The term "insurance card" is often equated with health insurance coverage, but a small and growing legion of insurers are issuing plastic to policyholders for more than just a doctor visit.Property and casualty insurers are finding advantages in dispensing branded stored-value debit and credit cards to customers for bigger ticket claims, particularly catastrophic homeowners claims.
Participating insurers reason that a claims card provides policyholders with an added measure of flexibility that a check does not.
Amica Mutual Insurance Co., Lincoln, R.I., began offering a Visa-branded ClaimCard to its policyholders two years ago. The card enables users to withdraw cash straight from an ATM or to make purchases at a host of local retail locations that accept the card. Amica's ClaimCard was developed by Sunrise, Fla.-based WildCard Systems Inc.
The Hartford Financial Services Corp. also understands the power of plastic. In 2001, the Hartford, Conn.-based insurer introduced The Hartford Insurance Claim Card as part of a 25-state pilot project.
Embossed with a Visa logo, the card is activated when a policyholder calls a toll-free number listed on the back. This enables the policyholder to use the card to acquire clothes, arrange for temporary lodging and-most importantly-use the card to schedule home repairs. As the card is used, the amount of money that's stored on it decreases.
The Hartford's card is accepted at more than 19 million locations worldwide that accept Visa, including retailers, ATMs and banks.
Hartford's chief goal is to provide money quickly to customers in need. Hartford executives overseeing the program found that more than 90% of the customers who opted to tap funds via the card indicated they were satisfied with the way the program operated.
However, two years after the program was first piloted, The Hartford is evaluating whether or not to expand the program nationwide.
In one of the more intriguing deployments of insurance-sponsored cards, Toronto-based Sun Life Financial in February formed a partnership with Boston-based Kidz Card Inc. to provide its employees with the first national medical-emergency identification card and prepaid phone card for children (see story on below).
The adoption of a claims card by property and casualty customers carries a great deal of potential-but at this stage, few carriers have expressed interest in issuing claims cards.
Industry observers say this reluctance stems from tradition: People like to have a check in their hands made out in their name. Many individuals also don't relish the idea of another piece of plastic in their wallets. Insurers such as Amica feel immune to such resistance. "All branch offices are now authorized to issue cards," says Mark Divoll, assistant vice president at Amica Mutual.
"Previously, only a small percentage of our branches issued them. We've issued about 2,000 claims cards, which is double the number we issued since late 2001."
Some initial confusion
Issuing cards requires employees to participate in a short training session, which is carried out in either a real or virtual classroom. Once trained, adjusters issue claims cards soon after arriving at the scene of a claim. Using a laptop computer linked to Amica's corporate Web site, adjusters log into a secure area of the site where they are authorized to store monetary value on a claims card.
While most Amica customers with homeowners policies have been receptive to receiving a claim card rather than a check, some are initially confused about the card's function.
"Several policyholders who have an existing Visa card have voiced skepticism about using a Visa-branded ClaimCard," Divoll explains. Many believe that using the ClaimCard will undermine the points they accumulate on the first Visa card, such as for frequent flyer miles. But points accumulate regardless of which of the two cards are used, Divoll explains.
Amica's claims card has a world of positive potential, says Divoll, adding that the company is so pleased with the inroads it has made that it is exploring making it available for auto claims.
For now, however, the insurer is "committed to using technology that leverages the Web, and we believe that ClaimCard's leading-edge characteristics will help us better serve our customers," Divoll says. "But in the big picture, we also need to do a better job to provide instant purchasing power to an insured at a time when they need it most."
Industry observers say the advent of stored-value cards-at least from an insurance standpoint-begs the question: Are insurers ready to embrace this concept for claims or other functions?
In lieu of cutting a check, wouldn't it make more sense to deposit a check into a customer's checking account?
"The most practical implementation of stored-value cards occurs in instances where an insurer has formed an ongoing relationship with a customer, such as a health and benefits provider," says Aaron McPherson, research manager at Newton, Mass.-based IDC/Meridien Research.
"A claims card for a disability claim makes sense because instead of issuing a check every month for six months to an individual, a provider can issue a card-the obligation is once and done," says McPherson, who authored a report titled, "What Drives Stored-Value Card Adoption?"
When a claim involves a single-check settlement, processing costs are minimal. As a result, handling these claims via an electronic fund transfer (EFT) can be more practical than issuing stored-value cards, McPherson says. An EFT claims payment would enable an insurer to dispense with check processing and mailing costs.
There are also security implications in issuing credit or debit cards-such as having to report and de-activate a card if it is lost or stolen.
However, Amica's Divoll believes it's more advantageous to issue a claims card than it is to process checks. Without revealing specific cost comparisons, Divoll says a claims card enables an insurer to provide a higher level of convenience to customers. A Visa-branded ClaimCard provides a greater degree of flexibility to customers in that a card is accepted at multiple retail locations.
"If a claims adjuster drops off a check to a policyholder the night their house is gutted by fire, the policyholder has to wait until the morning to cash it," he explains. "Next, they would more than likely deposit the check into a checking account. There's no guarantee that a check would be accepted at all the retail locations they'd need to go."
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