The administrative pitfalls that reduce profitability for your insurance company

In times like these, when household finances are stress-tested, many insurance companies face the reality that customers are chasing the best premiums. Loyalty rarely shows in the customer's wallet, but a deteriorating renewal rate is clearly visible in insurance companies' results.

Claims processes and risk models are continuously streamlined to improve the Combined Ratio and prevent unnecessary premium increases. The increased digitalization in the industry in recent years has primarily concerned claims handling. And indeed, smooth and user-friendly experiences in this core area are important. But what about the digitalization of internal processes, is that an overlooked opportunity for increased cost efficiency? The answer is yes. Costs for processes such as invoice management and payment flows can dramatically decrease if they are smartly automated.

Here are four areas where small improvements can lead to significant time savings and cost efficiency.

Where do resources go? Here are four common cost and time thieves:

1. Failed payments The more manual steps involved in your payment process, the greater the risk of the customer making a mistake. And even with direct debit, things can go wrong, such as insufficient funds in the account during the deduction or the customer having changed banks. Each failure generates an error code that your finance department employees need to investigate and rectify. With a customer base of hundreds of thousands of people—how many working hours are spent on this in a year? Every percentage reduction in the number of error cases means a large saving in time and resources.

   Incorrect payments are also not just an administrative time thief for your employees. If you don't have processes in place to catch mistakes in time, they can cause greater damage. Imagine one of your customers believes they are paying their insurance premium, but accidentally types a wrong digit in the OCR number so that the payment doesn't go through. The insurance may cease to be valid without the customer realizing it, until one day they need to use their insurance—and discover that the coverage isn't there. Then you have not only lost a customer but also damaged trust in your brand.

2. Routine customer service inquiries and costly phone calls What proportion of customer service inquiries to your company consist of questions about payment? How many of these could the customer have resolved themselves with the right conditions via digital interfaces? As an insurance company, it is incredibly important to offer customers quick help and personalized service. But it's crucial to deploy human interaction where it truly adds value; not to answer routine questions about invoices and payments.

   Even here, small shifts in efficiency can make a big difference. How would your organization use the time and resources you save? Some examples could be to shorten customer service response times, provide more room for personal interaction in claims cases—or more time to analyze customer data and develop more relevant offers for new sales and upselling.

3. Keeping systems updated in line with developments If your insurance company is an established player in the industry, you probably have a complex IT structure that has grown over a long time. Every update—for example, to add new payment and distribution methods or adapt to changing regulations such as DORA, PSD3, and new AML regulations—risks becoming an extensive development project that devours time from your internal IT resources.

   Outsourcing is not necessarily a more efficient alternative. Do you get help from different external partners for each part, such as paper invoices, SMS payments, and "My Pages"? Then the contracts and ongoing contact with multiple suppliers quickly become a growing administrative burden—while the customer experience becomes fragmented.

4. Costly distribution and reminders The costs for printing, enveloping, and postage are rapidly increasing in line with general price increases in society. At the same time, large parts of mailings have been digitalized with e-invoicing and Kivra. Paper and Kivra invoices today constitute a disproportionately large part of insurance companies' distribution costs, often entirely unnecessarily, as it is just as easy for the customer to access the invoice via, for example, "My Pages," email, or SMS. Moreover, paper and Kivra invoices generate significantly more payment errors and questions to customer service than an integrated invoice and payment journey.

Many insurance companies have realized the importance of digitalizing their invoices and have actively chosen to reduce mailings or not connect to Kivra. Ultimately, it's about fully owning your customer journey via, for example, "My Pages" and the app, and proactively working to reduce the number of late payments.

Do you want to know more about how you can save time and resources in your payment processes? Contact us!