The insurance industry is having a challenging year with factors such as inflation causing increasing costs whilst policyholders cut back on their insurance products to make ends meet in a cost-of-living crisis. Now more than ever, insurers are focussing on their customer experience to secure conversions, facilitating seamless customer journeys that meet the expectations of policyholders who have grown used to instant, omnichannel, and tech-driven services when making purchases in any industry.
But how can payments support insurers to improve their customers’ experiences? We spoke to one of our insurance industry experts, Dan Owens, to find out more:
What are the current issues facing the insurance industry?
I would say there are three main challenges the industry is currently facing. The first, and perhaps most pressing, being inflation. The insurance industry has seen claims inflation across all lines of business. The increase in the cost of labour, parts and materials, and fuel, as well as delays in the supply chains, have all had a significant impact, and insurers must now strike a careful balance between passing some of these costs onto their customers without pricing them out or risking compromising customer satisfaction and loyalty.
The second is ongoing digital transformation. Consumer expectations, the shift to remote and hybrid working post-covid, as well as legacy systems being challenged by new insurtech entrants, mean that insurers are having to navigate new ways of working. Whilst digital transformation can be a challenge for many businesses, it is also a fantastic opportunity to reduce costs in the long run whilst meeting customer expectations and utilising technology to replace manual processes.
Lastly, we cannot overlook the impact of climate change on the insurance industry. We have seen the increased frequency and severity of natural disasters, which are linked to climate change. This makes it very difficult for insurers to predict future losses and to price their products accurately. This also creates an opportunity for insurers to incentivise their policyholders to adopt climate-protecting measures and technology in return for lower premiums.
Why should insurers be looking to their payments for solutions?
Customer expectations have changed. Choice of payment method and a frictionless checkout process is what customers are experiencing every day in sectors such as retail, financial services, and healthcare. Insurers need to be offering the same level of choice and user experience to meet these expectations; otherwise, they risk losing this business to others who are embracing digital transformation.
Furthermore, payments and, specifically, payments data can offer important insights into customer behaviour. Not only can this help insurers further personalise and tailor the customer experience to their policyholders, but it can also provide opportunities for growth, for example, highlighting the best points in the customer lifecycle to promote cross-selling.
What should payments providers be doing to support insurers?
Payments providers must first and foremost understand their client’s needs. Resource constraints, back-office systems, reconciliation challenges, and legacy systems all play a huge part in deciding which payments provider to work with to support a business’ goals. Our role as a payment provider should be to enhance our clients' current processes and not disrupt. Restful APIs, willingness to integrate with 3rd party software providers, and detailed reporting are all key elements to supporting insurers achieve their objectives.
What role does payments have in improving the policyholder experience?
Payments providers typically work across a wide range of verticals. The ability to analyse data such as payment method preferences, devices used to make online purchases, types of cards used, i.e., debit vs. credit, and a range of other behavioural trends means that payment providers are uniquely placed to advise insurers on what their policyholders want and, more importantly, expect, when it comes to making payments. Providing a frictionless, intuitive payments experience for consumers whilst reducing fraud is possible by choosing a payment provider who understands your business. Meeting customer expectations is an absolute must. The ability to purchase insurance as well as receive claims pay-outs via a streamlined digital process can enhance policyholder experience and loyalty.
Why is streamlining pay-outs so important to insurers?
The cost of claims handling has risen significantly over the last few years. Inflation is a major factor in this, but also the sheer number of touchpoints involved in processing a claim means the process remains inefficient and subject to price increases at each of these points. Digital claims transformation is something we see happening across the industry, and whilst a lot of effort is being made to remove the manual processes, the final leg of the journey is often where insurers fall short of meeting consumer expectations. There is certainly room for improvement when it comes to pay-outs, with solutions such as Visa Direct and Mastercard Send offering a low-cost and scalable alternative to BACs and cheques.
What do you think the future of payments looks like for insurance?
I believe we will see a rise in alternative payment methods, the continued use of e-wallet payments, and open banking will become more prevalent as adoption rates continue to increase in the UK. Consumer affordability challenges will drive change and buy-now-pay-later will become more prominent, perhaps taking some of the premium finance volumes we see today.
How Cashflows can help you
We prioritise helping insurers to maximise customer value, enabling reliable and secure payment options that enhance the buying and claims journey for policyholders. Supporting our powerful technology are specialist relationship managers who know the insurance industry inside-out. They make it their business to deliver valuable technical and commercial support while helping clients to navigate compliance requirements.