modernizing insurance billing drives sales performance ... · pursuing a two-pronged strategy of...
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Billing Modernization Drives Sales Performance and Service Excellence
To win over a new generation of customers, increase effi ciency, and bolster the bottom line, insurers are
focusing on billing modernization and consolidation.
Americas . Europe . Asia-Pacifi c . Middle East . India
K arlyn Carnahan, principal in Novarica’s insurance
practice, points out that at its most basic function,
billing isn’t complicated. “You send out a bill, you
collect money,” she says.
However, it has become increasingly important for insur-
ers’ billing solutions to go beyond this basic functionality.
“Billing is becoming much more strategic,” observes Mike
Fitzgerald, senior analyst at Celent. “Insurers realize that
the billing process touches customers much more fre-
quently than other processes, even claims.”
“Billing is playing a diff erent role today than before. It has
a fundamental part in service excellence,” Carnahan adds.
Unfortunately, legacy billing systems are poorly equipped
to perform that role.
“Many carriers are looking at their legacy systems and real-
izing they are falling short in meeting current needs and
are not positioned at all to meet future needs,” says Carna-
han. “Often, their systems can’t handle multiple payment
methods or multiple policies. They simply don’t have the
level of sophistication needed to handle the complexity
of today’s insurance transactions.”
Additionally, many insurers—particularly lager carriers—
contend with multiple billing systems in their legacy envi-
ronment that compound the problem. Fitzgerald reports
that the average number of billing systems for insurance
companies with over $1 billion in premium is 3.7.
Successes achieved by carriers such as FCCI Insurance
Group and Catholic Mutual Group, which will be detailed
later in this article, demonstrate that upgrading billing
technology can deliver real and quantifi able benefi ts.
Pursuing a two-pronged strategy of modernization and
consolidation can not only solve vexing legacy system
challenges, but also create new opportunities for cus-
tomer satisfaction and competitive diff erentiation.
Buying into Billing
Several forces in the marketplace are shaping the billing
landscape today.
Billing Modernization Drives Sales Performance and Service Excellence
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““ ””Billing is playing a diff erent role today than before. It has a fundamental part in service excellence.
—Karlyn Carnahan Principal, Novarica
Customer expectations. The most infl uential market
driver is the attitude of today’s generation of customers.
“The ability to off er customers self-service is increasingly
becoming not a ‘nice-to-have,’ but a ‘must have,’” says Anil
Chitale, senior vice president and P&C practice leader at
MajescoMastek.
“People’s expectations about what they should be able to do
on the billing side are much diff erent than they were just a
few years ago. They are asking, ‘Why can’t my insurer do what
my airline can do or my book seller can do,’” adds Fitzgerald.
Customers have well-defi ned needs in the billing process,
Carnahan says. “Flexibility is a primary goal. Customers
want to determine what date of the month their bill is
due. They want to quickly deploy bill plans or change bill
plans in the middle of a period. They want control.”
The ability to use alternative forms of payment, especially
credit cards, is a baseline demand of the next genera-
tion of insurance consumers. “What I’ve heard from some
clients is their younger customers don’t have checking
accounts. They prefer to pay online with a credit card ver-
sus a check,” Carnahan says. The shift to online self service
in other sectors also has huge implications for insurance,
including the need to deliver online bill presentment and
payment (EBPP), she maintains.
Agents are also asking for expanded billing management
options, including details on commission and incentive
plans and payments, Carnahan adds. “Billing systems can
also be cause for complaint by agents, particularly when
they encounter some kind of exception and the system
doesn’t behave the way they expect,” she says.
Recognition of billing as important touch point. “Insur-
ers have come to realize that they send out policies once
or twice a year, and they may never contact a customer
with a claim,” Fitzgerald says. “However, they send out a
bill every month.”
As many as 70 percent of customer service calls to insur-
ance companies are billing-related. Recent studies have
shown that at least half of all insurers now consider bill-
ing to be a customer service issue rather than a purely
fi nancial issue. Billing presents a vital opportunity to fulfi ll
a brand promise of convenience and trust—or a risk of
compromising the brand through poor service and inac-
curate data.
Commoditization, particularly in personal lines.
According to a 2008 study by J.D. Powers, 44% of new
personal auto sales are through direct channels, and the
switching rate in personal auto is 39%. Consumers are
increasingly comfortable with the online insurance applica-
tion and administration process, and correspondingly intol-
erant of problems in the billing process. To put it another
way, a billing problem is a reason to start shopping.
Soft Market. With the soft market depressing premiums,
cross selling is a way insurers are looking to grow. “P&C
insurers are in a tough place right now. House values have
dropped and car sales are down, and carriers are not get-
ting rate increases,” says Fitzgerald.
