’CAUSE WE ARE PAYING IN A DIGITAL WORLD…
And we are a digital crowd … that expects convenience in more and more aspects of our lives
By Todd Sorrell
Insurance has historically been a traditional industry, driven by personal relationships—and paper. While not the earliest adopters of technology, we’re making significant progress in this area. For example, according to industry statistics, some 90-plus percent of agencies use an agency management system, and chances are that you’re reaping the benefits with it (whether you’re using Vertafore, Applied Systems, or another) to streamline your operations, even as you read this.
The digital age
While you’re working smarter due to technology within your agency, what about your clients? What role does technology play in their lives? Quite frankly, they’re way ahead of us in the tech adoption department. Consumers today are not only calling for—but also getting—service on-demand digitally from a variety of sources.
Insurance offerings may not change much over time, but you’re selling them to modern consumers. They want immediate results, personalization and ease of use. In today’s digital world, convenience is king.
Just look at the industries that have sprung up and exploded around the concept of convenience. A prime example is food delivery. Thanks to apps like Grubhub, DoorDash and Postmates, the term “take-out” now means ordering from your favorite restaurant (even if it doesn’t provide its own delivery service) and having the food delivered right to your door—for an extra fee.
E-payments are a logical next step for agencies that are increasingly tech-driven in other areas of their operations.
When ordering groceries online, you can pay in advance and pick them up outside the store, skipping the checkout line. Instacart and other providers will even bring the groceries to you for a fee. And of course, you can order a product from Amazon with “free” shipping—covered by an Amazon Prime® membership fee, paid annually—or you can pay extra for next-day shipping.
Inevitably, consumers are ponying up the extra bucks to get what they want instantaneously. If it saves them time, they not only want the convenience, they’re willing to pay a premium for it.
Convenience can be defined in several ways: time, accessibility, usability, or design. Different consumers have their own definition, and it’s important to provide a product that caters to all their needs. It’s not just about the rate they pay, but the level of support, customer care, and the ease of use of the company’s services. If consumers aren’t 100% satisfied with every aspect of the transaction—and every interaction with the vendor—they have plenty of other options that offer the same service. This is the standard that technology has set for service delivery in the digital age.
Convenience involves more than just delivery. With the growth of digital, consumers are conducting more business via their mobile devices. According to data from Google Analytics, some 40% of online transactions are happening via mobile. A busy business owner can order supplies, make travel arrangements and even pay the company’s credit card bill with a few clicks. Their business is not confined to “business hours,” because their phone or tablet allows them to multitask out in the field or pay bills from their home, hotel room, or vehicle.
It’s anything but business as usual.
Bridging the convenience gap
In response to heightened consumer expectations, many insurance agents and brokers have made their websites responsive and even offer apps. And that’s a good start. Your clients can easily spend 90% of their time on their phone. They live, they play, and they work online.
But when it comes to making insurance payments, many insureds still need to send in a check. To put that in context, imagine shopping on Amazon and checking “same-day delivery,” but then having to stop the transaction mid-purchase to write a paper check, which you proceed to drop in your mailbox or drive to an Amazon facility to deliver it in person. Talk about a disconnect!
In the past, of course, paying by check was the norm. In fact, in some cases it was the only option. It ensured the bottom line and kept costs low. And yes, about half of businesses today still prefer to write checks for a variety of reasons. However, by and large, consumers don’t want to have to drive across town anymore to drop off a check, and they’re willing to pay for the convenience of avoiding this.
Our firm saw this disconnect and set out to bridge the gap between today’s agencies and today’s consumers. Our electronic payment system platform—designed just for independent agencies, brokerages and MGAs—enables acceptance of credit card or automated clearing house (ACH) payments without a merchant account. It sets up quickly and integrates seamlessly with leading management systems. And customers, who are willing to pay for convenience, cover the transaction fees.
Comparing costs and fees
Because checks have been the industry norm for so long, the cost of processing paper checks is a hidden drag on the bottom line—for both you and your customer. Various studies estimate the cost of processing a check from a few bucks to up to $20. A good middle of the road estimate by the Aberdeen Group places the cost at $7.78—five times more than e-payment processing.
On your end, there’s also a hidden cost to paper check processing. Instead of being paid instantly, you have to wait for the check to arrive, deposit the check, and wait for it to clear. So, there’s staff time and wait time. And that does not even include chasing down delinquent payments. Is that check really in the mail? Is the customer sitting on their payables again this month? Delayed payments slow your ability to bind policies. And, if widespread enough, they can mess with your cash flow.
One of the biggest concerns of all merchants, not just insurance agents, is paying the processing fees for accepting credit card payments. We get it. The cost (in our case, 3.25% on a credit card transaction or $3 per ACH) can be passed on to the client, who already is conditioned to paying convenience fees. Plus, customers reckon, a little extra spending on a credit card can translate into more rewards points or cash back. No wonder they don’t mind!
Where we’re heading
Remember when cell phone providers offered free phones in exchange for a two-year contract? That was the industry standard. Then they changed the model and now offer phone leasing and cash for trade-ins. As industries adjust, consumers adjust—and vice versa.
Electronically paying insurance premiums, particularly by credit card, is a relatively new concept in a very traditional industry. No one expects the industry to ditch check writing overnight. But with consumers using e-pay in so many areas of their lives, why wouldn’t we want to offer them that option? For more and more personal and commercial lines clients today, it’s not just a convenience—it’s expected.
E-payments are a logical next step for agencies that are increasingly tech-driven in other areas of their operations. It’s simply good business to offer your clients the choice of electronic payment instead of checks.
Later in this series we will discuss the biggest hurdles facing the industry; security do’s and don’ts; and the future of e-payments. Stay tuned …
Todd Sorrel is co-founder of electronic payment processor ePayPolicy. The firm facilitates the acceptance of electronic payments via credit card and ACH with transaction fees being passed on to the consumer. This is the first in a short series of articles on electronic payments. For more information, visit www.epaypolicy.com.