With consumers now paying more premiums online than by paper check, insurance carriers need to present electronic bills effectively enough to leave a lasting good impression.Take a look at the numbers. Online bill payments accounted for 39% of bill payments among online households last year, an increase of 4% over the previous year, according to The 2007 Consumer Bill Payment Survey, a study by Rochester, N.Y.-based Harris Interactive Inc. and The Marketing Workshop Inc. Norcross, Ga. In contrast, the volume of checks sent by mail fell 4%, accounting for 34% of the volume.
Nationwide, consumers paying at least one bill online per month rose to 74%, compared to 69% of respondents in the previous survey. Consumer adoption of online bill payment has more than doubled since January 2002, when 37% of online households reported paying at least one bill online.
Those stats aren't lost on insurance companies. The vast majority of insurers understand the importance of offering electronic bill presentment and payment (EBPP), both directly to policyholders and as a component of their agent service portals, according to Matthew Josefowicz, insurance practice manager for Boston-based Celent LLC.
Half of insurers already offer EBPP to their policyholders, and nearly half already have it for agents, according to a 2006 Celent report, "Billing: Business and IT Issues for P/C Insurers."
"Insurers that do not offer EBPP or ACH/EFT payments, and even card payments, will find themselves at a competitive disadvantage," Josefowicz asserts.
In fact, he sees more electronic presentment and payment, and more credit card payment, as the major trend in billing and payment technology in the insurance industry.
REAL-WORLD EXAMPLES
One example of that trend is Albuquerque-based New Mexico Mutual Casualty Co., which has made technology changes over the past few years. The company's green-screen legacy claims system had outlived its usefulness. The company was bringing in a new Web-based policy administration system, and needed a new claims system to work with it.
They decided on a Web-based claim system from San Mateo, Calif.-based Guidewire Software Inc. Now, New Mexico Mutual is planning to use the vendor's BillingCenter. That system shares a platform with Guidewire's ClaimCenter and PolicyCenter. BillingCenter manages the end-to-end billing process for all lines of business and was developed in Java for the J2EE standard.
New Mexico Mutual hopes the system will do just that, while providing online capabilities, with the planned go-live date of May 2008. "I need to make sure I can get reports out of the system," says Lynn Krueger, billing and collections manager.
"We need increased online capability for the agents and customers [business owners] to be able to pay online," she adds.
E-BILLING IN HEALTH
P&C insurers aren't the only line of insurance focusing on electronic billing and payment technology. Back in the 1990s, as part of a large new internal billing system project, Pittsburgh-based Highmark Inc. decided to rewrite its internal billing system, a huge project that spanned multiple years, and a phase of this project included e-Billing, according to Al Dodson, the company's manager of e-Billing.
The Highmark project also included e-billing. The insurer chose an eBilling solution from San Francisco-based Avolent Inc. to create a single environment for its customers and its subsidiary customers to view invoices and make payments with a virtual consolidated bill. Customers are notified via e-mail when invoices are available, and they go to the secure Highmark e-Bill Web site to view invoice and billing reports.
Highmark's dental subsidiary got first crack at the e-billing system in 2001. And after a few revisions e-Bill has gone live in other Highmark departments, including its claims administrative services only (ASO) billing, its group business insurance and its life insurance subsidiary, and more implementations are underway.
Another insurer succeeding with online billing and payments is Ohio Casualty Group (OCG), based in Fairfield, Ohio. Six property/casualty insurance companies are part of the company, which is licensed to write auto, home and business insurance.
The company uses three billing systems - one for commercial lines, another for personal lines and a third for agency billing, says Kevin Newell, the director of billing and collections team. But the insurer's real story is its online billing and payment for commercial and personal lines.
OCG established a relationship with Norcross, Ga.-based CheckFree Corp. to implement an online presentment payment application in May 2006. According to Doug Apple, IT manager for billing applications, to implement the application OCG used technology within the company.
Newell adds, "We purchased a license and that was pretty much it. We had to do some tailoring on our side to accept interfaces." The customer logs in to OCG's Web site and follows a link to a CheckFree Web site and makes the transaction there. "We feed billing information to that application and [customers] can view their billing information online and then make a payment online," says Newell.
CHALLENGES
Now that insurers have put e-business in place, the new challenge seems to be adoption, though OCG's Newell and Highmark's Dodson point out they are happy with their adoption rates.
In 2006, the number of e-payments made electronically by Highmark customers grew twelve-fold, reaching more than 48,000. Highmark expects more than $7.5 billion worth of payments from eBilled customers in 2007.
"We're pleased with where adoption is sitting," says Dodson. "I think our adoption rates are so high because customers feel value on their end. They wouldn't do it if it didn't save them time and effort, so I think we're going to keep looking at how we can save them time and effort."
Newell agrees that success comes from giving customers what they want. "We've had very good results. As far as I can tell we're spot-on with industry trends in terms of adoption rate and capture rate. It's something our customers have wanted, and we were able to put a package together and implement it."
One way to improve adoption is to accept credit card payments, which presents another challenge for insurers, Newell says. "The acceptance of credit cards-there's not much of a choice anymore; you're going to have to do it to become more competitive," and OCG is exploring it, he says.
Another challenge is providing the right information on electronic bills. "Easy access to information is important," says Newell. "Getting detail-type of billing information out of our systems is something that challenges us." And having to stay abreast of state regulations makes the process of billing even more complex, especially when doing business in 49 states, as OCG does.
Highmark's Dodson can relate to compliance concerns. Group billing-especially when bills are sent via the Web-can become difficult because of Health Insurance Portability and Accountability Act (HIPAA) regulations, so Highmark is cautious, while trying to provide as much billing information as possible to the customer. "We set up a user's role in e-Bill as either having the right to see HIPAA data or not," he explains. "If a report or display has HIPAA data in it and a user doesn't have the right to see the data, they don't even see a link to this data."
"Our group billing," says Dodson, "involves a summary invoice and then a number of reports that support that summary with varying level of details so you can drill down to ending roster or member level activity."
"Our bills in [the insurance] industry are huge, and [customers], especially on the group side, like to download the statement and do offline analysis in a spreadsheet," says Dodson. "As we make future e-Billing enhancements I think we want to look ahead to really understand what kind of analysis they're doing and maybe we can help them with that."
Editor's Note: At press, Liberty Mutual announced plans to acquire Ohio Casualty Corp. for $44 per share in cash. The transaction is valued at about $2.7 billion.
Ohio Casualty generated $1.4 Billion in net written premium in 2006 and had pre-tax income of $300 million. It is the holding company for The Ohio Casualty Insurance Co. and five other P&C insurance companies, known collectively as the Ohio Casualty Group.
The transaction is not subject to any financing contingencies. Although, at press time, the deal has been approved by the boards of both companies, it remains subject to approval by Ohio Casualty shareholders and regulatory bodies.
Following the acquisition, Ohio Casualty will be part of Liberty Mutual Group's Agency Markets business unit. The 11 companies in the unit have more than 6,800 employees and about 6,500 appointed agencies.
