Lack of Instant Insurance Claims Payout Options Risks Customer Loyalty

Giving customers less payout options is an odd loyalty play for the insurance sector, yet that is the industry-wide strategy currently in play, as noted in the PYMNTS collaboration with Ingo Money, “Insurance Disbursements Brief 2022.”

This shift away from offering customers more innovative disbursement options differs starkly from the attitudes of other consumer-facing industries. In sectors such as retail or banking, newer methods such as real-time payments are becoming normalized, partially because of pushes to increase consumer pay choice.

Moreover, it is not the case that this customer preference changes for insurance claims. When given the option, consumers chose instant payouts 23% of the time, followed by its closely related cousin, same-day bank account transfers, at 21%. These choices were the far and away favorites compared to checks at 12% and cash at 7%. Despite the payment method’s popularity, insurance firms are eliminating instant disbursement payouts. In 2022, the option was offered for just 62% of disbursements, compared to 74% in 2021, most often for life insurance claims.

This pullback of customer-facing disbursement options may be a tremendous loyalty mistake that could result in lost revenue, as consumers time and again indicate their preferences are driven by deals and lowered price points. Although one excuse for firms not offering payments choice could be to lower costs and preserve their control over prices, businesses seeking to offset costs could instead opt to partner with firms to streamline the process, possibly prioritizing those with instant and other innovative payout choices. This could even serve as a long-term retention strategy, as younger and more digitally connected customers may seek carriers providing instant or same-day disbursements.

For insurance companies that may be reconsidering scaling back innovative payout options or that never offered them in the first place, some partners and platforms exist to ease the transition. Carriers still stuck on paper checks may consider companies such as insurance payments firm ePayPolicy, which expanded its platform last year to include its CheckMate tool. With CheckMate, carriers can route checks for faster and scheduled daily collection and view check images and remittance details in a single dashboard. The platform also provides tools to reconcile check data with invoices from a carrier’s accounting system.

Another option for companies ready to go fully digital is providers such as online bill payment services solution InvoiceCloud, which partnered last year with insurance software supplier Intellagents. The integration makes available InvoiceCloud’s solutions, including for handling inbound premiums and outbound payments, to Intellagents members. The partnership aims to provide carriers and their clients with “a premier billing and payments experience.”

In many cases, following industry-wide trends may be best business practices. However, when it comes to providing customers with payment choices and other innovations, outliers in the insurance industry may reap the most rewards.