With so many change initiatives happening simultaneously, it’s no wonder that claim payment transformation has fallen a bit behind. But not only is paper check payment much slower (5-7 days) and more expensive (10 x more) than digital payments, it comes with 3 inherent insurer payment challenges: multi-party payments, lienholder and mortgagee payments, and vendor payments. In this 3-part series, we’ll discuss these 3 claim payment challenges and how digital transformation addresses them. We’ll provide an overview of the challenges here in part 1, further delve into lienholder payments in part 2, and finally take a look at the vendor payment world in part 3.
Multi-party claim payments have long been a pain point for both insurers and claimants because of the authorization, cashing and deposit process. Since many insurance policies list more than one person as the insured (e.g. joint owners, spouses, etc.), insurance claim checks are very often made out in the name of both parties. This becomes challenging when the word ‘and’ exists between the party names. In that situation, it’s then required that each party endorse the check before it is allowed to be cashed or deposited.
Complicating the process further, most banks will require that all payees be present together at the bank to endorse the check, especially for larger check amounts, with each person presenting a government issued photo identification to safeguard against fraud. If this step cannot occur, then the check may need to be re-issued, initiating the check payment process all over again. As one can imagine, this can not only be tremendously inconvenient and frustrating, it can turn into a coordination nightmare, and surely does nothing to improve a customer’s experience.
Lienholder & Mortgagee Payments
Similarly, in the situation of an auto loan/lease or a home mortgage, the financial institution (‘lienholder’) or mortgage lender (‘mortgagee’) holding a financial interest in the auto or home will be listed on the respective policy. When a claim occurs, payments may be made out to both the claimant and the lienholder or mortgagee. These specific types of multi-party payments necessitate an even more involved and burdensome process, replete with additional steps and time constraints that the paper check process further complicates.
Property and casualty insurance claims often result in payments to third parties such as: medical providers, auto body shops, car rental companies and roofing businesses. These third-party vendor payments can be single payments or bulk payments, requiring explanatory remittance documentation to be attached for reconciliation purposes. Vendors need to be able to readily understand what payment amount correlates to which carrier for which customer or patient, as well as for what specific service and service date. Providing this information and integrating it with the actual check payment can be difficult and confusing. Vendors can wait long periods to receive claim settlement checks, and then once they do, many times are not able to allocate the payments and accurately reconcile their accounts.
Digital Claim Payment Transformation
So how can these claim payment challenges be resolved? The complications and delays involved with the paper check process for multi-party and vendor payments can be eliminated with the right digital payment solution. Selecting a comprehensive digital payment platform designed for property and casualty insurers can greatly simplify the authorization and reconciliation processes, as well as give all payment recipients (e.g. policyholders, lienholders, mortgagees and vendors) complete payment flexibility.
In part 2 of this 3-part series, we’ll take a deeper look into the pain points of lienholder payments, including the auto total loss process.