With softening growth of non-life premiums, and insurance companies beholden to public and private investors who expect strong 2023 returns, carriers who think creatively about how they can retain their customers and reduce manual overhead will shine in a tough market.
One of the most glaring gaps in the global insurance market today is the lack of local, digital options for international policyholders and large corporate groups to make premium and deductible payments. Many companies, including even the most advanced insurance carriers globally, often still rely on manual PDF form fills and phone calls for payment via some distribution channels. Most carriers have in recent years built a front-end, self-serve portal for international policyholders to manage their benefits, submit claims and make premium payments via credit card, but the payment options remain limited. Nearly all require payment in the currency that their policy is underwritten in, rather than the currency that the policyholder holds funds in.
That leaves agents and brokers, who international insurance carriers have traditionally relied upon to reach populations where the carrier doesn’t have a local presence, unable to seamlessly pay for policies via anything but expensive international credit cards and costly wire transfers.
Why does global insurance lag on digital payments?
Managing a patchwork of bank accounts, payment gateways and payment processors is par for the course for global insurance carriers today. Whether because they have not found one truly global solution or because they’ve inherited different technologies through M&A, insurance carriers and their back-office teams have to deal with growing complexity when it comes to managing international premium collection – and it comes at a cost.
The biggest payment processors in the space offer limited options to policyholders across Latin America, APAC, the Middle East and Africa. Popular payment gateways patched together with these payment processors can add costs – for both the policyholders and carriers alike. And relying on international wire transfers for premium payment, which is prevalent when receiving larger sums that cannot be made via card, results in bank fees for all involved while creating havoc for collections teams who deal with manual bank statement reconciliation. Companies are forced to either chase the payment or write it off.
Solving payment issues makes a difference to customers, back-office teams
Let’s look at one example. In the International Private Medical Insurance (IPMI) space premiums are mostly collected on an annual basis and international policyholders and employer groups experience a number of challenges when paying premiums.
Take a policyholder in Brazil. In order to pay a global health insurance premium that is underwritten in USD, they have to go to their local bank, manually fill out several forms and pay high fees to convert their BRL to the USD Premium, then send those funds internationally. The whole process can take weeks, which for the insurance carrier means delayed payment, and for the policyholder means a time-consuming, poor experience and, worse, potentially being uninsured while abroad. Alternatively, if the individual has a credit or debit card, they will pay multiple different fees to the card network and issuing bank on top of what is being charged directly to the insurance company. Foreign transaction and FX fees in particular can mean that the individual is ultimately paying as much as 4-6% on top of what they thought their premium cost would be when they signed up for the policy. All the while, they lack real-time visibility into payment status.
Once the international premium payment has been sent by the policyholder, it is now on the carrier’s customer service and collections teams to mark the payment as received in their system of record. Depending on the payment method used for payment, this means reconciling bank statements, merchant statements and oftentimes, because the data is incomplete, cross-checking multiple systems and vendors to piecemeal data together in order to simply know who paid what. And this is for when there is no issue with the payment processed. When a payment gets lost, disputed, delayed or arrives short of the full amount, it strains back-office teams, who are fielding calls with the policyholder, payment providers and banks involved. On top of their day jobs, these teams have had to become resident experts in the rules and regulations of international payments and all that comes with it. All while the insurance carrier is at minimum paying ~3% of their premium plus additional transaction-related fees to these payment processors and multiple wire transfer and maintenance fees to their banking partners.
Payment experience is part of the customer experience
A PYMNTS survey found that 71% of finance and insurance CFOs said digitization is a very or extremely important strategy to improve balance sheets – the highest percentage of the 400 CFOs surveyed across many different industries. The average of the sample, which included CFOs from healthcare to retail, stood at only 59%.
As insurance companies expand their global footprints through a multitude of distribution channels, there is an ever-growing need for them to provide a better customer experience in order to differentiate amongst their competition. Providing local payment options, methods and easing the payments process is increasingly a part of that.