A typical insurance customer could pick up a copy of Insurance & Technology and not understand a great deal of what he or she reads. Technology topics such as service-oriented architecture and legacy replacement are largely foreign to the public: As long as carriers are there for them when they need assistance, consumers don't really care how insurers' systems work.
E-payments, though, is one topic that a vast majority of consumers are familiar with. As broadband Internet access continues to penetrate U.S. homes, consumers expect electronic payment capabilities from their insurers, just as they do from their banks, utility companies and many retailers.
Those expectations, however, aren't always being met. Basic e-payment capabilities are not yet standard in the insurance industry. Although that could change in the next 18 months or so, it's safe to say that the insurance industry lags behind many others in the realm of electronic billing and payment. "It's the other industries that are elevating customer expectations," says Katie Doyle, product marketing manager for San Mateo, Calif.-based Guidewire's BillingCenter solution.
When an insurer cannot support expected e-payment capabilities, Doyle adds, it is jarring to customers. "Oftentimes, it leads [customers] to reconsider their options when their policy hits renewal," she asserts.
So how did insurers fall behind other industries? Many experts fall back on the old adage that insurance companies are traditionally technology laggards. But most insurance technology executives are too savvy to ignore an opportunity with such clear benefits.
Mike Fitzgerald, a senior analyst in Celent's insurance practice, offers another explanation. "A good deal of the industry actually has the independent agency in the middle," says the Chicago-based analyst. "Industries that are much more direct-to-consumer have been pushed to [adopt e-payments] just because it's been a consumer request. [Other industries] have been faster to respond because they've had more pressure on them."
Perhaps that's why direct carriers, such as Progressive Insurance (more than $14 billion in annual premium), appear to be leading the industry in e-payment adoption. According to Vikki Nowak, director of online servicing at Progressive, in 1999 the Mayfield Village, Ohio-based carrier became the first auto insurer to offer online payment capabilities.
"Very early on, management saw the long-term upside of the Internet and was ready to capitalize on its capabilities," Nowak recalls in an e-mail interview. "We're always looking for innovative ways to provide consumers with more choices in car insurance. E-payments are another way for us to do that."
Nowak identifies ease of use for customers as a key business driver behind the carrier's e-payment technology investments. "You need to be mindful of how people are beginning to morph payment strategies -- [such as] the Internet, online banking, credit cards, PayPal, etc. -- and make it easy for them to buy based on how they want to buy," she says.
Progressive has also realized cost savings and efficiency gains from its online payment capabilities. Nowak says the carrier encourages customers to use e-payments by offering an electronic funds transfer (EFT) discount and lower installment fees.
While Patrick Howard, director of marketing at Norcross, Ga.-based CheckFree (which was acquired by Fiserv in January 2008) acknowledges that it's important to provide customers with all of the various payments options that they might prefer, he stresses that insurers can benefit from driving insureds to the online channel. "That's the lowest-cost channel, and it's also the channel where you can have the highest degree of impact," Howard suggests.
The dual benefit of e-payment technology -- customer satisfaction and cost savings -- is leading more insurers to invest in the technology. "It's just been the acknowledgment and the acceptance of electronic payments, especially as things get tighter economically and from a competition standpoint," suggests Steve Kramer, VP of electronic payments at Western Union Payment Services (Greenwood Village, Colo.). "People are looking for great customer service ... [and] lower costs. Those seem like competing arguments. [E-payment technology] is actually a way to accomplish both."