Insurance & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


04:05 PM
Lisa Valentine
Lisa Valentine
Connect Directly

Carriers Look to Billing to Improve Customer Service and Retention

Billing is a critical but often overlooked aspect of customer service and retention -- not only for policyholders, but for agents and distributors as well.

Billing: The Key to Growth
3 Factors Behind Carriers' Renewed Attention to BillingIFBI Cuts Costs and Improves Service With Billing Solution
Every insurance carrier creates and distributes bills. And as long as those bills have been accurate and delivered on time, most insurers have paid little attention to improving the customer experience around billing.

But that has begun to change. In the past few years, insurers have begun to look at their billing systems with fresh eyes. They are considering how an improved billing process can provide differentiation and a competitive advantage. After all, the bill is the most frequent point of customer contact -- a customer may go months or years without submitting a claim, but all customers receive bills at regular intervals.

Billing provides a huge opportunity for insurers to improve customer satisfaction and retention, says Craig Weber, insurance practice senior vice president at Boston-based research and consulting firm Celent. "Billing has traditionally been looked at as an administrative task," Weber says. "But insurers are starting to take cues from large-volume billers, such as utilities and communications companies, and are realizing that billing is a very powerful tool for maintaining and enhancing customer service."

In the current difficult and competitive market, says Weber, every customer becomes even more important. And receiving a bill is when the policyholder thinks about insurance coverage and costs; if the billing process isn't handled well, the experience may spur the customer to defect to another carrier.

"Billing is our constant contact with our customer, so we want to make it as easy and painless as possible," says Thomas Kern, vice president of product administration and program management at Harleysville, Pa.-based Harleysville Insurance ($1.1 billion in 2008 total net written premiums). Customers are enthusiastic about Harleysville's new credit card and debit card billing services, Kern reports, noting that within six months, 7 percent of Harleysville's customers have opted for the new payment type -- a result exceeding the 5 percent uptick the carrier had targeted prior to rollout.

Harleysville continues to use its own home-grown billing system, according to Kern. But the carrier relies on Brookfield, Wis.-based Fiserv Electronic Payments Services (formerly BillMatrix Corp.) to manage credit card, debit card and one-time EFT payments.

Even if insurers are hesitant to embark on new billing systems initiatives, most companies appear to recognize the importance of billing to customer satisfaction and retention. In a billing market survey of more than 60 P&C carriers in North America conducted by Guidewire Software (San Mateo, Calif.), 80 percent of respondents said they believe that billing is "very important" or "important" to customer satisfaction, and 86 percent said they believe that billing affects customer retention (see related chart, below).

How Important is Billing to Customer Satisfaction?

The importance of billing for insurers is summed up by Billy McCarter, SVP for delivery at New York-based MajescoMastek: "Nobody reads their policy, but everybody reads their bill. If you get the bill wrong, the customer may leave. But if you get the bill right, that bill becomes an effective sales and marketing tool."

Leap of Faith for Some

Although some insurers, such as Harleysville, are working to optimize their billing systems, most are not, says Jay Otterbacher, VP of Exceed Delivery at CSC, in Falls Church, Va. "While some insurers see billing as critical to their CRM strategy and an area they can exploit, many do not, since billing isn't a pain point," says Otterbacher. "Other initiatives, such as claims or policy system enhancements, more often bubble to the top of the list of priorities."

Part of the trepidation in attacking billing is that it is a large, complex project that requires integration with a multitude of other systems, Otterbacher notes. "With billing, there is a lot of opportunity to mess up, and if you do, it's a very big deal," he adds.

Another stumbling block is the pervasive feeling that it's difficult to determine an ROI on a large-scale billing replacement, according to Kimberly Morton, global product marketing director for Guidewire Software. "If you wait to try to quantify an ROI, you'll never replace your billing system. In some ways, replacing billing is a leap of faith," Morton says.

That said, policyholders increasingly want flexibility in their payment plans in order to better manage their finances. For example, customers with tight household budgets may find it easier to pay for insurance coverage on a monthly or quarterly basis rather than paying one large annual bill. Insurers that can offer payment options improve customer retention, says CSC's Otterbacher, since receiving a large bill can be an impetus to shop around for a less expensive policy.

Harleysville has also seen an increase in the number of customers asking for reduced coverage or higher deductibles to lower their premiums, possibly due to economic pressures, says the insurer's Kern. These types of changes can be problematic when legacy billing systems do not allow mid-cycle policy changes.

"If you don't change the policy, billing remains pretty simple," says Kern. "But if the customer asks to make a change to the policy today, and you produced an invoice last night, you need a billing system that can adjust the amount due and reissue the invoice." Although the process of making these types of changes increases Harleysville's operational costs, Kern says, the carrier needs this flexibility for customer satisfaction and retention.

1 of 3
Register for Insurance & Technology Newsletters