Navigating the Process of Insurance Premiums: Why Timing is Everything

Understanding these 4 challenges with premium processing can help you stop them before they occur.

Emily WashingtonJanuary 5, 2017

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Insurance carriers know all too well the headaches involved when it comes to processing premiums. If the timing of billing is off, the customer experience can be negatively impacted. This can not only affect sales, but a bad customer experience can spread like wildfire in today’s social media-driven world.

Another pain point to the premium process is the financial reporting requirements driven by SOX and NAIC MAR. To accurately report financials and profitability measures, financial controls are needed to prevent issues and speed the month-end close process.

And as if these issues alone aren’t a constant battle, updating the underlying core systems introduces additional risk and complexity. Whether a new system is going live, or an existing system is undergoing an upgrade, every infrastructure change could increase the risk of missing or inaccurate data.

These challenges are just some of the obstacles insurers must face, making it critically important to ensure the accuracy of the data moving through the insurance premium process.

The Causes, Consequences and Challenges

Understanding the challenges associated with the premium process allows insurers to get in front of problems and stop them even before they occur.

Timeliness

When signing up for an insurance policy, a customer fills out an application. The insurer then reviews the application. Once the application is approved, the insurer will notify the customer and then let them know that they will receive an invoice within the next 30 days. Once the customer receives the invoice, they may have a 30-day grace period to make their premium payment. However, what if the timing is off and an invoice is sent late or not at all? This could cause a customer to receive a late fee or, worse, if an invoice never gets sent, the customer’s policy can be terminated altogether. Issues like this can undoubtedly upset a customer or cause them to leave for a different insurer.

Reconciliation

Issues like duplicate policy holders, empty or partially complete fields, or inaccuracies in key policy information frequently cause billing errors.  These kinds of mistakes require reconciliation across sources such as agent portals, policy systems, billing systems, general ledger, and reporting data warehouses. When errors are not corrected, or not adjusted properly, these mistakes may cause inaccurate customer bills, resulting in the customer being under or over billed.  Under billing can mean lost revenue and over billed services can result in customer loss, high call center volumes, misstated financials, regulatory fines, and more.

Processing

The billing operations team must follow a process. First, they must send the original invoice to the customer within a certain timeframe and then wait another period for the invoice to be paid. This poses a problem for the finance team if the timing is off. The finance team must make sure they are collecting those payments. If the payment doesn’t come in, they must send a follow up to that customer, giving them a grace period. If another window goes by without payment, the payer will terminate that application.

Core Systems

Many insurers are updating their core systems and from an operational standpoint, this can pose huge challenges. When upgrading core systems, you may implement a new system to run parallel to your legacy system, cut over new policies to a new system as of a certain date, or migrate historical data entirely into the new system. All scenarios pose risk, especially if policy information resides in multiple systems. How do you ensure all the data is accounted for, and there is visibility into all data associated with each policy holder?

To solve these challenges, insurers need a solution that allows them to perform premium reconciliation in a timely, yet efficient and simplified process, while providing visibility into this information across the entire organization. The solution must also ensure data integrity of the information during core systems migration.

A Flexible Solution

An Enterprise Data Analysis platform provides automated, end-to-end reconciliation of the entire premium process.  With the ability to analyze large volumes of data across disparate systems in real-time, insurers have the ability to audit and visualize key premium information in their enterprise continuously. This helps premium payments settle accurately and on time and, at the same time, eliminate under- or over-billing that can result in fines, misstated financials, litigation and lost customers.

To learn more about navigating the premium process, check out this webinar:

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