Chicago - The fortunes of two industries are beginning to intertwine, according to Cards & Payments, a Chicago-based sister publication of Insurance Networking News.
The way C&P tells it, changes in the health and property/casualty insurance markets are presenting new opportunities not only for insurers but also for credit and debit card issuers and card processors.
First, the switch to consumer-directed health care plans finds the public assuming greater responsibility for managing health care services and determining how to pay for them. In that new environment, payment card services can help consumers monitor payments and manage health care services, the magazine says.
Using payment cards also allows for more effective administration of health savings accounts associated with high-deductible health plans, C&P says.
Research suggests that by 2012 the convergence of banking and insurance services will lead to a combined total of more than 53 million health-savings accounts, health-reimbursement accounts and flexible spending accounts, according to BearingPoint, the McLean, Va., consulting company. Most of those accounts will be tied to payment cards, the company says.
Growth will not have to be “bought” through acquisition of established businesses or by leveraging share from competitors, the magazine notes. Those strategies are expensive, time-consuming and often unsustainable, according to the article, the article adds.
The magazine also points out that consumer-directed health care is growing faster than 401(k) accounts or individual retirement accounts grew in their early stages. BearingPoint estimates that financial institutions will gain more than $4 billion annually in new revenue from consumer-directed health care accounts by 2012, covering several categories of financial products.
The efficiency, greater control and broader array of consumer-information services offered by payment card products will make cards an integral part of this new market, the magazine says.
A second trend is in property/casualty insurance, says the magazine. Carriers are beginning to use cards to pay catastrophe claims and standard property claims to consumers and small businesses.
Payment cards can help insurance companies and other organizations that provide disaster-relief funds achieve the three “Cs” of card-based systems: capture, control and correct, the article continues.
Card networks provide automatic capture of card-spending information in terms of who, what, when and where--by merchant category today and in the future down to the item level. Using restricted codes, either by type of merchant or geography, issuers can control where cards are valid.
After Hurricane Katrina, for example, the codes for plastic surgery and high-end retail items could have been blocked, significantly reducing the inappropriate use of relief funds.
If fraud is discovered, whether by the cardholder or another party, the merchant may be charged back for the transaction to correct the error.
Card payments can help insurance carriers reduce fraud, cut costs in payment processing and improve customer service, thereby improving customer retention. They also enable claimants to gain quicker access to their funds, obtain automatic accounting of their purchases and possibly gain access to special benefits and discounts from retailers that have marketing agreements with carriers.
Source: Cards & Payments
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