modernizing insurance billing drives sales performance ... · pursuing a two-pronged strategy of...

Billing Modernization Drives Sales Performance and Service Excellence

To win over a new generation of customers, increase effi ciency, and bolster the bottom line, insurers are

focusing on billing modernization and consolidation.

Americas . Europe . Asia-Pacifi c . Middle East . India

K arlyn 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.

However, it has become increasingly important for insur-

ers’ 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 fre-

quently than other processes, even claims.”

“Billing is playing a diff erent 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 real-

izing they are falling short in meeting current needs and

are not positioned at all to meet future needs,” says Carna-

han. “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.”

Additionally, many insurers—particularly lager carriers—

contend with multiple billing systems in their legacy envi-

ronment 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.

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 quantifi able benefi ts.

Pursuing a two-pronged strategy of modernization and

consolidation can not only solve vexing legacy system

challenges, but also create new opportunities for cus-

tomer satisfaction and competitive diff erentiation.

Buying into Billing

Several forces in the marketplace are shaping the billing

landscape today.



““ ””Billing is playing a diff erent role today than before. It has a fundamental part in service excellence.

—Karlyn Carnahan Principal, Novarica

Customer expectations. The most infl uential market

driver is the attitude of today’s generation of customers.

“The ability to off er 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 diff erent 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-defi ned 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 genera-

tion 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 ver-

sus 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. “Insur-

ers 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 insur-

ance companies are billing-related. Recent studies have

shown that at least half of all insurers now consider bill-

ing to be a customer service issue rather than a purely

fi nancial issue. Billing presents a vital opportunity to fulfi ll

a brand promise of convenience and trust—or a risk of

compromising the brand through poor service and inac-

curate 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 applica-

tion and administration process, and correspondingly intol-

erant of problems in the billing process. To put it another

way, a billing problem is a reason to start shopping.

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 get-

ting rate increases,” says Fitzgerald.

In the past, billing was a “back offi ce” function and was

thought of as a necessary evil. Today, the soft market has

insurers looking for new ways—including billing—to

diff erentiate themselves to agents and consumers. Cus-



““ ””People’s expectations about what they should be able to do on the billing side are much diff erent 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

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.

Policy administration replacement. Carriers have had

an increased appetite for policy administration replace-

ment. Since many billing systems are “baked in” to admin-

istration 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 plat-

forms also makes it difficult to create new billing plans

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 bill-

ing information,” says Fitzgerald. Problems created by leg-

acy 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 dur-

ing 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.

“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 bill-

ing. 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 inabil-

ity 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


Americas . Europe . Asia-Pacific . Middle East . India

interface, frustrating customers and leading to increased

training time and cost for staff . Lack of automated work-

fl ows leads to manual processes and workarounds, and

manual entry and limited automated validation cause

invoice inaccuracies and subsequent customer disputes.

4. Limited visibility. Lack of integration with other sys-

tems makes it diffi cult to consolidate billing information

and resolve problems when they occur, and poor report-

ing capabilities inhibit visibility into business performance.

“Insurers have diffi culty getting data out of the legacy bill-

ing 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.

“Legacy billing systems also have a diffi culty in dealing

with regulatory requirements, particularly managing fees

across diff erent 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 cus-

tomer and customer records existing in multiple systems.

“The biggest problems of multiple billing systems are

seen in customer service. It’s diffi cult to provide a consoli-

dated customer experience when information is across

multiple billing systems. Each system can have diff erent

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 fi nd they can’t do that,” says Carnahan.

It is also diffi cult and expensive to maintain multiple sys-

tems 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.”



““ ””It is also diffi cult 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.

“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.”

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 sys-

tems 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 sys-

tems should support all lines of business for both direct

and broker bill and deliver automated workflow process-

ing. 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 flex-

ibility through user-defined, rules-based configuration

rather than custom coding.

“Business-user configurable plan rules are essential,” Fitzger-

ald 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.

Customers want a plethora of payment options designed

for their individual needs and that support payment meth-

ods 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 flex-

ibility for varying bill plans; the ability to modify bill plans

mid-stream. It’s about having multiple billing plans for dif-

ferent 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 foun-

dation, modern billing systems are comprised of exten-

sible 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 appli-

cations increases IT efficiency. Consolidation to a single plat-

form 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 tak-

ing 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 informa-

tion 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.

Enhanced customer service and self-service. Modern bill-

ing platforms provide improved customer choice in pay-

ment 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 advertise-

ments, billing statements are a communication that cus-

tomers 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

billing systems with document production systems delivers

the appropriate marketing message. Modern billing sys-

tems also integrate with the valuable email channel, deliv-

ering 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 discus-

sion around other lines of coverage. A lot of legacy sys-

tems simply don’t include workflow for it,” Fitzgerald says.

“When you’re servicing a customer who has a billing ques-

tion, an effective way to cross-sell is to give the billing rep

a cross-sell script or a workflow tool to do a smooth han-

doff to a sales rep.”

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 cus-

tomer would receive a single bill.

“We also made the bill easier to read,” Geaglone says. “We

post invoices online and allow customers to make pay-

ments via a link on the website. We also enhanced com-

mission 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 ser-

vice. 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 cus-

tomer satisfaction,” Gea-

glone explains.

Catholic Mutual Group

addressed its member ser-

vice objectives of providing more information by convert-

ing 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 sys-

tem 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 organiza-

tion is different in that we are in existence to serve the Cath-

olic 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.”

She reports that the project met its goals of allowing Cath-

olic Mutual Group to generate the billings it wanted in the

fashion it wanted, and in a “painless” way through configu-

ration, 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 pay-

ment mechanisms.”

Additionally, modernizing billing isn’t just about fixing

problems created by legacy platforms—it’s about opti-

mizing billing processes.

“Insurers need to look at what gains they can achieve

through enhanced billing functionality,” says Fitzgerald.

“The workflow management tools; the business intelli-

gence and analytics; knowing what kind of pay plans you

have that are in place in different lines. Those are all fea-

tures 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 mod-

ernization and consolidation enables insurers to achieve

these objectives today while providing a foundation for

continued advantage in the years ahead.



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