As more and more insurers are realizing, billing is the most frequent experience that their customers have with them. For insurers that do it well, it is an opportunity to make a good impression by presenting accurate information in a convenient and user-friendly way. For insurers that do it poorly, it increases their costs, both directly -- as in the cases of mistaken cancellations leading to costly reinstatements or billing errors leading to increased call volume -- and indirectly, in the impact that poor performance in billing has on customer experience and retention.
Billing has become an important part of insurers' agent service and customer service strategies over the past few years. The primary factors driving this renewed attention to billing are:
• The increased importance of new payment methods, especially credit cards. For some personal lines insurers, close to 5 percent of their customers pay via credit card. Personal lines and individual life insurers have also seen correlations between the use of recurring payment methods such as cards or electronic funds transfer and higher customer retention.
• The increased need to communicate real-time billing information via new channels such as the Web and via download to agency management systems. In recent interviews with CIO members of the Novarica Insurance Technology Research Council, electronic presentment for both agents and customers was frequently mentioned as a key focus area in billing.
• The increased need for agility in being able to support new products and new billing plans. Agility in introducing new products and channels is an important goal for insurers as the market becomes more competitive. Billing needs to be able to keep up with changes made in other areas.
The Current State
For most insurers, billing systems are part of a legacy homegrown or vintage vended core processing environment. For many larger insurers, these are primarily calculation and record-keeping systems that are supplemented by a document automation solution that actually creates the statements. These inflexible legacy billing systems can prevent insurers from taking advantage of new opportunities and meeting customer and agent expectations.
The billing systems provider market, especially in property/casualty, continues to evolve and move upstream. In the past two years, Guidewire, based in San Mateo, Calif., has become a much more established player, with four live clients and more than a dozen companies in implementation. New York-based MajescoMastek purchased STG and continues to expand its client base and improve the user interface of the application, while CSC, of Falls Church, Va., and StoneRiver (formerly Fiserv), of Oakland, Calif., continue to hold strong positions. Duck Creek, based in Bolivar, Mo., has also entered the market.
Nearly all of these vendors' systems are componentized parts of broader policy administration suites, although many of these were developed independently and subsequently integrated into the suite, rather than being carved out of an integral whole.
In addition, SAP (Newtown Square, Pa.) and Oracle (Redwood Shores, Calif.) also offer insurance billing solutions, which were adapted from products that serve other verticals.
Interest in Packages Accelerates
The market for stand-alone packaged billing solutions had historically been strongest in the midsize and smaller ends of the market (under $1 billion in premiums), with most of the large insurers relying on homegrown or other legacy systems. However, with the maturation of several existing solutions and the establishment of several others, even the largest insurers are looking first to the vendor marketplace before considering rebuilds.
Over the past two years, the installed base of modern vended billing systems has grown more than 20 percent in property/casualty. In life/annuity, billing as part of core policy systems is still the norm, but activity is picking up there as well, as life/annuity companies start to modernize their infrastructures.
As one midsize life/annuity company CIO with whom Novarica spoke recently put it: "Billing is a big deal -- it's customer-facing, causes a lot of complaints, and it's hard to consolidate. I'd like to see us do something there before we get out into those other areas."