The Power of Digital Payment During a Crisis

Elisa Logan, VP, Growth, VPay

Elisa Logan, VP, Growth, VPay

Disasters present in many forms. From an insurance carrier and policyholder perspective, common situations and images that may come to mind include fire, flood, and natural disasters such as hurricanes and tornadoes.

The COVID-19 pandemic recently presented a new perspective on crisis situations for the insurance sector. Amid COVID-19 stay-at-home orders, digital payment infrastructures proved a powerful ally for business continuity, elevating policyholder peace of mind while helping carriers maintain a competitive edge.

Regardless of the vantage point, disasters often unveil the true strength of insurer-policyholder relationships. When calamity strikes, the role an insurer plays in stabilizing negative forces is critical, especially when it comes to access to money. Policyholders look to their insurers for a speedy response and help with basic needs such as shelter, food, and emotional support.

Within a rapidly evolving digital age, many insurers are striving to strike the right balance between automation and highly-personalized, highly responsive customer support experiences. Notably, a recent webinar featuring four of the nation’s largest carriers suggests that the ability to “deliver empathy at scale”—balancing automation with access to one-on-one service from empathetic claims handlers—will define successful claim experiences of the future.

Yet when it comes to the need for rapid access to cash in a disaster, the business case for a progressive, forward-thinking approach to digital payments is easy to make. Simply put, insurers that align strategy with current movements on the digital stage will gain a competitive edge.

Disaster Response—Policyholder Expectations

A recent Engine Insights/VPay survey of 502 policyholders found that consumers overwhelmingly want faster payment: More than two-thirds say the ability to receive same-day claim payment is somewhat or very important to their claim experience, and more than half said they would be willing to switch insurers to gain access to instant claim payment. These findings trend significantly higher in younger generations.

The same survey found that nearly 60% of respondents received their last claim payment by paper check—and for more than half, the process took four days or longer. Especially during a crisis, that’s a far cry from real-time payment. Imagine, for example, a situation where a family’s home is flooded. If the family is cash-strapped, having immediate access to funds may be the difference between securing a new place to stay or having to call on friends and family—or, in the worst of situations, ending up on the street.

In the digital age, consumers expect better. It’s one reason why some leading insurers have stepped up their approach, using drones to assess damage in recent hurricanes and simplifying payment via debit card transfer that takes only minutes.

These movements suggest that traditional automated clearing house (ACH) payments—representing the infrastructure of choice for most insurers who have embraced digital payment—is only the first step.

The reality is that traditional ACH cannot compete with the turnaround times of emerging digital payment options, which enable payment in near real-time as opposed to several days, with no holds on funds received (typical with ACH).

A Better Approach to Crisis Response

80% of insurers say evolving policyholder expectations, including the desire for more digital touchpoints, customized digital experiences and seamless service, are driving digital innovation. Insurers who are still dealing primarily in paper for payment processing must take the first steps to implement a forward-thinking digital strategy, and those who have already taken some action must continue to expand their portfolio. From ACH payment and virtual cards to push-to-debit and mobile e-payment, insurers would bewise to consider strategies that draw on the advantages of multiple and growing electronic claim processing offerings.

In tandem with digital payment advancement, optimal strategies will keep customizable experiences at the forefront. Consumers, by and large, want control over how they receive their money, and preferences can vary across generations. Functionality exists that allows consumers to make choices—whether paper or a digital option—via text or email.

As digital infrastructures grow, so must strategies that secure the data held with them. The threat is very real: Nearly half of insurers dealt with significant cybersecurity events in 2017, and ACH fraud was the only scheme to increase in 2018, with about 33%of participating organizations reporting actual or attempted debit fraud and 20% saying they were targeted for credit fraud. It’s one reason the National Automated Clearing House Association (Nacha) has implemented new data security requirements to better protect storage of bank account information necessary for ACH.

Consequently, insurers must recognize and address the increasing threat of ACH fraud with security strategies that evolve simultaneously with the growth of digital payments. They must also be prepared to comply with new Nacha rules—a resource-intensive undertaking that many find is best addressed by third-party fintech partners.

Crisis situations present unique opportunities for insurance carriers to either build trust and loyalty or leave policyholders frustrated and dissatisfied. As digital infrastructures continue to advance and consumers become increasingly accustomed to their speed, delayed payment will be viewed as inexcusable during a crisis. Investment in digital payment offerings assures policyholders that they can rely on their carriers to be there when needed most.

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