In the last decade, many insurers have undertaken large-scale transformation initiatives. In most cases, the investments have focused on claim management and policy administration areas. These broad-based change programs have been driven by a few clear imperatives -- the need to meet rising customer expectations, modernize aging IT systems, improve decision-making and standardize duplicative processes and applications (many of which resulted from multiple mergers and acquisitions).
Transformation of the billing function has rarely -- if ever -- been a priority. In some cases, billing enhancements have been planned as part of a policy administration transformation. In many other cases, the billing process has simply been overlooked. To some extent, that's a function of the long-held view that billing was a separate, internal function more closely associated with accounting than with customer service. Today, however, with increasing emphasis on integrated customer experiences and new pressure to boost loyalty, billing transformation should move on to the strategic agenda for property and casualty insurers.
The business case for billing transformation is clear. While successful transformation isn't purely about technology, consolidating multiple billing platforms is a core element of the value proposition. This is especially true for firms with many duplicative systems/applications -- we have seen up to 14 disparate billing systems in the most redundant cases. Beyond unnecessarily high costs, legacy billing systems can constrain insurers in many ways. They may prevent flexibility in offering different types of payment plans for policyholders. Thanks to siloed billing processes and data, most call center representatives can't answer simple billing questions, which make up a large percentage of inquiries (as much as 30% to 40% by some estimates). In addition, there's limited capacity to offer self-service tools via digital channels, which today's empowered consumers and business owners expect. Visiting a typical carrier's online portal demonstrates the extent to which billing is an afterthought; invariably, there are self-service tools for quoting and claims, but billing tools and data are rarely available and provide limited function when they do exist.
However, optimal value won't be achieved through technology upgrades alone. Billing transformation should be viewed, fundamentally, as a strategic, business-led project, with success enabled by the combination of new technology, integrated processes and consistent experiences. A comprehensive rethinking of billing is in order. For example, insurers should consider how billing touch points can deepen and strengthen customer relationships as part of an overall customer life cycle and ecosystem, one that also incorporates marketing, sales, claims, customer service and policy service. In such a new world, billing performance will no longer be measured strictly in terms of cost, efficiency and collections rates.
Why is the customer-facing perspective so important? Primarily because billing is the only guaranteed interaction point with policyholders and, accordingly, there's a real need to get it right. Plus, the risk of negative impacts may be high, especially when rate increases are involved. The history of claims transformation helps illustrate the point. Industry research -- including EY's Global Insurance Consumer Survey -- has shown that a positive claims experience is a baseline expectation for consumers. A negative claims experience, however, is a major threat to satisfaction, loyalty and, ultimately, renewal rates. The same downside risk exists for billing experience -- a fact that's broadly underappreciated at many insurers.
For a significant percentage of policyholders -- those with relatively "low-maintenance" homeowner and auto policies -- the receipt and payment of a bill may be the only contact they have with their carriers all year. Insurers can use these touch points to boost loyalty and reduce churn by showing appreciation for the business -- and a concern for the policyholder with regard to proper coverage and savings. The potential for negative customer reactions around rate increases and the overall predominance of direct billing are two other reasons it's worth assessing and optimizing these touch points. For instance, customers paying via automated means may only notice a rate increase when they look at their monthly credit card or bank statements.
Waiting For Integrated Billing
Consumer expectations for truly integrated billing are rising. Account billing (multiple policies for a single insured customer) is now considered basic and mandatory. Given the complex needs of many multigenerational families today, household billing is becoming an important capability (placing bills for multiple policies across multiple insureds -- such as college-age or young adult children still at home -- with the same address on one bill). This requirement cannot be met by most legacy billing systems (or most policy systems, for that matter) and forces insurers to develop additional workaround processes to accommodate that household view and financial accounting. It's not out of the realm of possibility to expect that someday soon there may be regulatory pressure to simplify insurance bills and billing communications, similar to what has occurred in the credit card industry. If this occurs, it will further stress today's billing technologies and processes.
Recognizing the value proposition for billing transformation, insurers will begin to ask, "What is the best way to realize the value?" There are a number of core concepts and enablers to keep in mind.