A White Paperby Brad Hauser

AVP,

Insurance Solutions – Billing as a Service

A New Frontier for Competitive DifferentiationThe Billing and Payment Process

A White Paper on The Billing and Payment Process Mphasis 3

Contents

Introduction .................................................................3

Frequent Customer Interactions ..................................3

Impacts to Key Business Metrics ................................3

The Enterprise Billing and Payment Strategy ..............4

Executing the Billing and Payment Strategy ...............4

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IntroductionYou can reduce billing operations expenses by up to 30% (Novarica)[a], increase customer retention by up to 5% (PwC)[b] and support accelerated product development by thinking differently about billing and payment processes. Leveraging methods already proven across multiple industries will enable your organization to capitalize on new customer service tools that are quickly becoming the “table stakes” in the broader consumer payments market.

The transformation begins by leaving behind the notion that billing is painful but a necessary back office process, and embracing it as a competitive differentiator that can also reduce expenses.

Billing is positioned uniquely due to prevailing trends such as frequent customer interactions and direct impact on key business metrics.

Accordingly, a comprehensive Enterprise Billing and Payment Strategy can transform billing and payment processes from mundane, recurring back office cost center status to a fundamental enabler of corporate objectives and competitive differentiation.

Frequent Customer InteractionsBilling represents the most frequent touch point in the industry with customers often interacting with their insurer quarterly or monthly. In a 5-year span, a monthly payment customer will interact with their carrier at least 60 times, thus presenting 60 opportunities either to exceed or fall short of meeting evolving customer expectations. Policyholders want to pay their bills and view their balances whenever and wherever in the manner they choose.

Insurers must meet billing service standards set by similar providers in other industries. Examples include mobile self-service, text notifications of payments due and applied, and video bills that not only reduce call center volumes but also include cross-selling or up-selling suggestions.

The billing and payment process is also a significant trigger for simple and complex endorsements, both in and out of sequence, as customers remember a “change of address” or coverage change they require. Policyholders expect these changes and updates to be made on their terms and at their convenience as simply as downloading an e-book or the latest season of their favorite television series to their tablet.

Impacts to Key Business MetricsBilling and Payment Processes simultaneously impact sales, customer retention, fee revenue, and expenses – measurable and accountable metrics. Trigger points provide selling and cross-selling opportunities. Service options and flexibility improve customer retention. Billing best practices improve efficiencies and reduce costs. Key metrics include (PwC)[b]:

Bill payment by using mobile doubled from 8 million U.S. online households in 2012 to 16 million in 2013. This growth was driven primarily by smartphone owners, among whom mobile bill payment surged 150%. Consumers who pay bills using their mobile device do so primarily for its convenience (70%), anytime access (55%), and time savings (49%). – Fiserv[c]

Reduce billing-related IT costs by 5%–20%

New product speed-to-market increase of 3%–5%

Decrease in cash processing costs up to 40%

Reduce bad debt by 5%

Reduce days premium outstanding by 20%–25%

Improve cross-selling by 2%–3%

Diminish service call times by 3%–5%

Retention improved by 2%–5%

Reduced billing error rate

Internal workflow improvement

Simplify issue resolution

Cash application & time reduction

Compliance improvement

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The Enterprise Billing and Payment StrategyAn Enterprise Billing and Payment Strategy provides a framework for creative thought, conscious decisions, and measurable outcomes relative to the unending potential combinations of pay plans and payment mechanisms, and how they align with broader corporate objectives.

Combinations of pay-plans (monthly, 2-pay, 3-pay, quarterly, paid-in-full, etc), billing mechanisms (print, mail, e-bills, texts), lines of business, payment processing options (lock box, e-payments), account information access (portals, mobile, call center), and available payment mechanisms (check, EFT, credit card, e-checks) result in different outcomes for both carriers and customers. One combination may improve retention but reduce fee income (direct debits). Another may increase fee income but also the frequency and associated cost of cancellations/reinstatements (monthly payment by check).

The development of a sound Billing and Payment Strategy begins with ensuring a clear understanding of the current state.

“Carriers don’t really understand the cost of their billing operations, and as a result they underestimate their actual expenses.” – Novarica[a]

Key metrics must be measured and prioritized against corporate goals and objectives. Is fee income a higher priority than retention? Does expense reduction trump all? Once reordered and prioritized based on broader corporate goals, the organization can examine how the various components of the billing and payment processes combine to affect the results.

This requires a multi-dimensional view of the many combinations available and an understanding of the expected outcomes. For example, a carrier may be interested in reducing costs and improving retention by increasing the use of automatic payments by reducing or eliminating installment fees. However, this will result in an associated reduction in fee revenue. Therefore, the loss of fee revenue must be balanced against improved retention and reduced processing costs. Retention is a key benefit, especially given that the cost of acquiring new customers can be up to 10 times the cost of retaining an existing customer (PwC)[b].

Executing the Billing and Payment StrategyWith a strategy in hand, the organization can then turn its attention to execution. Unfortunately, many carriers are burdened with systems that are unable to provide the flexibility and responsiveness needed to support a dynamic and objective-driven strategy. This can make the prospect of a major IT billing initiative overwhelming.

The good news is that these challenges can be addressed without undertaking a major billing initiative. A billing service solution with a robust billing engine at its core can be implemented in 3–5 months with little or no support from the carrier’s business or IT staff, provide high flexibility to meet changing requirements, and track clearly measurable metrics that allow the carrier to manage the true cost of billing and understand the associated business results.

Thinking strategically about The Billing and Payment Process and leveraging the right technology and process solution will open the door to this new frontier for competitive differentiation.

Sources

a. Best’s Review White Paper “How the Global Billing Revolution…” Mphasis and Novarica, p. 3, 4

b. Making a statement: “Transforming insurance billing to gain a competitive edge.” PwC FS Viewpoint, January 2014. www.pwc.com/fsi, p. 3, 4

c. Sixth Annual Billing Household Survey,” Fiserv, Eric Leiserson, December 2013, www.fiserv.com, p. 3

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Brad HauserAVP, Insurance Solutions – Billing as a ServiceAbout Author

Brad Hauser is AVP and head of Mphasis’ Billing as a Service (BaaS) practice. He has over 25 years of experience in both insurance business and technology units, including serving as Director of Cash Management in the Officer of Treasurer at Nationwide and VP Application Services at MAPFRE/Commerce.

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