E-payments for VSC Claims: Making Payments Faster, Cheaper and More Efficient

Several factors are contributing to vast changes in the electronic payments landscape with the result that commercial business to business payment processes are working hard to catch up to consumer payments. These factors include technology improvements, broader regulatory acceptance and an increasing comfort with newer payment options such as mobile and prepaid. Among commercial business to business payments, the single-use virtual payment solution is an area that is experiencing the fastest growth because of the level of control it provides and the efficiencies it brings to bear in payment processing.

In turn, companies are exploring alternative solutions as they try to realize every opportunity for swifter, easier tools to help their businesses – and bottom lines – improve. A key motivator for this change is highlighted in a 2010 survey by TowerGroup: according to respondents, the top business driver for an insurer to seek a new claims technology solution is cost and expense reduction, followed closely by customer satisfaction.

The trend is gaining traction across various industries. Wright Express, for example, has experienced more than 40 percent average yearly growth in its single-use virtual payment solution over the past five years, and projects nearly 30 million transactions in 2011. However, claims payment processors may still be lagging; in a 2009 survey by Wright Express, over 80 percent of auto insurers were still utilizing checks for the majority of their auto claims payments.

“Check Engine”: Identifying Manual Payment System Issues

Traditionally, paper checks can be comfortable and familiar for businesses, but they have always suffered from inefficiencies in the payment and settlement process. The administrative requirements involved with a paper check can delay a transaction, decrease customer satisfaction, make for significant accounting reconciliation efforts and cause increased strain on company expenses – particularly when in high volume.

The standard claims payment process often involves several time-intensive and potentially manual steps. These could include but may not be limited to: manually dispersing and communicating payment information (after reviewing repair shop bills), manually reconciling payments, and resolving billing disputes. Electronic payments can significantly improve these processes thereby saving time and money.

Fueling Efficiencies and Savings with Electronic Payments

As a payments solution provider to warranty companies, property and casualty insurers and third party administrators (TPAs), Wright Express has become very familiar with payment disbursement to auto repair and maintenance shops. One solution does not fit all, as several considerations may factor into an appropriate payment method such as product line, vendor type, payment characteristics and who is being paid. Overall, though, the result is the same: a customized single-use e-payment solution will increase efficiencies, save time and money, and provide benefits not only for the customer, but for all stakeholders including the carrier, adjuster and merchant. Among the specific benefits for each group:

Customers – Accelerates the claimant’s access to the repaired vehicle

Carriers – Improves reconciliation, reduces cost, increases control, and reduces vendor payment time without reducing float

Carrier’s Adjusters – Reduces call time per claim and creates a simple and fast means of creating and delivering a payment

Merchants – Speeds up payment and decreases administrative time

To explain how it works, it might be helpful to “take a look under the hood.” Single-use account numbers are generated instantly and used only once. The single use number means accounting reconciliation can be automated. Additionally, credit limits are set for the amount of the purchase to help prevent overcharges, and vendors usually provide customers with an online web site to track and monitor the claim payment to the very end, often without added time and cost.

For various reasons, single-use electronic payments are a good starting point for auto claims companies. They do not require pre-financial information registration; can leverage existing MasterCard commercial payment systems for broad acceptance; can simply interface with customers’ existing payments and operational systems; often streamline a fragmented supplier base; and, in most cases, merchants prefer it.

Despite the increased savings and efficiencies, some insurers might still question whether a technology change will be worth doing. However, the majority of costs are limited to the initial IT development. Once the development phase is complete, there is usually no upfront software fee and no additional operational fees.

Electronic Payments in Motion: Auto Claims Company Example

By way of a real example, Mercury Select Management, Co., Inc.’s vehicle service agreement operation is now experiencing the benefits associated with single-use virtual payments. ABC has approximately $35 million in annual vehicle service agreement claims paid through 14 adjusters who together process over 40,000 claims payments annually. Needless to say, Mercury used to produce a significant amount of paperwork during the year on auto claim payments.

Prior to choosing a single-use solution, Mercury's adjusters were sharing a handful of traditional credit cards to process payments for repairs. While credit limits were in the millions, they experienced frequent service interruptions with their account where payments couldn’t be processed, sub-standard payment controls, and a significant monthly effort to reconcile their books. This standard process for Mercury produced situations of fraud, poor customer service and eventually could have created lasting damage to its business development.

Mercury knew it needed a more efficient process and more controls around the payment and reconciliation. Once it implemented the single-use virtual payment solution, the company experienced 99.9 percent payment accuracy and at the same time had a 90 percent reduction in manual reconciliation time (freeing up two staff members). Additionally, it had minimized billing disputes, improved customer service and almost completely eliminated fraud. Now, the company can better serve its customers and manage its business growth efficiently.

Navigating your Electronic Payments Solution

If a company like Mercury can improve its labor payment reconciliation efforts by 90 percent, a real opportunity exists for others to experience cost savings. In order to begin the switch to a single-use payment solution, it is best to follow these initial success strategies to help seamlessly implement electronic payment solutions:

• Success Strategy #1: Establish an executive sponsor and cross-functional team with operations, accounting, IT and compliance to begin the discussion of switching to online technology.
• Success Strategy #2: Leverage internal and external partners to create and manage an appropriate business case, project plan and rollout tools.
• Success Strategy #3: Be clear with pilot goals and build internal confidence with simpler payment types that have a higher probability of success.
• Success Strategy #4: Ensure the rollout plan clearly addresses the needs of claims processors and team leaders.

Based on past successful implementation efforts by numerous companies, if all recommended strategies are utilized in combination, an insurer will improve its course in fully switching from manual, paper check claim payments or using one or two credit cards for all claim payments to a single-use payments solution for all auto claim payment processing.

The Road Ahead

Looking ahead, adoption of single-use payment solutions by the auto claims processing industry will continue to grow as customers, carriers and adjusters increasingly make the switch. In the end, the technology shift from manual to electronic will increase customer satisfaction, improve business management and ultimately help fast-track a company for future savings and success.