Billing Modernization Drives Sales Performance and Service Excellence

Billing Modernization Drives Sales Performance and Service Excellence To win over a new generation of customers, increase efficiency, and bolster the bottom line, insurers are focusing on billing modernization and consolidation. Americas. Europe. Asia-Pacific. Middle East. India

Karlyn 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. Billing is playing a different 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 realizing they are falling short in meeting current needs and are not positioned at all to meet future needs, says Carnahan. 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. Billing is playing a different role today than before. It has a fundamental part in service excellence. Karlyn Carnahan Principal, Novarica Additionally, many insurers particularly lager carriers contend with multiple billing systems in their legacy environment 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. However, it has become increasingly important for insurers 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 frequently than other processes, even claims. 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 quantifiable benefits. Pursuing a two-pronged strategy of modernization and consolidation can not only solve vexing legacy system challenges, but also create new opportunities for customer satisfaction and competitive differentiation. Buying into Billing Several forces in the marketplace are shaping the billing landscape today.

Customer expectations. The most influential market driver is the attitude of today s generation of customers. The ability to offer 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 different 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-defined 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 generation 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 versus 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. Insurers 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 insurance companies are billing-related. Recent studies have shown that at least half of all insurers now consider billing to be a customer service issue rather than a purely financial issue. Billing presents a vital opportunity to fulfill a brand promise of convenience and trust or a risk of compromising the brand through poor service and inaccurate 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 application and administration process, and correspondingly intolerant of problems in the billing process. To put it another way, a billing problem is a reason to start shopping. People s expectations about what they should be able to do on the billing side are much different 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 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 getting rate increases, says Fitzgerald. In the past, billing was a back office function and was thought of as a necessary evil. Today, the soft market has insurers looking for new ways including billing to differentiate themselves to agents and consumers. Cus-

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. 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 billing information, says Fitzgerald. Problems created by legacy 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 during 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. Policy administration replacement. Carriers have had an increased appetite for policy administration replacement. Since many billing systems are baked in to administration 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 platforms also makes it difficult to create new billing plans 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 billing. 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 inability 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

interface, frustrating customers and leading to increased training time and cost for staff. Lack of automated workflows leads to manual processes and workarounds, and manual entry and limited automated validation cause invoice inaccuracies and subsequent customer disputes. It is also difficult 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. 4. Limited visibility. Lack of integration with other systems makes it difficult to consolidate billing information and resolve problems when they occur, and poor reporting capabilities inhibit visibility into business performance. Insurers have difficulty getting data out of the legacy billing 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. 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 find they can t do that, says Carnahan. It is also difficult 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. 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. Legacy billing systems also have a difficulty in dealing with regulatory requirements, particularly managing fees across different 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 customer and customer records existing in multiple systems. The biggest problems of multiple billing systems are seen in customer service. It s difficult to provide a consolidated customer experience when information is across multiple billing systems. Each system can have different

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. Business-user configurable plan rules are essential, Fitzgerald 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. 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 systems 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 systems should support all lines of business for both direct and broker bill and deliver automated workflow processing. 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 flexibility through user-defined, rules-based configuration rather than custom coding. Customers want a plethora of payment options designed for their individual needs and that support payment methods 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 flexibility for varying bill plans; the ability to modify bill plans mid-stream. It s about having multiple billing plans for different 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 foundation, modern billing systems are comprised of extensible 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 applications increases IT efficiency. Consolidation to a single platform 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 taking 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 information at the fingertips of customers.

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. billing systems with document production systems delivers the appropriate marketing message. Modern billing systems also integrate with the valuable email channel, delivering 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 discussion around other lines of coverage. A lot of legacy systems simply don t include workflow for it, Fitzgerald says. When you re servicing a customer who has a billing question, an effective way to cross-sell is to give the billing rep a cross-sell script or a workflow tool to do a smooth handoff to a sales rep. Enhanced customer service and self-service. Modern billing platforms provide improved customer choice in payment 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 advertisements, billing statements are a communication that customers 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 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 customer would receive a single bill. We also made the bill easier to read, Geaglone says. We post invoices online and allow customers to make payments via a link on the website. We also enhanced commission processing, including posting agents commission statements online and paying them via direct deposit.

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 service. 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 customer satisfaction, Geaglone explains. Catholic Mutual Group addressed its member service objectives of providing more information by converting 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 system 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 organization is different in that we are in existence to serve the Catholic 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. fashion it wanted, and in a painless way through configuration, 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 payment mechanisms. Additionally, modernizing billing isn t just about fixing problems created by legacy platforms it s about optimizing billing processes. Insurers need to look at what gains they can achieve through enhanced billing functionality, says Fitzgerald. The workflow management tools; the business intelligence and analytics; knowing what kind of pay plans you have that are in place in different lines. Those are all features 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 modernization and consolidation enables insurers to achieve these objectives today while providing a foundation for continued advantage in the years ahead. She reports that the project met its goals of allowing Catholic Mutual Group to generate the billings it wanted in the