Because of the strict regulatory environment in which they operate, insurance companies are careful about adopting unproven technology.
However, with the maturation of the Internet and the need to maintain parity with competitors, many are now investigating how the Internet and related information management technologies can enhance their operations, improve business processes, reduce costs and increase revenues.
Internet storefronts may be the most visible application of technology for insurers, but improving backend processes largely invisible to the customer offers significant promise, and quite possibly, far greater potential savings.
Three critical processes drive much of the cost of doing business for insurers–policy production and archive/retrieval, customer/claims correspondence, and billing/invoicing. This article deals with how the Internet and other complementary solutions can improve the efficiency of these processes, lower their financial impact and ultimately, help grow the business.
For most insurers, creating a policy, making changes to it, routing it between offices, and printing and delivering it to customers has traditionally been a manual process. However, the Internet and specialized software for policy production and retrieval significantly streamline the exchange of information between agents/brokers and insurance carriers, lowering costs and reducing policy production cycles–and often doing in hours what used to take days or weeks.
Agents and brokers utilize these new tools to access forms and information from insurance carriers, complete the forms, and electronically transmit completed policies, notices and related information back to the carriers. This revamped process not only saves paper, postage and handling costs, it also significantly reduces the amount of time to get completed policies into the hands of customers.
The economics for electronic policy production and retrieval are compelling. An end-to-end document management system that enables online routing, viewing and editing of policies, as well as local retrieval and printing of previously issued policy documents, can save an insurer more than half a million dollars in the first year alone.
Converting manual paper transactions into electronic workflows streamlines costly bottlenecks and improves the speed and quality of customer service and satisfaction. In addition, such a system ensures that all forms are current, consistent and correct, reducing risk exposure.
As insurance companies grow, the customer correspondence process often becomes disjointed. So many lines of business and so many different production methodologies within the same company can result in claims correspondence that is inconsistent and unprofessional.
In addition, the time it takes to produce correspondence depends on what systems each individual uses. Finally, many companies rely on the old standby, paper, and are unable to automatically deliver formatted correspondence by fax or e-mail, even when customers prefer these methods.
The challenge is to develop systems that standardize the look and feel of correspondence, allow for customization based on specific data, and automate the process so that customers receive critical information swiftly in the format they desire.
Automated claims correspondence solutions should also be tied into electronic storage systems, enabling instantaneous retrieval by customer service representatives while they are handling service calls.
The good news is that thin-client applications that leverage the Internet for production, delivery and retrieval of claims correspondence are producing encouraging results. These solutions make available at every workstation preformatted templates that representatives populate with transaction-specific information and then distribute based on customer preference, whether e-mail, fax or print.
Company representatives can store, retrieve and view correspondence via a browser, eliminating unnecessary printing. These solutions also reduce the time it takes to search for previous correspondence or to update ongoing contact with customers, enabling customer service representatives to spend more time actually working with customers.
Finally, automated claims correspondence solutions enable employees to produce attractive, consistent communications, thus improving the overall image of the provider.
Some companies turn to an outsourced claims correspondence solution, eliminating the need for representatives to ever touch a piece of paper. In an outsourced solution, a rep uses the same document creation software to create letters from predefined templates and graphics. However, rather than printing locally, the rep sends the letter electronically to an application service provider (ASP) facility where it is printed, folded and bulk-mailed with other communications.
In addition to taking advantage of bulk mailing rates, the company benefits by making the rep responsible only for customer contact and initial correspondence composition, eliminating a time-consuming, manual process from his or her workday.
Billing is also a key area where technology can help. The insurance industry is one of the largest mailers of recurring bills. At an average, fully-loaded cost of $5 per paper bill, not to mention manual payment, exception and dispute-management processing expenses that can be many times the cost of the bill itself, it is easy to see that invoicing activities are a significant cost driver for insurance companies.
To reduce billing costs, insurers have begun investigating electronic bill presentment and payment (EBPP) and electronic invoice presentment and payment (EIPP). Since a typical company saves approximately $7.25 for each bill sent and paid electronically (the cost of the bill plus a pro rata share of reduced processing and dispute management costs), the savings from such a system can add up quickly.
Electronic billing and invoicing also provide faster cash flow and reduce days sales outstanding (DSO), lowering the average cost of working capital for the company as a whole.
Though similar in concept, EBPP and EIPP are different in implementation. EBPP is typically associated with end consumer billing, whereas EIPP is associated with corporate, business-to-business invoicing. While consumers have been slow to adopt EBPP, and many insurance companies have just started offering it, EIPP has been embraced much more rapidly, primarily because such systems provide a positive return on investment with only a 12%-15% adoption rate.
If implemented correctly, EIPP reduces the number of customers calling to question their invoices, lowers the time required to process accounts receivable and provides an opportunity to deliver high-quality, targeted marketing messages.
The ultimate benefits of EBPP and EIPP are similar. Carriers reduce their billing and payment processing costs, increase customer retention by making it easier to do business with them, and stay ahead of the competition by marketing and cross-selling additional lines of business to an established customer base.
Brokers and agents can focus on providing customer service and selling new business since they are removed from the billing process and related administrative headaches.
Customers (individual and corporate) receive a more informative and concise statement that can be accessed and paid according to their time schedule or business processes, plus they eliminate the mistakes and lost documents inherent in manual, paper-driven invoicing systems.
The bottom line is that the Internet and related software solutions make it easier and more efficient for insurers to conduct business. In addition, the appearance and utility of correspondence are improved by technologies that automate and standardize its design, generation and delivery.
Making it easier to conduct business and enhancing their corporate image enables insurers to build greater trust with their customers. Customers with a greater level of confidence and trust in their insurer will purchase additional lines of business. As a result, the customer churn so prevalent in todays competitive marketplace is slowed, and the cost of servicing these customers is reduced, providing a net positive to the bottom line.
William D. Barry is senior vice president of sales and marketing for Docucorp International, www.docucorp.com.
Reproduced from National Underwriter Life & Health/Financial Services Edition, November 25, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.