenges.
"The biggest shift and biggest issue is the awareness of bill presentment and payment as a service issue-understanding the impact it has on the brand and on the relationship with producers and clients.
"It's more than just a financial issue," says Matthew Josefowicz, group manager of Boston-based Celent LLC's insurance practice and author of a Celent report, "Billing: Business and IT Issues for P/C Insurers."
In January 2006, Celent surveyed a broad range of its property/casualty insurance company clients about their current billing practices and needs. Business and IT executives from 35 insurers responded to the survey. Nearly all of the insurers represented were multi-line property/casualty insurers.
"When billing is only about collections and financials, it's very easy to push it onto the back burner, and say it's doing a good enough job," says Josefowicz.
"Maybe you're losing a little bit of money on the float, maybe you have some problems with cancellations and reinstatements, but it's probably not bubbling up to senior management's attention. But at the point it is affecting brand or relationships with producers, it starts to gain more attention; it starts to be thought of more strategically."
SERVICE AND MARKETING ISSUE
Nearly half of the survey respondents consider billing a service or even a marketing issue rather than a pure financial issue. This may be because electronic billing and payments have become so widespread with consumers. "Electronic bill presentment and payment (EBPP) is certainly a checklist item for many consumers, especially younger consumers-people under 35," says Josefowicz.
According to Josefowicz, a negative experience with billing or payments is the second-most powerful driver of customer satisfaction, right behind poor claims handling. But you really can't compare the two.
"Hopefully, most of your customers aren't going to have claims, but everybody's going to be billed. And billing mistakes affect people directly, because it's their money or it's their coverage that's affected," he says.
What's more, billing and payments doesn't only affect consumers; it's also an important agent-relations issue, Josefowicz adds.
"Access to billing information is a major demand of agents. Insurers need to make sure the information they're presenting to their agents is accurate and up to date."
According to Celent's report, approximately half of insurers already offer EBPP, and the average insurer with more than 100,000 policies has an average of 3.7 separate billing systems. Of those, a slim majority use vendor-provided billing systems. A third of larger respondents use homegrown solutions that are more than five years old for their primary system, but more than half of respondents use even older homegrown solutions for their second-highest volume system.
However, respondents are not happy with those homegrown solutions, according to the report. Homegrown solutions have a disproportionately low satisfaction level compared to vendor solutions, especially for core billing functions, such as support for different bill types.
Josefowicz says this is because some insurers' IT departments-whose main focus is to support the business-are asked to develop billing and payments software.
"Homegrown solutions tend to be built to solve a very specific set of business problems at a specific point in time, whereas most vendor solutions will be more extensive and more extensible than the specific needs of today."
Josefowicz has seen homegrown solutions being replaced by vendor-provided solutions. "Most insurers that have replaced billing systems over the past few years have opted for vendor solutions. There's a general preference for buy rather than build in the insurance space, and there are a broad array of vendor solutions on the market, with more coming on this year and next."
WHERE TO IMPROVE
The areas identified as most in need of improvement or additional functionality by survey respondents are primarily related to service. They include automated printed notifications, allocating partial payments, accepting electronic payments (ACH/EFT) and credit cards, and supporting EBPP for agents and policyholders.
Celent's survey results indicate that insurers will continue to invest in improving and replacing their systems. Specifically, Celent estimates that between 8% and 10% of non-maintenance IT spending will go toward billing over the next five years, ranging from about $537 million in 2006 to $749 million in 2010 (see "Total IT Spending on New Billing Projects," page 7). This spending will focus not only on new areas, such as e-business, but also on improving flexibility to change business practices in response to market needs, and integration to share data more effectively with other core systems and analytical systems.
"The technology is available to address the industry challenges today," says Josefowicz. "It's not an insurmountable problem; it's just that insurers have a lot to do, and this is one project. It's a matter of competing priorities; some of them will get to this sooner than others."
