Billing In the Age of Digital Insurance: From Back Office Function to Innovative Growth Engine
Everything is connected. In insurance, this is proving true throughout the value chain. In order for an insurer to enter the realm of Digital Insurance 2.0, it must consider the connections and adapt accordingly. Fortunately, digital insurance transformations are enabling. Once they are considered and implemented, they begin to free the organization up to be more than it has ever been before.
Billing is a great example. At one time, billing was as “back office” as you could find. There was a tenuous tie between billing and marketing for those who sent marketing messages with bills, but billing was still firmly fixed within the back office functions.
With today’s exciting new products and services and non-insurance offerings, new billing methods are vital. In addition, new channel opportunities and new digital ways of interacting with customers are transforming the role of billing. Billing flexibility is now crucial to growth. Billing is now a key customer engagement tool and a foundational component to a new digital experience.
A quick shift into Billing’s fast lane
The rapid digital transformation within other industries is pulling Billing into the fast lane. According to Mary Meeker’s Internet Trends 2018 report, 60% of transactions are digital in nature, ranging from mobile payments, messenger apps and contactless payments through online commerce sites and buy buttons.
The nature of e-commerce is evolving from where it began. The payment portion of the transaction is now a component of an integrated digital value chain that includes search features, bundling, recommendations and quotes, complex schedules, data streaming in and out and numerous integrations.
To help insurers grasp the possibilities and the ways in which they need to transform, Majesco recently published Billing in the Era of Digital Insurance 2.0: At the Center of Growth and Innovation. As a valuable supplement to the report, we held a Billing webinar, enlisting two of Majesco’s billing experts, Sameer Karode, Vice President, Product Management and Badri Mallikarjunan, Client Development Practice Leader. We began with Sameer discussing three key aspects to the new billing capabilities:
- Subscription and One-Off Purchases
- Seasonal Billing
“When it comes to innovative products, we see Billing likely to play a bigger role than it has before in traditional products,” said Sameer. This will require a substantial increase in the capabilities that Billing will need to provide, as some of these capabilities will shift from the policy admin system to Billing. Others will simply need to be added to Billing’s capability portfolio because they don’t exist within most insurer’s systems.
For example, usage-based insurance requires a new approach to billing. The premium calculations that now exist within the policy admin system must be either shifted to or exposed to Billing in order to be more flexible and transparent. If a policyholder is being charged for mileage driven or timeframe of use, the billing functions must be able to capture that data efficiently and effectively and make calculations based upon that data. For some insurers, it will be easier to collect an upfront deposit and debit the usage premium against the deposit, instead of billing the same amount in following month like in case of traditional billing. Either way, the billing information will need to be detailed enough for customers to see and understand in real time.
“This is very similar to an EasyPass or a PlatePass model,” said Sameer, “where you collect a deposit when the vehicle is set up. There is no traditional billing where you send an invoice, wait to see if it is paid and then follow up. When the customer drives the vehicle, the telematic device will feed the trip / mileage driven data for the vehicle through a set of standardized web services. Billing takes the trip data, calculates the premium based on a per-mile rate captured from Policy Admin and debits it from the deposit that was collected up front.”
Sameer points out that there are many benefits to a modern billing solution, not the least of which is better financial performance.
“There is no cash flow issue. No waiting for payment. It is a completely no-touch digital product all the way through.”
Subscription billing — experimental, but growing in use
Subscription billing is big across many industries, but insurance is just now beginning to catch up. Insurers need to be prepared for a steady growth of products and services that will require subscription-based billing. Subscription types require more than just calendarized transactions. Subscription capabilities include frequency changes, free trial periods, and the application of promotion codes. Billing’s subscription capabilities should also extend to freemium or premium services — mimicking popular app features, where services could be supplemented by ads.
Insurers have traditionally shied away from seasonal insurance products and those that you can turn on and off — likely because of the loss of consistent income and the possibility that once the product is turned off, it may not be turned back on again. The consumer, however, might rather pay for the seasons in which they are using the insured property.
“Let’s say that you own a motorcycle or boat and you live in the Northeast,” said Sameer. “In the winter, you aren’t taking these out, but you are still paying by the month and that doesn’t feel right. What seasonal billing does is it aligns your payment plans proportionally with your usage.” This, Sameer posits, could save insurers from canceled policies because the insured sees the fairness in being billed the bulk of the premiums during the months of real use.
Billing that is built to flex
“There are different trends in the insurance space that are specific to billing,” said Badri. “As insurance carriers, we need a way to manage these and also have the flexibility to deal with anything new that might be thrown at us. The needs of the consumers are changing. They want more things digitally. We need to be nimble and support those needs in a quick and agile fashion.”
Badri’s assertion is that a configurable enterprise billing chassis is the solution.
“The way we deal with this is by using specific submodules within billing.”
For any insurance product that is being underwritten or any service being offered, there is information that needs to be collected. But each product or service has different needs and requirements based on myriad details from geography to sales channels. How do you collect taxes? How do you deal with commissions? How do you make adjustments? How do you apply discounts? If, instead of trying to make an “all in one” solution that covers most situations, you use a submodule approach, then you are constructing a much more functional and flexible solution that can adapt to new innovations as opposed to using a traditional approach of customization.
This also brings great flexibility to the process, because the numbers of bill types have grown with the increase in channels, product types and digital capabilities. Some bills, for example, are simply direct forms of traditional bills. Others are consolidated account bills. Carriers who used to keep silos for their property, life, mortgage, etc., now want to combine those bills.
Agencies that might want to carry products from multiple carriers, but want to maintain their one-face, one-relationship status with customers, may need to consolidate billing from multiple sources. Insurers who serve agents may wish to give account statements across all policies for a customer or under a given agency.
As group insurers are now offering greater selections to employers, they have a greater need for consolidated measures that can be easily handled through payroll deductions. This makes them more appealing as a one-stop solution for time-crunched HR departments. They also need an effective list bill solution that can serve employers or TPAs.
All of these innovative new functions are aimed at fostering insurance growth across all products and channels.
Bringing simplicity to a complex process
A billing solution that can use these types of submodules can reduce the complexity in launching new products and create a veneer of simplicity for the customer — whether that customer is an employer, an MGA, an agency or a retail consumer. It also prepares insurers to be able to handle many different types of transactions, reducing them to simplified apps that work much the same way, regardless of their source.
“To hide the complexity from the carrier,” said Sameer, “we have constructed (an approach) where you can have all of these payment vendors as apps…and they are simply integrated within our EcoExchange. From a core billing solution, it is just one interaction. The rest of the complexity is hidden from the billing engine. This is the future, where insurance will have these kinds of apps where you don’t have to worry about point-to-point connections and integration specs as the industry changes.”
This brings us back to our original idea, that connections are driving innovative billing solutions. If connections are fueling the need, then the simplification of connectivity across capabilities, data streams, integrations and channels is crucial. For more information on the exciting potential of billing within Digital Insurance 2.0, be sure to view the Billing webinar and download Billing in the Era of Digital Insurance 2.0 today.