Our increasingly digital world has kept the insurance industry in a constant state of flux. Insurance professionals must seek new, streamlined solutions to deliver and exceed policyholder expectations. This ongoing transitional period requires overhauling outdated insurance payment processing, adjusting policies and replacing aging technologies to remain competitive in the digital landscape.
While disruptive, digital transformation is necessary. It will help insurance companies remain relevant and flexible and enable them to seamlessly integrate agile business models and adaptable technology in the future.
Understanding Policyholder Expectations
What does it mean for your business when two-thirds of global payments are digital transactions? It means you must embrace necessary changes to keep up with widespread adoption of online payment methods. It also means you need to implement a modern solution built to meet the needs of your policyholders.
Legacy systems that rely on paper checks and manual processes slow down payments and internal operations. Also, cyber threats are increasingly sophisticated, making policyholders seek better protection for their sensitive personal information. In recent years, policyholders have overwhelmingly favored digital experiences and the streamlined approach claims management software provides for processing insurance claims and payments.
Despite this information, the industry has been slow to change. As a result, insurers are not just falling behind; they're risking their future. Much of this can be attributed to a few factors: lack of trust in and understanding of digital infrastructures, uncertainty surrounding data privacy and apprehension over digitizing such large quantities of data. The digital landscape continues to evolve, so combating these challenges can feel overwhelming.
Despite the complexity, insurers need digital transformation, particularly in payments, to streamline their processes and enhance the policyholder experience. You can stand out as the strategic choice for policyholders seeking quick, convenient and safe options. By implementing the digital tools, platforms and strategies required to optimize insurance payment processing, your organization can reduce manual errors, handle large transaction volumes, enhance payment security and resolve unpredictable cash flow.
A Five-Step Approach to Digital Transformation
For insurers seeking to modernize, it’s important to understand that comprehensive change cannot happen overnight. Instead, organizations must incorporate a phased approach with tangible benefits at each stage to successfully integrate digital products, practices and services. The five steps outlined below will help organizations demystify digital transformation in insurance payments, providing clear and simple solutions for insurers to adopt along their journey to digitization.
Step 1: Assess Your Current State
Before diving into digital transformation, organizations should understand their current environment and tech stack. Conduct an audit to reveal pain points in your payments processes (for both you and your policyholders), opportunities to replace legacy infrastructure and resource requirements to modernize your business and achieve your business goals.
Is your organization still processing claim reimbursements through manual ACH transfers and paper checks? If so, this is an opportunity to transition to automated disbursement processes and perhaps even faster payment speeds, like Same Day ACH payments or instant payments. Explore payment processing platforms that can easily integrate with your existing systems and claims management software while offering policyholders faster, more convenient payment options.
Step 2: Define Your Goals
Once you’ve evaluated your environment and current state, establish short- and long-term goals. Consider improvements to your policyholder experience, the volume of online transactions you handle, the types of software you use and your plans for service expansion or coverage. Reflect on your current policyholder retention rate and strategies to improve it. Will you make changes to any existing policies? What do you need to reach and attract new audiences and convert them into policyholders? Ask yourself these questions and look for payments partners that offer the right solutions.
This is also the time to consider ways to future-proof your business. Explore embedded finance, artificial intelligence, instant payments and additional emerging technologies. Not sure where to start? Ask policyholders for feedback, review their behaviors and research the latest industry trends, especially those closely related to insurance such as banking. Adding adaptive and flexible tools will better prepare you for emerging technologies and additional digital transformation later on.
Step 3: Choose Your Digital Payments Partner
Outlining your goals is critical to understanding your priorities as you research potential digital payments partners. This step can help you identify and define the missing pieces required to enhance your business.
When selecting a partner, consider the following factors:
- Security: Pay-by-bank payments involve sensitive financial data, so a strong security track record is essential. Look for a partner that uses industry-standard security measures like encryption and tokenization to protect data.
- Ease of integration: Integrating a new account-to-account (A2A) payments platform with your existing systems can be complex. Look for a partner that offers a user-friendly API (Application Programming Interface) and other integration tools to make the process as smooth as possible.
- Scalability: Scalability is important for insurance companies as your needs can fluctuate throughout the year. Select a vendor that can support high transaction volumes through a cloud-based architecture.
- Customer Experience: The A2A payments space can be complex. Ensure the vendor you choose offers responsive and helpful customer support. Look for robust developer documentation, multiple support channels and a fully simulated testing environment.
With a developer-friendly, single API solution, Dwolla is a digital A2A payments partner that allows insurance companies to send and receive payments directly from their bank accounts.
Dwolla’s API allows insurers to embed digital pay by bank payments into existing insurance applications and payment flows through a bank-agnostic approach. This allows businesses to seamlessly initiate account-to-account payments, including instant payments like RTP or FedNow. Dwolla provides insurers with a payment solution that can manage and reconcile payments across multiple financial institutions for quick, secure and direct payment. Dwolla’s encryption and tokenization protect information, and insurers control the branding and user experience.
Leveraging Dwolla for digital transformation provides seamless bank integration, enterprise-grade security and a single API solution that unlocks cost savings, enhanced payment capabilities, improved policyholder experiences, real-time data visibility and automated efficiencies for insurers.
Step 4: Pilot and Implement
Now that you’ve selected your partner, it’s time to replace your aging payments infrastructure and deploy modern technologies. Work with your digital payments partner to trial, launch and sustain your digital transformation. Refer to your payment service provider's customer support for resources and assistance throughout the integration process. The goal is to ensure a smooth transition and seamless experience for your policyholders.
Discover which use cases, transaction types, funds flows, bank partners and account types are currently eligible for your digital transformation, and investigate how you can expand in the future. As you finalize the setup process, build and test your integration in a fully simulated environment, like Dwolla’s Sandbox, to minimize friction during your launch to production.
Once completed, the testing phase will transition to production, allowing you to launch your integration.
Step 5: Measure and Optimize
Choosing to digitally transform your payments system may seem daunting, but the rewards are worth it. By using automated tools to measure and optimize your new system, you’ll observe changes to business operations and workflow optimization, reductions in transfer processing times and manual errors, and improvements to policyholder experiences—not to mention cost savings.
Leverage data analytics to gather critical information on policyholders. This will allow you to shape plans that better reflect their preferences, lifestyles and behaviors. You can also gain real-time visibility into cash flow. Use automation to streamline processing and create a more efficient digital documentation process.
The Benefits of Digital Payment Transformation
Taking a measured, iterative approach to digital transformation gives insurers and policyholders a better chance of success. Taking the time to find areas for improvement, research solutions and test the integration reduces the risk of potential disruption and creates a better policyholder experience.
Change is inevitable, but that shouldn’t make it daunting. Finding the right payment processing platform can help insurers navigate an increasingly complex digital world. Dwolla’s dedicated experts are with you every step of the way, providing support for a smooth and successful integration.
Dwolla is the go-to payments solution with features that streamline and optimize payment systems, protect data, reduce errors caused by manual processes, elevate the policyholder experience and scale to meet your evolving business needs.
Learn more in our latest guide: 2024 Guide: Understanding A2A Payments and Their Role in Insurance Payment Processing.