In the past, billing was a “back offi ce” function and was
thought of as a necessary evil. Today, the soft market has
insurers looking for new ways—including billing—to
diff erentiate themselves to agents and consumers. Cus-
Billing Modernization Drives Sales Performance and Service Excellence
Americas . Europe . Asia-Pacifi c . Middle East . India
““ ””People’s expectations about what they should be able to do on the billing side are much diff erent than they were just a few years ago. They are asking, ‘Why can’t my insurer do what my airline can do or my book seller can do.’
—Mike Fitzgerald Senior Analyst, Celent
tomer service is key, and billing is now seen as a critical
customer touch point. In complex lines of insurance, such
as commercial lines, a robust billing system is increasingly
important for data accuracy given the high number of
endorsements and policy changes.
Policy administration replacement. Carriers have had
an increased appetite for policy administration replace-
ment. Since many billing systems are “baked in” to admin-
istration systems, carriers are taking another look at billing
as a result.
“Billing and policy administration tend to be wrapped up
together,” Carnahan says. “Policy administration is one of
the top projects for carriers in 2010 and 2011. On the P&C
side, about 50% of the carriers we work with are in the
process of replacing or getting ready to replace policy
administration.”
Falling Down
Against this backdrop of change, legacy billing systems,
characterized by manual touch-points and convoluted
workflows, fail to respond. The inflexibility of legacy plat-
forms also makes it difficult to create new billing plans
easily or to integrate with other systems.
“What customers think should be really simple things—
such as viewing a statement online—is very hard to do
with a legacy system, particularly if you have multiple
administration systems from where you need to get bill-
ing information,” says Fitzgerald. Problems created by leg-
acy billing systems fall into four key categories:
1. Service capability. Legacy platforms offer little to no
support for external access by brokers or policyholders.
They have limited or no ability to change billing plans dur-
ing a policy period to support a change in customer needs.
That was a problem faced by Catholic Mutual Group. “The
system we had in place was designed in a very structural,
very tight manner. It only captured certain pieces of data.
It met all the requirements of business in 1999, but things
change,” says Mary Ellen Freyermuth, director of MIS.
“We had requirements to be able to produce billings in
a more unique manner, and to capture more data on the
billing to make it easier for members to understand bill-
ing. We could not do that with the old system,” she says.
2. Inflexibility. “The ability to react quickly is simply not there
with a legacy code base. Companies find they do not have
the flexibility to respond to business needs, from rolling out
new products to entering new geographies,” says Chitale. In
fact, over a quarter of carriers report that enhancements to
their primary billing system are so difficult that they are no
longer made. Hard- and custom-coding leads to an inabil-
ity to quickly deploy new billing plans or support different
payment types, such as credit card, EBPP, or EFT. Fewer
than half of carriers can support credit card payments,
and less than a third has the ability to accept debit card.
3. Technical cost and complexity. Legacy coding is
increasingly difficult—and expensive—to maintain and
support. Legacy billing systems also lack an intuitive user
Billing Modernization Drives Sales Performance and Service Excellence
Americas . Europe . Asia-Pacific . Middle East . India
interface, frustrating customers and leading to increased
training time and cost for staff . Lack of automated work-
fl ows leads to manual processes and workarounds, and
manual entry and limited automated validation cause
invoice inaccuracies and subsequent customer disputes.
4. Limited visibility. Lack of integration with other sys-
tems makes it diffi cult to consolidate billing information
and resolve problems when they occur, and poor report-
ing capabilities inhibit visibility into business performance.
“Insurers have diffi culty getting data out of the legacy bill-
ing solution, either as a source of information for reporting
about the billing process or as a source of analytics that can
be used by other areas of the company,” Carnahan says.
“Legacy billing systems also have a diffi culty in dealing
with regulatory requirements, particularly managing fees
across diff erent states and product lines,” Chitale adds. “The
reconciliation process can also be very labor-intensive.”
Multiple-System Shortcomings
These problems are exacerbated by multiple billing systems
acquired over time or for individual lines of business. Multiple
billing systems result in multiple bills going to a single cus-
tomer and customer records existing in multiple systems.
“The biggest problems of multiple billing systems are
seen in customer service. It’s diffi cult to provide a consoli-
dated customer experience when information is across
multiple billing systems. Each system can have diff erent
processes and data sources that can lead to inaccurate
service. Seemingly simple things like allocating funds to
multiple policies can be a challenge. And when they want
more robust features—account bill, EBPP, recurring credit
and debit card payments—insurers with multiple systems
may fi nd they can’t do that,” says Carnahan.
