This piece is by Oliver Werneyer, CEO, Imburse and it looks at the changing landscape of payments and how insurance brands can adapt to the new payment options and platforms out there.
The insurance industry is often cited as a latecomer to digitialisation. Regulation, legacy systems, complex products and an inherent risk-averse nature appear to have prevented many insurers from keeping up with their banking counterparts and other sectors, where 24/7 accessibility, a one-click process/purchase solution, quick delivery and a tailored digital service is the norm.
In order to move forward, insurers are told they need to embrace digital transformation. This suggests the solution lies in technological change and while this is one element, tech is only the catalyst for change. The answer lies in re-thinking the whole business model.
Insurers continue to run disconnected systems that fail to give them a single view of their organisation, product lines, performance, finances or customer base. This inevitably creates hurdles at every stage of the relationship, frustrating employees and customers (and in this digital age, the latter are used to having solutions tailored to their lifestyle).
The business model must prioritise these disparate parts of the organisation and work to integrate them.
One area where there is a clear integration issue is payments. Despite the collection of premiums and payment of claims being ‘mission critical’ to the insurance value proposition, it’s generally not considered a core competency. Most business models fail to identify where the function sits, which means leaders are unable to overcome their payment challenges.
Does payment responsibility sit in operations, IT, finance or customer services?
This lack of ownership brings lower investment into dedicated payment resources, payment teams, technology, ongoing maintenance and the support structures. And with no central area of responsibility, there’s often a fragmented IT architecture unable to support a single view process.
So even if the front-end of the business may be digital, initially meeting customers’ needs, the back-end (operations), tend to lag behind, causing problems at those key pain points – making and receiving payments.
Over the past few years there’s been a huge growth in payment options – Google Pay, Apple Pay, Pay Pal, cards, vouchers etc. These differing solutions need to be managed across a line of business and potentially across global groups, but as this increases operating expenses and capital expenditure, very few insurers recognise payments as a core competency and build teams to streamline and extend customers’ options.
Why? Because even a big insurer with 2+m customers paying monthly (which rarely happens), would only end up with 24m transactions a year, which although isn’t small, isn’t that significant when compared to e-commerce or retail.
It’s no surprise, therefore, to find most insurers believe building and running a payments team does not add value. Their preference is to consider external solutions, such as renting payment capability middleware.
So what is middleware? Middleware acts as a bridge between an operating system or database and applications. Often described as ‘software glue’, it provides a method of communication and data management between applications that would otherwise not be able to exchange data.
Why the name? Because is sits between client requests on the front-end and the back-end resource being requested.
Middleware enables users to easily navigate the payments world, giving them access to any payment provider and technology for collection and pay-outs, via a single platform that supports the whole operation. Users can seamlessly connect their business and customers to whatever payment tech is right for them.
The rental option gives insurers access to continually evolving software, with a focus on reliability and security, rather than paying for in-house upgrades and teams.
In addition to providing simple access to multiple payment technologies and providers, and in doing so, meeting customers ever-changing payments needs (increasing satisfaction and retention), a platform such as Imburse, resolves any B2B challenges, for example, when managing intermediary payouts.
For insurers with broker and agent relationships, the tech enables them to track and link payments. Once a premium is collected, the tech triggers a broker commission payout and if the policy’s cancelled, the request’s linked to the broker and the commission payment ends. A white-label option also enables customers to see the broker, rather than the insurer’s branding.
Middleware does the heavy lifting. This single interface connects to and triggers any payment, via any provider and any technology, in any market, performing roles that may be covered by teams including: payments, collections, claims payout, loyalty and accounts.
Using cloud-based payment software to connect to the payments ecosystem, regardless of the IT infrastructure, can help insurers grow and develop propositions, secure in the knowledge the payment space is covered. This is particularly important when moving into new markets; the payment world may look different when launching new products, impacting other areas such as operations and reducing paper-based costs.
This also helps in the area of parametric insurance and new capability requirements around real-time payments, and addresses any risk management issues around how insurers manage PSD2 and ‘Open’ regulatory compliance.
The payment elephant
In e-commerce, customers make a payment and expect something in return. Here the focus is on the payment journey and the product. In insurance the product is the claims payment, so if it isn’t seamless and tailored to customers’ needs, at a time of high emotion, the impact on customer satisfaction will be huge.
Digitalising processes and improving the customer experience revolves around payments and with Open Insurance just around the corner, it’s vital insurers address that payment ‘elephant in the room’.
Using data and technology are seen as THE solutions to addressing many of the challenges the insurance sector faces and with the insurance proposition starting and ending with a payment, this area must be given a higher priority.
Cloud-based middleware provider Imburse, connects large enterprises to the payments ecosystem, regardless of IT infrastructure, business area, market or requirements. Imburse’s ‘plug & play’ solution enables enterprises to collect and make payments using a variety of payment technologies and global providers.
Launched in 2018, Imburse is in London, Zurich and Lisbon.