Digitization is reshaping numerous industries and transforming business models and markets. Many areas of the economy are hoping that the leap into digital processes will provide new impetus for their business and ultimately lead to growth and increased sales. The effects have also been clearly felt in the area of digital payment solutions in recent years, and not just in online retail, but increasingly in the insurance industry.

Insurance companies have long relied on the classic payment model: in most cases, they collect premium payments by SEPA direct debit, or alternatively they have customers transfer the amounts. But if this works so well, why should insurance companies consider modernizing their payment infrastructure?

Payment solutions and reports for insurers

As payments become more digitized, the number of fraudulent chargebacks also increases. Modern chargeback management provides detailed information on how chargebacks occur. Insurers are thus able to evaluate precise error codes and understand what the reason for a chargeback was. Since the whole process is digital, they complete this discovery process very quickly and can react immediately. If the evaluation is also accompanied by integrated real-time risk checks, chargebacks are much less likely to occur. Intelligent solutions minimize fraudulent chargebacks, saving the insurer effort and money.

Insurance companies with a large number of customers are also dependent on efficient tools that help them automatically merge transactions and premium bookings, because the greater the volume of data, the greater the cost of analyzing it. Equally important is batch handling, a processing method that makes it possible to collect premiums from many thousands of policyholders at the same time.

Bringing the end user into the comfort zone

Thinking from the customer side, an optimized payment infrastructure also represents a huge win for insurers. End consumers are used to being able to use convenient and secure payment methods such as credit cards, PayPal or, more recently, Apple Pay, thanks to years of experience in online retail.

Insurance companies can benefit from this trend and increase their conversion rates for suitable products by offering a tailored payment mix. It has been proven that consumers who encounter one of their preferred payment methods in the checkout are more likely to actually purchase a product.

The growing number of new types of insurance offers, in particular, are  perfect for this approach to payment optimization. For prospective customers who want to spontaneously buy policies for temporary situations, a SEPA transfer is comparatively inconvenient. In addition, insurers face the risk that customers will charge back amounts if nothing has happened. If, on the other hand, they want to take out flight insurance at short notice while traveling, smartphone theft insurance after buying their new cell phone, or accident insurance on the ski slopes while on vacation, PayPal, credit card and the likes come in handy.

A payment solution that allows insurers to offer their customers an optimized checkout with suitable payment options is worth its weight in gold. Solutions that allow them to activate and deactivate payment options swiftly and easily are particularly attractive to providers. This enables them to respond rapidly to changes in payment preferences and to easily optimize the payment experience for the customer.

Bill payment has never been easier

But what if a policyholder has not paid the premium on an insurance policy that has been in force for a long time? That’s an uncomfortable and stressful situation for the customer; even if they simply forgot to make a payment. But modern payment solutions can help here, too. Thanks to QR codes and payment links, they conveniently pay the outstanding amount from an email sent to them by the insurer. All it takes is a click on the payment link and the customer is taken to a payment page that offers them all the options and payment methods they want.

This simple trick has been proven to result in a faster and more positive response to payment requests and reminders with no additional implementation effort on the company’s website.

Such a smart approach can also be used in other contexts, such as upselling or cross-selling insurance products. The goal is always to minimize the hurdles for the consumer and maximize convenience.

More than SEPA: recurring payments

But what about the core business of most insurers: recurring payments? Here, too, it is worth keeping up with progress. So-called recurring payments have long since ceased to be the domain of SEPA direct debits. Credit cards can also offer this service. But to do so, insurers must be able to store the data in their own system. This can only be done in a data protection-compliant manner via PCI DSS certification in tokenized form.

A payment service provider like Computop solves this problem, because it is able to encrypt the sensitive credit card data in such a way that only tokens, in other words substitute numbers, are stored on the servers. The advantage is that these numbers are worthless to criminals in the event of data leaking into their hands, thus protecting both the customer and the insurer from fraudulent use.

The PSD2 payment services directive also imposes high requirements on the technical processing of “recurring payments” so that they can be executed without the customer having to be re-authenticated when the contract is renewed. This creates appealing alternatives to the SEPA direct debit, which offer consumers real added value in many respects.

This shows that, in the area of insurance , digitization involves much more than, for example, the transformation from branch insurers to direct insurers. Rather, it enables an entirely new product world and raises security to a new level for all involved. In this industry, too, it lays the foundation for greater customer satisfaction and, ultimately, closer customer loyalty and rising sales.