Paymentech, the nationâs third largest electronic payment solutions provider, today introduced to the insurance industry its automatic payment service for recurring billing. The program enables insurance companies to automatically receive monthly customer payments. The announcement was made during the Insurance Accounting and Systems Association conference, a leading insurance industry gathering held this year in Nashville, Tenn.
Paymentech, the largest processor of credit card payments for direct marketing and on-line services, sees growing interest within the services industry for automated solutions. Responding to market research by MasterCard and Visa, Paymentech has begun offering electronic payment programs that are tailored to the insurance industry.
Over half of the top 20 companies in automobile, property/casualty and life insurance currently offer some type of credit card acceptance, said Gary Beck, senior director for Paymentechâs recurring payments program. However, automated monthly or quarterly payment is a new option.
With a recurring payments program, consumers can choose to have their credit card, debit card or checking account automatically cover their automobile, property/casualty or life insurance premiums. Customers simply authorize the automatic payment and receive a statement for their records. Insurance providers then electronically collect receivables. Research also indicates that credit card acceptance can help close the initial sale and reduce walk-in payments.
As a convenience to cardholders, recurring payment programs can also improve customer service and retention, said Beck. Credit card usage has established a small foothold within insurance, accounting for less than 2% of all premium payments. Automated billing can accelerate use.
Consumer research conducted by MasterCard shows that a third of customers prefer making recurring payments by credit card, said Beck. Consumers find recurring payments easy. There are no checks to write, stamps to buy or bills to mail.
Operational benefits can include improved cash flow and faster credit to an insurance companyâs account, as check payment delays are eliminated. Streamlined operations and lower statement mailing costs are other advantages to insurance companies. Recurring payments can also provide a foundation for the development of automated, paperless billing processes such as Internet, E-mail and voice response units (VRU).
Paymentech arranges for payments to be handled according to an insurance customerâs preference. Paymentech processes a monthly billing file of payments with all authorized and successfully cleared card and electronic check transactions.
Paymentech, founded in 1985, is the leading provider of full-service electronic payment solutions to the direct response industry. The company processed 1.6 billion transactions and $46 billion in sales volume during 1997. Paymentech is the third largest processor of bankcard transactions and a leading issuer of commercial cards in the United States.
Recurring Payments Fact Sheet
Recurring payments (RPs) account for over $500 billion in all types of annual payments. Less than 2% is currently captured on cards. Approximately 5% of payments are made through direct debits of consumer checking accounts (Nilson Report, August 1996). According to a MasterCard survey, 93% of all types of recurring bills are paid by a written check; however, 36% of consumers use some type of recurring payment for at least one bill. Automatic payment type preferences were —
· checking account debit (electronic check processing)
· paycheck deduction
· credit card recurring
According to industry surveys, the total annual premium payments for home owners, auto and life insurance is $306 billion. Of that figure, total credit card volume accounted for about $767 million.
Benefits of RPs
Merchants (service industry):
· secure transactions
· improved collections
· improved customer service and retention
· streamlined processing
· convenience, saves time and money
· option to revolve