This white paper discusses how insurers can transform their billing and payment processes from a back office cost center into a competitive differentiator. It argues that billing represents frequent customer touchpoints and impacts key metrics like retention and expenses. The paper recommends developing an enterprise billing strategy to examine how various payment plans and mechanisms affect priorities like fee income, retention, and costs. It suggests implementing a billing service solution to execute the strategy flexibly within 3-5 months while tracking measurable metrics.

1. A White Paper
by Brad Hauser
AVP,
Insurance Solutions – Billing as a Service
A New Frontier
for Competitive
Differentiation
The Billing and Payment Process

2. A White Paper on The Billing and Payment Process Mphasis 3
Contents
Introduction .................................................................3
Frequent Customer Interactions..................................3
Impacts to Key Business Metrics................................3
The Enterprise Billing and Payment Strategy..............4
Executing the Billing and Payment Strategy...............4

3. A White Paper on The Billing and Payment Process Mphasis 4
Introduction
You can reduce billing operations expenses by up to 30% (Novarica)[a]
,
increase customer retention by up to 5% (PwC)[b]
and support accelerated
product development by thinking differently about billing and payment
processes. Leveraging methods already proven across multiple industries
will enable your organization to capitalize on new customer service tools
that are quickly becoming the “table stakes” in the broader consumer
payments market.
The transformation begins by leaving behind the notion that billing is painful
but a necessary back office process, and embracing it as a competitive
differentiator that can also reduce expenses.
Billing is positioned uniquely due to prevailing trends such as frequent
customer interactions and direct impact on key business metrics.
Accordingly, a comprehensive Enterprise Billing and Payment Strategy can
transform billing and payment processes from mundane, recurring back
office cost center status to a fundamental enabler of corporate objectives
and competitive differentiation.
Frequent Customer Interactions
Billing represents the most frequent touch point in the industry with
customers often interacting with their insurer quarterly or monthly. In a
5-year span, a monthly payment customer will interact with their carrier
at least 60 times, thus presenting 60 opportunities either to exceed or fall
short of meeting evolving customer expectations. Policyholders want to pay
their bills and view their balances whenever and wherever
in the manner they choose.
Insurers must meet billing service standards set by similar providers
in other industries. Examples include mobile self-service, text notifications
of payments due and applied, and video bills that not only reduce call
center volumes but also include cross-selling or up-selling suggestions.
The billing and payment process is also a significant trigger for simple
and complex endorsements, both in and out of sequence, as customers
remember a “change of address” or coverage change they require.
Policyholders expect these changes and updates to be made on their terms
and at their convenience as simply as downloading an e-book or the latest
season of their favorite television series to their tablet.
Impacts to Key Business Metrics
Billing and Payment Processes simultaneously impact sales, customer
retention, fee revenue, and expenses – measurable and accountable metrics.
Trigger points provide selling and cross-selling opportunities. Service options
and flexibility improve customer retention. Billing best practices improve
efficiencies and reduce costs. Key metrics include (PwC)[b]
:
Bill payment by using
mobile doubled from
8 million U.S. online
households in 2012
to 16 million in 2013.
This growth was driven
primarily by smartphone
owners, among whom
mobile bill payment surged
150%. Consumers who
pay bills using their mobile
device do so primarily
for its convenience (70%),
anytime access (55%),
and time savings (49%).
– Fiserv[c]
Reduce billing-related IT costs by 5%–20%
New product speed-to-market increase of 3%–5%
Decrease in cash processing costs up to 40%
Reduce bad debt by 5%
Reduce days premium outstanding by 20%–25%
Improve cross-selling by 2%–3%
Diminish service call times by 3%–5%
Retention improved by 2%–5%
Reduced billing error rate
Internal workflow improvement
Simplify issue resolution
Cash application & time reduction
Compliance improvement

4. A White Paper on The Billing and Payment Process Mphasis 5
The Enterprise Billing and
Payment Strategy
An Enterprise Billing and Payment Strategy provides a framework for
creative thought, conscious decisions, and measurable outcomes relative to
the unending potential combinations of pay plans and payment mechanisms,
and how they align with broader corporate objectives.
Combinations of pay-plans (monthly, 2-pay, 3-pay, quarterly, paid-in-full,
etc), billing mechanisms (print, mail, e-bills, texts), lines of business, payment
processing options (lock box, e-payments), account information access
(portals, mobile, call center), and available payment mechanisms (check,
EFT, credit card, e-checks) result in different outcomes for both carriers and
customers. One combination may improve retention but reduce fee income
(direct debits). Another may increase fee income but also the frequency and
associated cost of cancellations/reinstatements (monthly payment by check).
The development of a sound Billing and Payment Strategy begins with
ensuring a clear understanding of the current state.
“Carriers don’t really understand the cost of their billing operations, and as a
result they underestimate their actual expenses.” – Novarica[a]
Key metrics must be measured and prioritized against corporate goals and
objectives. Is fee income a higher priority than retention? Does expense
reduction trump all? Once reordered and prioritized based on broader
corporate goals, the organization can examine how the various components
of the billing and payment processes combine to affect the results.
This requires a multi-dimensional view of the many combinations available
and an understanding of the expected outcomes. For example, a carrier may
be interested in reducing costs and improving retention by increasing the use
of automatic payments by reducing or eliminating installment fees. However,
this will result in an associated reduction in fee revenue. Therefore, the loss
of fee revenue must be balanced against improved retention and reduced
processing costs. Retention is a key benefit, especially given that the cost
of acquiring new customers can be up to 10 times the cost of retaining an
existing customer (PwC)[b]
.
Executing the Billing and
Payment Strategy
With a strategy in hand, the organization can then turn its attention to
execution. Unfortunately, many carriers are burdened with systems that
are unable to provide the flexibility and responsiveness needed to support
a dynamic and objective-driven strategy. This can make the prospect
of a major IT billing initiative overwhelming.
The good news is that these challenges can be addressed without
undertaking a major billing initiative. A billing service solution with
a robust billing engine at its core can be implemented in 3–5 months with
little or no support from the carrier’s business or IT staff, provide high
flexibility to meet changing requirements, and track clearly measurable
metrics that allow the carrier to manage the true cost of billing and
understand the associated business results.
Thinking strategically about The Billing and Payment Process and
leveraging the right technology and process solution will open the
door to this new frontier for competitive differentiation.
Sources
a. Best’s Review White Paper “How the Global Billing Revolution…” Mphasis and Novarica, p. 3, 4
b. Making a statement: “Transforming insurance billing to gain a competitive edge.” PwC FS Viewpoint,
January 2014. www.pwc.com/fsi, p. 3, 4
c. Sixth Annual Billing Household Survey,” Fiserv, Eric Leiserson, December 2013, www.fiserv.com, p. 3

5. A White Paper on The Billing and Payment Process Mphasis 6
Brad Hauser
AVP, Insurance Solutions – Billing as a ServiceAbout Author
Brad Hauser is AVP and head of Mphasis’ Billing as a Service (BaaS)
practice. He has over 25 years of experience in both insurance business
and technology units, including serving as Director of Cash Management
in the Officer of Treasurer at Nationwide and VP Application Services
at MAPFRE/Commerce.

6. VAS18/07/14A4BASIL2923
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