Insurers Can Ensure Card Growth

  Changes in the health and property/casualty insurance markets are presenting new opportunities not only for insurers, but also for credit and debit card issuers and card processors.
  First, the migration to consumer-directed health care plans finds consumers assuming greater responsibility for managing how they receive health care services as well as how and how much they pay for them. Payment card services can help consumers better monitor their payments and facilitate the delivery of health care services in this new environment. The use of payment cards also allows for more effective administration of tax-advantaged health savings accounts associated with high-deductible health plans.
  The second major trend is in the property/casualty insurance industry. Carriers are beginning to use cards to pay both catastrophe claims and standard property claims to consumers and small businesses.
  BearingPoint research suggests that by the year 2012 the convergence of banking and insurance services will lead to a combined total of more than 53 million health-savings accounts, health-reimbursement accounts and flexible spending accounts. Most of these accounts will be accessed with payment cards.
  This is a new and promising opportunity for both banks and insurers. Growth in this area will not have to be "bought" through acquisitions of existing businesses or by stealing market share from competitors. Those strategies tend to be expensive, time-consuming and often unsustainable.
  Surprisingly, the consumer-directed health care market is growing faster than either the 401(k) or the individual retirement account markets did in their early stages. BearingPoint estimates that financial institutions will gain more than $4 billion annually in new revenues from consumer-directed health care accounts by 2012, covering several categories of financial products.
  The efficiency, greater control and broader array of consumer-information services offered by payment card products will make cards an integral part of this new market.
  Though different from those in the health care industry, the forces driving the growth of payment cards in the property/casualty insurance industry are no less powerful or pronounced. In contrast to nearly every other industry in the United States, insurance companies still pay claims to consumers using paper checks.
  Payment cards can help insurance companies and other organizations that provide disaster-relief funds to achieve the three "Cs" of card-based systems: capture, control and correct.
  Card networks provide automatic capture of card-spending information in terms of who, what, when and where-by merchant category today and in the future down to the item level. Using restricted codes, either by type of merchant or geography, issuers can control where cards are valid. For example, after Hurricane Katrina, the codes for plastic surgery and high-end retail items could have been blocked, significantly reducing the inappropriate use of relief funds.
  And if fraud is discovered, whether by the cardholder or another party, the merchant may be charged back for the transaction to correct the error.
  Card payments can help insurance carriers reduce fraud, cut costs in payment processing and improve customer service, thereby improving customer retention. They also enable claimants to gain quicker access to their funds, to obtain automatic accounting of their purchases, and possibly to gain access to special benefits and discounts from retailers with which the carrier has partnered.
  James Dean and Kirsten Trusko are senior managers at BearingPoint, a management and technology consultancy. Both also are co-leaders of the company's Consumer Driven Healthcare Financial Services practice. Dean can be reached at James.Dean bearingpoint.com. Trusko can be reached at Kirsten.Trusko bearingpoint.com
  (c) 2007 Cards&Payments and SourceMedia, Inc. All Rights Reserved.
  http://www.cardforum.com http://www.sourcemedia.com