It is also diffi cult and expensive to maintain multiple sys-
tems and to train staff on their use. Trying to connect
multiple systems with point-to-point integration also
increases cost, complexity, and fragility.
Carey Geaglone, vice president of information services at
FCCI Insurance Group, can attest to the problems created
by multiple billing platforms. “Our agents were telling us
they were getting frustrated with multiple bills because
we had multiple systems,” she says.
“We needed to solve the customer service issue. We
needed to be easy to do business with. When problems
started cropping up surrounding our billing systems and
the appropriate application of consolidated payments,
we took action,” Geaglone says. “Our customer satisfaction
was at stake.”
Billing Modernization Drives Sales Performance and Service Excellence
Americas . Europe . Asia-Pacifi c . Middle East . India
““ ””It is also diffi cult and expensive to maintain multiple systems and to train staff on their use. Trying to connect multiple systems with point-to-point integration also increases cost, complexity, and fragility.
“You have to be able to treat customers as accounts, not
just individual, single policies,” says Fitzgerald. You have to
treat them as a package. And that’s where legacy systems
are falling down.”
Modernization and Consolidation
Modern billing systems are defined by their configurability,
in contrast to the customization required by hard-coded
platforms. They support multiple billing types and options
and match billing types to business line and channel
needs. These platforms deliver increased flexibility, greater
efficiency, improved cash flow, reduced costs, improved
customer service, and enhanced sales opportunity.
Increased flexibility. Although most modern billing sys-
tems are designed to provide flexibility to support a wide
range of business needs, they should not simply be an
empty toolbox. As configured “out of the box,” billing sys-
tems should support all lines of business for both direct
and broker bill and deliver automated workflow process-
ing. A unified customer view should allow presenting a
single bill. But what most distinguishes a modern billing
system from its predecessors is its ability to deliver flex-
ibility through user-defined, rules-based configuration
rather than custom coding.
“Business-user configurable plan rules are essential,” Fitzger-
ald says. “Many times the sales side of the business will
approach the IT side say they need a particular billing plan
for a line of business, and IT says it will take several months. A
user-configurable bill plan shortens that time considerably.”
“For insurers, the ability to create automated workflows
and streamline the process without the involvement of IT
is essential,” Carnahan says.
Customers want a plethora of payment options designed
for their individual needs and that support payment meth-
ods and channels they want to use. “For customers, it’s
about the ability to modify the look and feel of the invoice
and configure that bill for their specific needs; the flex-
ibility for varying bill plans; the ability to modify bill plans
mid-stream. It’s about having multiple billing plans for dif-
ferent policies owned by a single customer and handling
different types of payments. It’s about delivering online bill
presentment, accounting, and inquiry,” Carnahan adds.
Efficiency. By being built on an open, flexible, SOA foun-
dation, modern billing systems are comprised of exten-
sible components that can support additional products,
lines, states or channel needs with ease. Fully web-enabled
functionality increases both customer and staff productivity
while the SOA-based ability to integrate with existing appli-
cations increases IT efficiency. Consolidation to a single plat-
form allows insurers to leverage a common data-model and
significantly reduce billing and payment transaction costs.
Additionally, EBPP lowers print and mail costs. “Many
companies have ‘green’ initiatives and have committed to
a certain level of print reduction,” Fitzgerald says. “Online
statements and bill pay contribute to those goals by tak-
ing paper out of the process. Sending out a couple of bills
per month per policyholder can add up quickly.” EBPP also
reduces customer service calls by putting billing informa-
tion at the fingertips of customers.
Billing Modernization Drives Sales Performance and Service Excellence
Americas . Europe . Asia-Pacific . Middle East . India
Visibility. Reporting capabilities of modern billing systems
make it easier to locate information, resolve problems,
monitor performance, and control the billing process.
Additionally, by extracting process logic from hard-coding
into rules-based configuration tools, insurers gain insight
and control around system processes and design, which is
critical in today’s compliance-focused business climate.
“Centralizing the billing function provides CFOs a great
level of comfort in dealing with regulatory requirements,”
Chitale says.
Improved cash flow. “Modern billing platforms provide
greater speed to market in general,” Carnahan says. “With
EBPP, there is the definite potential for collecting and
booking premium faster and improving cash flow, as well
as decreasing lockbox fees.” Native billing functionality of
today’s platforms should also automate or simplify cash
reconciliation, validate payments, and prevent fraud.
Enhanced customer service and self-service. Modern bill-
ing platforms provide improved customer choice in pay-
ment methods. Online bill options are “open all hours” and
provide immediate and reliable application of payment
to accounts, while online inquiry allows both agents and
customers to resolve issues and manage their accounts
without the involvement of insurers’ billing staff. When
customers do call, billing reps can find information to
resolve customer issues quickly.
