Insurers and Agents Gain Insight into Billing
Insurance Networking News, June 1, 2009
Insurers increasingly are choosing to direct bill insureds. But that can pose communication problems between insurers and agents.
The insurer/independent agent relationship has long been an important one, and when you add an insured to the mix, miscommunication and challenges are sure to arise. Such is the case with the billing process. Historically, agents were the ones who took responsibility for billing - as part of a larger customer service effort, agents were the insurer's face and ears to the insured. The past couple of years, though, have brought more sophisticated technology and complex products and combinations to the billing process. The industry reacted with direct bill, which changed the insurer/agent relationship.
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Direct bill grew in personal lines and, ultimately, in commercial, according to Mike Fitzgerald, senior analyst at Boston-based Celent. "The insurer has been taking on more of the administrative activities around billing where it makes sense," he says. "Agents began to welcome that because the carriers could do it much more efficiently, and it wasn't something that was much of a value-added service."
Deciding to direct bill or allow the agency to bill can be tricky, especially if the insurer wants to account bill - billing multiple accounts on one statement - or if the product is complex and of higher value.
Mike Fitzgerald
"Agents may not want the carrier to direct bill if they are running a program with many different coverages being underwritten by a number of different companies, but may want to present one bill to the insured," says Scott Curran, lead for Bermuda-based Accenture's North American Insurance Billing Practice.
However, Curran says, agency bill involves a great deal of back and forth between the insurer and the agent, figuring out who owes whom how much, and that can get expensive. "Now, because of the high cost of billing, it's becoming more and more apparent that if an agent can have a carrier do the billing and trust that the billing is done well, the agents are allowing the carriers to do more of the billing." Curran points to another direct bill benefit: The agent is often paid the commission up front, where in the agency bill model, the agent is taking the commission off of every insurance payment.
However, a challenge with direct bill is keeping the agents informed. "If there's a cancellation being issued, the agent should know about that before any notice of cancellation goes out to the insured," Curran says. "The agent can intervene, and help the insured get the payment in on time."
LEAVING LEGACY BEHIND
The needs of agents were paramount when Albuquerque-based New Mexico Mutual Group (NMMG) decided to replace its legacy billing system. "Our system was not Web-based; it was an AS/400," says Lynn Krueger, NMMG's billing and collection manager. "Our statements were pretty out-of-date."
Before deciding on a billing system solution to enable its direct bill, NMMG queried its independent agents to find out what they required. They wanted to be able to see the billing statements and statuses online, Krueger says. "They are very involved in the billing process," she says. "They see all notices of cancellations. We send duplicate forms to insured and agents."
NMMG ultimately opted for BillingCenter from San Mateo, Calif.-based Guidewire. The new system enables an end-to-end billing process, including payments, collection agency management and agent commissioning, and is in use by 40 internal users, across the billing, underwriting, accounting and claims departments.
These capabilities are necessities to many insurers. Insurers have learned over the last couple of years that policyholders - companies or individuals - aren't comparing insurers' billing capabilities against other insurers. They are comparing the bills from insurers to bills from the cable company, or the phone company, Curran says. "From an insured's perspective it's not that different, but we all know there are many things that make insurance billing more difficult than other industries."
The insurers' old billing systems, often combined with policy admin systems, can't support necessary functions. Other industries have greater capabilities because they don't have to work with outdated systems holding such vital data, according to Curran. "With a combined billing/policy system, making a billing process change would be a big development effort," he says. "But insurers now are looking for systems that the business can configure. If the business wants to use billing to differentiate itself, they can configure the system to support the differentiating capability. In the past, the older systems got in the way of bringing out new payment methods, even sometimes new lines of business."
This is yet another driver for implementing a new billing system, according to Kim Morton, global product marketing director at Guidewire. "It's great to have a system to launch new products, but if you can't bill for it, you can't launch them," she says. "Multiple bill plans can't be done on legacy systems," she says. "And that's a headache for agents."
When ICW Group upgraded its multiple lines of business onto one platform, the San Diego-based insurer implemented industry-specific solutions from SAP, Newtown Square, Pa., for claims, payments, billing, financials and corporate performance management.
"We have a comprehensive five-year growth and transformation strategy," David Hoppen, COO, ICW Group said in 2008. "Therefore, we needed to look beyond short-term fixes in our claims, payments and billing operations to the enterprise at large. SAP solutions gave us the functionality required to meet our current and anticipated needs, and the framework to improve our operational efficiencies. Since customer satisfaction is of paramount importance, we needed an integrated platform so our customers will be better served."
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