At the 2016 ACE Conference, Randi Lichtenstein from BNY Mellon and Don St Jacques from Jopari Solutions discussed opportunities for insurers to increase adoption of electronic payments.
Countries like the UK have payment systems that are advanced beyond ours and they have not been paper check based for years. Paper checks are very inefficient. The average cost of issuing a check is almost $6. In addition to print and mail costs, checks can get lost and need to be reissued, remain uncashed requiring escheatment, and cause delays getting payments to consumers.
There are many growing pressures on what is seen as an imperfect payment system. Some of the market pressures include meeting the expectations of millennials, advancing technology, growing regulations, fraud and cyber attacks, and globalization of trade flows.
Some of the insurance industry payment challenges include:
- Desire to retain assets as long as possible to earn investment income.
- Client satisfaction.
- Millennials reliance on phones.
- Security issues with storing banking information.
- Costs of checks including mailing, reissuing, and tracking.
- Legislative mandates.
Insurance Industry Advancements in Payments
- Same Day ACH – The ACH network started in 1974 and it now moves over $40 trillion annually. Examples include direct payroll deposit, bill payments, and government benefits. Since its inception it has been batch driven with a one to two day settlement process. Currently when same-day transactions are required they must be wired that is much more expenses. New NACHA rules will allow for same-day settlement of certain ACH transactions phasing in over three years starting on 09/23/16. Initially only domestic transactions under $25,000 are eligible for same-day ACH and there will be an additional surcharge for these payments.
- Alias Payment Solutions – This is the electronic movement of funds without the knowledge of payee banking information. An example of this is clearXchange (cXc). Consumers who bank at a network of the larger banks in the United States they can sign up for cXc and they receive a token for their email address or mobile phone number that is housed in a central database. Payments can then be made using only that email address or mobile phone number and the cXc network posts it to the appropriate account. The individuals account information is never shared with the issuing party.
- Real Time Payments – This is currently being developed by an organization called The Clearing House (THC). THC is owned by 24 of the world’s largest commercial banks. Real Time Payments will be an industry changing initiative in the USD payments arena as they will provide customers and businesses the ability to immediately send and receive funds directly to a bank account at any time day or night within seconds. This is expected to start in 2017. There are many details of this still to be worked out but if it actually works as expected this would be a game-changer in the payment industry.
Workers’ Compensation and Medical Provider Portal Solutions
The use of portal technology has changed traditional customer service. Portals allow their customers to access information around the clock. Examples of this include ordering online, making reservations, and being able to check the status of your order.
In the insurance industry, portals are being used for medical eBilling, electronic remittance of payments, pre-authorizations and other things. Some states have mandated the use of medical eBilling in workers’ compensation.
One of the newest challenges for workers’ compensation payers includes Electronic Funds Transfer which is modeled after the 2014 CMS requirements. Many states are already requiring EFT and additional states are adding this. The IAIABC model rules for eBills requires the use of EFT.
When designing a portal it needs to be focused on the real user. Security is also a huge concern. You need to make certain you can supply utilization metrics and statistics to show it is effective. Finally never forget about the client experience which translates into actual and perceived value.
On the indemnity payment side, some jurisdictions still have antiquated rules in place that have not kept up with the evolution of banking. This includes requiring paper checks issued by banks within that state. Regulators and organizations like IAIABC are working to evolve the indemnity payment model to take advantage of new technology and speed delivery of payments to injured workers.