Billing is a key stop on the road to insurance modernization

Back when property and casualty (P&C) insurers first set out to modernize their core processes, it made good business sense to tackle policies and claims before addressing the downstream functions of billing and payments. Now, though, the customer experience (CX) gap has grown too wide to ignore.

While policyholders can now add coverage at the click of a button and upload photos of property damage from their smartphones, their billing statements still often arrive via snail mail. Legacy billing systems also get in the way of insurers delivering the dynamic pricing and personalization products that keep them competitive in a market where insurtechs increasingly set the standard.

The good news for insurers is that by waiting to update their billing systems, they’ve gained the advantage of widely available, road-tested cloud technology, making billing modernization relatively quick and straightforward. Insurers can choose from an array of preconfigured, plug-and-play features, whether they decide to implement a P&C-specific platform or build their own by integrating standalone software packages.  

Pulling billing into the modern world

There’s no escaping the impact of older billing systems on insurers’ ability to compete. No matter how much insurers advance their core systems, legacy billing that runs in batch mode remains a burden, especially when large commercial insurers need to make changes such as invoice corrections, which require significant time to generate amended bills and make accounting adjustments.

Worse, inflexible billing processes are no match for an increasingly real-time marketplace. Dynamic pricing based on individual needs is among consumers’ top three insurance concerns, along with online purchasing and mobile apps. Yet legacy billing systems are unable to support either dynamic pricing or personalization.

These limitations hamper insurers’ ability to attract younger customers, who may be just as likely to turn to offerings from the insurtech sector, which has set a high bar for billing models that accommodate usage-based insurance and policies tailored to the sharing economy. For P&C insurers to stay relevant in the eyes of customers who expect great experiences in exchange for their customer loyalty, modernizing this back-office function can no longer be ignored.

Speed and flexibility of the cloud

Cloud-enabled software-as-a-service (SaaS) products can play a key role in providing the quick go-to-market insurers are looking for and allowing them to fine-tune their marketing strategies. For example, we partnered with a mid-size insurer to move its full suite of core systems, including billing, to a SaaS platform in less than 15 months. The greenfield initiative not only transformed the insurer’s consumer market business end-to-end, but it also freed its staff to focus on business innovation and improved CX.

The new real-time billing capabilities enabled the insurer to expand into personal lines in the growing market of supplemental benefits. Moreover, because the SaaS vendor handles content management, the carrier stays current with critical industry content and ensures it writes business based on the most up-to-date actuarial data.

The cloud also offers the flexibility to “compartmentalize” the billing ecosystem, allowing insurers to install individual components for functions they can swap in and out to better meet their business needs. Using a modular architecture built on application programming interfaces (APIs), insurers can integrate core workflows provided by SaaS vendors for functions such as invoicing, payroll deductions and third-party payments. Such flexibility enables insurers to capitalize on pay-as-you-go business models for usage-based products and data streams from connected-home devices.

The outcomes of standardized, flexible payment processing extend across all lines of business. Organizationally, insurers gain a holistic view of operations. Customer service representatives can access complete, up-to-date information about all policies and accounts, and agents’ commission information is easily available through a web or portal interface.

Taking steps toward billing modernization

Here’s how insurers can begin to modernize their billing systems.

1. Understand the pain points in your billing and financial systems. The number-one pain point for insurers’ legacy billing systems is the systems’ tightly coupled code and architecture that prevents modularization and the seamless flow of data among systems. Another challenge lies in the dozens of outdated rules embedded in legacy program code and current programmers’ limited knowledge of them.
   
   By inventorying all system pain points, insurers can determine the path that best fits their organizations’ needs. They can better evaluate whether to improve the billing system by rewriting code, purchasing component software or implementing a platform.
   For example, when a worker’s compensation insurer evaluated its billing system, it found hundreds of rules sitting inside its legacy code that needed updating. Because it wasn’t feasible to debug so many rules, it partnered with our team to modernize its revenue cycle management system, as well as its invoicing, collections and accounts receivables processes. The result: annual savings of $2.1 million over five years, among other benefits.
   
   
2. Develop proofs of concept (POCs) for your top two or three product choices. POCs ensure your organization understands platform and product functionality prior to purchase — and is better positioned to foresee the full costs. These rough prototypes act as a reality check for which core business processes can be modernized using out-of-the-box components and without customization.
   
   Using POCs, insurers can also determine whether platform components meet their needs for systems external to billing, such as commissions, general-ledger reporting, and account and delinquency management, or whether they’ll need to integrate standalone plug-in products.
   
   
3. Conduct a multi-dimensional assessment of your organization’s current-state billing functions. It’s essential for insurers to involve a broad range of stakeholders in their billing modernization assessment — otherwise, they can easily fall prey to common pitfalls, such as viewing the assessment through an IT-only lens, or accommodating organizational resistance by including manual overrides instead of defining automated, system-driven functions. By involving users, product team members and billing operations staff, organizations can gain a full perspective on the complexities of billing and the role of speed, CX and product quality. It also helps shape plans for the change management required for modernizing billing processes.

Whether the goal is full-scale transformation, incremental implementation or even a strategy refresh, billing modernization is an essential move. It will enable P&C insurers to close the CX gap, compete with the new capabilities emerging from insurtechs and ensure relevance amid ongoing industry change far into the future.