Insurance carriers are still largely using paper-based payments processes, and some banks see an opportunity to speed up their disbursements and settlements as part of a larger effort to help commercial clients innovate payments.
There's a competitive upside for banks to offer innovation to insurers, a valuable client segment that makes a lot of payments. As a result, some banks have sought out fintechs working on insurer technology.
Take Cleveland-based Keycorp, which in late November announced a strategic partnership with tech firm Snapsheet, a provider of digital claims solutions for insurance carriers.
Key made an undisclosed equity investment in the firm so it can have “a more strategic role [with Snapsheet] than being just a reseller” of its technology, said Matthew Miller, head of product and innovation at KeyBank Enterprise Commercial Payments. It’s a similar strategy Key has followed with its recent investments in other commercial payments fintech companies.
There’s a ready market. Many insurance companies are now pursuing upgrades because modern technologies like application programming interfaces have made it easier to integrate services without having to replace existing legacy systems wholesale or build something themselves from scratch.
“The modern systems and platforms are designed to talk to each other in an easier and simpler fashion and much more quickly than in the past, and APIs create that bridge,” said Sayantan Chakraborty, head of product management for the global treasury management division at Minneapolis-based U.S. Bank.
Key’s investment follows the joint launch and announcement of a service called Snapsheet Transactions, a payment platform on the back end of Snapsheet’s existing claims solution. Snapsheet Transactions provides carriers with a payment hub that features a variety of payment options, said Miller.
Miller said feedback from Key’s insurance carrier clients indicated a desire to have more tech solutions to speed up and digitize the payments process; in fact Miller said it was a joint client that initially brought Key and Snapsheet together.
“From the time a claims decision is made to processing a payment can often take weeks; we want to help them take that down to two-and-a-half days,” he added. Further, once those payments are finally processed they are typically mailed out via paper checks, a process that could make an insurance carrier’s customer “wait another 7-10 days,” said Miller.
Key’s new capabilities with Snapsheet Transactions allows insurance clients to digitize payments and gives them flexibility in how a payment is processed.
“We want to offer the carrier choice — there still are some scenarios where a paper check makes the most sense — but many payments can be delivered in a digital way,” Miller said. “You think about the benefits to the carrier — operational efficiency is at the top of the list. They can eliminate a lot of paper and automate some processes. And [the insurance company’s] customer experience is improved as well. They are hearing from their customers, ‘You can take my monthly premium payment electronically yet you can’t pay me that same way?’”
U.S. Bank is another bank looking to provide insurance clients with more innovative tech solutions. Last month it announced two new commercial payments services, Disbursements via Zelle and Supplier Prefer Pay, digital payment solutions designed to make it easier for corporate and commercial banking clients to transition from paper to electronic payments.
Insurance carriers are a big segment of the commercial client base that can benefit from those services, said U.S. Bank’s Chakraborty, who added insurance companies have been focusing more effort recently in digitizing and making more efficient the claims and payment process.
“The shift that I have seen in the last year and a half is more around how to digitally tie the whole ecosystem together, from when a claim is processed to when a payment is made,” he added. “It’s a big area of discussion for insurance clients. And in the last few quarters we have seen momentum in this area.”
Expect more insurance carriers to pursue modernizing and upgrading payment processes, said Peter Olynick, senior practice lead for retail banking at NTT Data Consulting.
“It’s generally true a lot of insurance providers are not taking advantage of the latest and greatest thinking around payments innovation,” he said. “Physical checks are expensive to create and reconcile, I think you’re starting to see them more looking to leverage digital payments.”
Olynick said banks need to provide those services to insurance clients, who tend to be valuable customers. “They make a lot of payments and they are a valuable client segment to banks,” he said.
That’s a sentiment shared by Key’s Miller.
“The insurance space is very much an area we want to innovate around,” he said. “Insurance carriers make a high velocity of payments so this makes sense for us.”