The insurance industry is transforming and payment processing is central to this change. Advanced technologies like artificial intelligence (AI) and automation have the potential to reshape how insurers process payments and handle transactions.
So, with this in mind, how can emerging technologies transform insurance payment processing and what does the future hold?
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The current state of insurance payment processing
Today, insurance payment processing is characterised by slow processing times, operational inefficiencies and underinvestment. Challenges such as reliance on legacy systems, manual processes, and outdated tools are central to the issue.
These approaches are unsustainable for business growth and often lead to inefficiencies. Skilled employees frequently find themselves performing repetitive, manual tasks such as data entry, reconciliations and claim tracking. As payment and data volumes grow, these manual tools and processes are struggling to keep up, exacerbating operational challenges.
While spreadsheets and legacy systems are widely used in payment processing for insurance, excessive reliance on such tools can be detrimental to an organisation. Especially when these tools are stretched beyond their intended capacity.
The impact on businesses is significant, leading to high-value premium write-offs, an increased risk of human error, lengthy processing delays of 60, 90, or even 120+ days, and inaccurate reporting.
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By GlobalDataThe role of AI in transforming insurance payment processing
AI is one technology poised to address these challenges. The technology can streamline claims and payments by automating repetitive tasks and using machine learning algorithms to assess claim documents and process payments more quickly.
Additionally, AI can detect fraud by identifying patterns and anomalies in data that signal fraudulent activity that may indicate fraudulent activity, which costs the industry billions annually. Furthermore, customer satisfaction can be enhanced through AI-powered chatbots and virtual assistants, which provide instant responses to payment inquiries, such as billing issues or payment statuses.
Despite its potential, adopting AI comes with challenges, such as ensuring data privacy and ethical use. AI should be seen as more of a supplementary/supporting technology, rather than a solution to all problems.
How automation can reshape insurance payment processing
Automation offers another key opportunity to transform insurance payment processing. It can streamline premium collections by simplifying premium allocation, accounts payable and settlements, while also ensuring regulatory compliance and providing audit trails. Automation reduces administrative burdens on skilled employees, allowing them to focus on value-add tasks such as investigating exceptions and reconciliation breaks.
Moreover, a common pain point for those working in insurance payment processing is dealing with vast numbers of disparate data sources and systems. Automated tools enable the seamless integration of data between disparate systems, improving data connectivity and operational efficiency.
By enhancing workflows and consolidating processes, automation has the potential to significantly improve the overall efficiency of insurance payment processing.
Beyond AI and automation – what’s next?
Technology is only part of the solution. Data standardisation, such as adopting common data standards will be hugely transformative in reducing costs and driving the efficiency of the process.
ISO 20022, for example, provides the opportunity to exchange richer and more detailed levels of payment information.
Integrated services through application programming interfaces (APIs) can open the way for faster and more effective data transfer and ingestion. This allows for more responsive workflows and better connectivity between insurers, banks and payment platforms. Real-time payment systems further enhance efficiency by improving speed and accuracy, alleviating common challenges faced in traditional payment processing.
The state of insurance payment processing
For many firms, the existing state of insurance payment processing is inefficient, costly and prone to errors. Firms who fail to embrace the latest technological evolutions and wider trends within the market, risk falling (further) behind, operational efficiencies and costly errors.
But not all hope is lost. The future of insurance payment processing is bright, driven by AI, automation, and new technologies. Firms that embrace innovation can remain competitive.
Piers Williams is Global Insurance Manager at AutoRek