Up-selling and cross-selling. In contrast to advertise-
ments, billing statements are a communication that cus-
tomers will generally read in detail. Therefore, the billing
process presents a tremendous marketing opportunity.
Modern billing systems maximize sales opportunities by
delivering targeted marketing messages through paper
or electronic bills, in the call center, and via online and
email channels. Analytics determine the right products to
target to a particular customer and whether a customer is
an appropriate target for upsell or cross-sell. Integration of
billing systems with document production systems delivers
the appropriate marketing message. Modern billing sys-
tems also integrate with the valuable email channel, deliv-
ering personalized content, promotions, and experiences.
The user interface of the billing system can also aid call
center reps in marketing efforts. “Insurers have struggled
with how to prompt the billing rep to even start a discus-
sion around other lines of coverage. A lot of legacy sys-
tems simply don’t include workflow for it,” Fitzgerald says.
“When you’re servicing a customer who has a billing ques-
tion, an effective way to cross-sell is to give the billing rep
a cross-sell script or a workflow tool to do a smooth han-
doff to a sales rep.”
Case in Point
To solve its customer service issues related to multiple
billing systems, FCCI partnered with MajescoMastek to
implement the STG Billing platform. A key objective was
to deploy full account bill functionality so that, regardless
of the number of policies a customer had in force, the cus-
tomer would receive a single bill.
“We also made the bill easier to read,” Geaglone says. “We
post invoices online and allow customers to make pay-
ments via a link on the website. We also enhanced com-
mission processing, including posting agents’ commission
statements online and paying them via direct deposit.”
Billing Modernization Drives Sales Performance and Service Excellence
Americas . Europe . Asia-Pacific . Middle East . India
Consolidating to a single, modern platform also delivered
other benefits. “Some of the biggest issues we were facing
related to speed to market and ease of doing business,”
Geaglone says. “Price is a factor, but how quickly can you
get product out there and how quickly people can access
information is important in this self-service, 24/7 world.”
FCCI also gained advantage by deploying a system with
a modern, intuitive user interface. “Condensing bill plans
and streamlining processes have helped customer ser-
vice. We can turn those
calls around, rather than
having to call people back
with the information. Our
goal wasn’t to replace staff,
it was to make their jobs
easier, allowing us to grow
business and increase cus-
tomer satisfaction,” Gea-
glone explains.
Catholic Mutual Group
addressed its member ser-
vice objectives of providing more information by convert-
ing its legacy system to the STG platform.
“Previously, we could not tell anyone at any given time
what they owed on different policy terms. The new sys-
tem provides us the capability to bring up a service screen
for our customer service reps to let them know what they
owe on different terms,” Freyermuth says.
Flexibility was also a key consideration. “Our organiza-
tion is different in that we are in existence to serve the Cath-
olic Church,” Freyermuth says. “We have in-house marketing
people who go out and sell our business. They sell whatever
the customer wants, and we have to make it work.”
She reports that the project met its goals of allowing Cath-
olic Mutual Group to generate the billings it wanted in the
fashion it wanted, and in a “painless” way through configu-
ration, rather than custom-coding. By being web-based,
the platform also allows Catholic Mutual Group to provide
members with access for billing inquiry and management.
Moving to Modernization
For carriers looking at modernization, the benefits are
clear. “Modern systems see their role as more than ‘Get the
bill out, get the cash in,’” says Carnahan. “Newer systems
provide increased flexibility and a higher level of customer
service. For insurers, those systems also provide a higher
level of sophistication for handling varying cash amounts,
various fees from different jurisdictions, and multiple pay-
ment mechanisms.”
Additionally, modernizing billing isn’t just about fixing
problems created by legacy platforms—it’s about opti-
mizing billing processes.
“Insurers need to look at what gains they can achieve
through enhanced billing functionality,” says Fitzgerald.
“The workflow management tools; the business intelli-
gence and analytics; knowing what kind of pay plans you
have that are in place in different lines. Those are all fea-
tures insurers can capitalize on.”
Today there is unprecedented opportunity to leverage
billing to create, manage, fulfill and strengthen a brand
promise of convenience, trust and service. There is the
potential to utilize customer data to increase sales and
drive greater agent and customer retention. At the same
time, ever-evolving regulatory and compliance issues
require tighter financial reporting controls. Billing mod-
ernization and consolidation enables insurers to achieve
these objectives today while providing a foundation for
continued advantage in the years ahead.
Billing Modernization Drives Sales Performance and Service Excellence
Americas . Europe . Asia-Pacific . Middle East . India