Insurance companies have presented Visa and banks with a new market to prospect for stored value card customers — their claimants.

Traditionally, insurance companies write checks or use direct deposit to pay claims — whether to a homeowner with a damage claim, a doctor who has treated a patient, or a beneficiary when a relative has died.

But insurers have sparked a new take on financial services convergence: Since December they have been teaming up with credit card companies and banks to settle policyholder claims by issuing claims payment cards — stored value cards that give access to all or part of the money due to the policyholder. (See related story on page 17.)

“With a stored value card, we can avoid sending numerous checks through the mail” and give claimants instant access to the funds, said Scott McAlindin, senior vice president of Hartford Financial Services Group, one of the insurance companies using this method.

Once an insurer approves a claim, the policyholder can ask that some or all of the payment be issued on a stored value card. The insurer sends the money to the card bank, which loads it onto a cobranded card that it issues to the customer. The card, like a credit card, can then be activated by calling an “800” number.

The card can be replenished as often as needed. If it expires before the claim funds have been spent or before the whole claim has been paid, the claimant can get the remaining money in a check or can be issued a new card with a new expiration date.

“You can use such a card anywhere” that a credit card is accepted, “including ATM machines, and you have the same guarantees you have with a credit card,” said Rick Pileggi, director of stored value products for Visa U.S.A. in Atlanta. “If it’s lost or stolen, the customer has zero liability, and the card can be replaced.”

The three insurers doing this are Hartford, Amica Mutual Insurance Co., and Standard Insurance Co.

In January, Hartford Insurance, the newest of the three in this market, initiated a nine-month pilot test of the cards with Visa. The cards are available to homeowners insurance clients who live in the 25 states served by Hartford’s Tampa, San Antonio, and Phoenix claims centers.

Citibank issues the card, which has both the Visa logo and hologram and Hartford’s logo, and it has custody of the funds. No fees are associated with the card, and customers can check the balance by calling a customer service number or using an ATM.

Thus far, Mr. McAlindin said, Hartford has settled 800 claims using these cards, and its survey of these claim recipients found that more than 90% were very satisfied with the card.

Until the end of this month, the claims payment cards will not permit more than $10,000 to be loaded, though larger claims may be paid this way in the future, he said.

Down the road, Mr. McAlindin said, Hartford intends to issue a claims payment card automatically with a policy so that, when a claim is approved, the insurer can load the settlement onto the card rather than having to issue a check. No decision has been made as to when the card would be rolled out nationwide or when (and whether) it would be made available for other product lines, he said.

Amica Mutual of Lincoln, R.I., started using stored value claims payment cards from Visa for its disaster recovery program last December. The insurance company’s adjusters distribute the cards to policyholders at the disaster site so that they can take care of immediate needs, such as paying to board up broken windows or paying hotel expenses if their home is not habitable.

On June 1, Standard Insurance of Portland, Ore., began using Visa stored value cards to pay long-term disability claims that require regular payments. Policy beneficiaries who hold the Standard SecureCard get their monthly disability payments as a credit to the card on their regular benefit payment date, said Kim Doyle, director of product development for the insurer. Customers can then either use the card as a debit card or can transfer funds from the card to checking and savings accounts over the phone.

Ms. Doyle said the claims payment card is useful for the insurer’s disabled clients, who may have trouble getting around and getting to the bank to cash a check. “We’re always thinking about ways to help our claimants through the day-to-day issues of being disabled,” she said.

The card issuer, U.S. Bank, is a subsidiary of U.S. Bancorp, a $160 billion-asset financial services company in Minneapolis. Joe Janz, U.S. Bank’s senior product manager of retail e-payments, said it is “trying to dip our foot in the stored value pool.” He said he views the arrangement with Standard as a start.

The bank, already a big issuer of Visa-branded cards, not only has custody of the money on these cards but also handles several processing tasks for them as well, Mr. Janz said.

The card is cobranded with logos of the bank and the insurer, and Mr. Janz said the program will help raise awareness of U.S. Bank outside its traditional markets.

Though the idea of using a stored value card to pay insurance claims came originally from the insurers themselves, Mr. Pileggi said that for Visa the program is part of its push to popularize these cards. The claims payment card can introduce the insurers’ customers to the idea of stored value cards, which Visa says is an important part of its growth plans. “It’s another way to get the Visa brand in front of them,” Mr. Pileggi said.

Such cards are becoming more popular, said Jack Dale, chief executive officer of the marketing and financial services consulting firm Entandem, in Sterling, Va.

“A lot of the activity centers around getting rid of manual or paper-based processes,” he said. Using a stored value card also lets insurers outsource part of the claims-paying process, which helps them, he said. In addition, he said, credit card companies and banks get people to use an additional product.

Mr. Dale predicted more growth in these kinds of payments, especially as consumers become more comfortable with prepaid plastic gift certificates and with debit cards.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.