(Image credit: Alexander Lesnitsky.)

Achieving economies of scale has become the new imperative for successful, forward-thinking operations within the workers’ compensation sector. Working in tandem with this trend are expectations for increased digitization and faster turnaround of payments—from both a service provider and claimant perspective.

Not surprisingly, COVID-19 upped the ante on digitization for all industries. A Salesforce Research survey of 15,600 consumers found that 88 percent of customers expect companies to accelerate digital initiatives in the wake of the pandemic. And notably, a recent Guidehouse-sponsored study reveals that nearly one in three consumers have changed their primary method of making payments, citing issues such as convenience and safety.

In terms of quick digitization wins, payment is a natural choice within the framework of claim processes. The right digital payment strategy will not only address market expectations for rapid payments, but also streamline operations and generate immediate return-on-investment (ROI).

Yet workers’ compensation insurers have historically struggled to capitalize on the advantages of digital payment strategies due to a variety of factors. The good news is that a holistic strategy that brings together the right options can drive a shift from paper checks to electronic payment by as much as 80 percent.

Overcoming Challenges

The primary challenge to getting a digital payment strategy up and running in the workers’ compensation sector comes down to one issue: adoption.

Automated clearinghouse (ACH) models—the entry point for many insurers that have adopted some form of electronic payment—necessitate the existence of a bank account along with appropriate routing and account numbers. Many workers’ compensation claimants are simply reluctant to sign up for digital payment when they are required to provide an insurer their bank account information. Plus, some claimants, such as migrant workers, may not even have access to a direct deposit account.

The issue of adoption has historically limited workers’ comp insurers from realizing the administrative benefits that accompany the shift from paper checks to electronic payments. The most obvious of these advantages include eliminating the costs of printing and mailing checks, reducing banking and treasury fees, creating an efficient single system of record across payment types and streamlining claim payment management.

To ensure a successful, sustainable digital payment strategy, workers’ compensation insurers need a model that allows employees to accept secure digital payments through a third-party while maintaining their autonomy and privacy. Claimants then have greater peace of mind that payment details and personal information are separated from the inner workings of the workers’ compensation and employer claim process.

Embracing a More Modern Approach
The good news is that mobile solutions that draw on the latest technological advancement and digital payment models exist and are making this happen. Workers’ compensation insurers would be wise to identify a partner that delivers in this area and position them well for the future.

Choice matters to consumers: An 2021 Accenture report found that while digital expectations are on the rise, there are clear differences in appetite across generations. Consequently, the right payment solution provides a broad portfolio of options—including ACH, push-to-debit, virtual cards and traditional paper checks—and allows claimants to conveniently manage their payment preferences on any mobile device. It also provides a means for claimants to receive notifications and track payments over time.

On the insurer side, the right partner can provide a solution that integrates seamlessly with an insurer’s existing financial systems and workflows. Online portals improve efficiencies through centralized, real-time views of claim, payment and delivery data, simplifying reconciliation. Also important is claimant access to support services, which helps keep insurers from getting bogged down with phone calls and questions.

Security must be a top priority when choosing a partner and solution. Nearly half of insurers dealt with significant cybersecurity events in 2017, and the sophistication of bad actors is growing by the day.

While third-party support is advantageous in terms of digital payment adoption in the workers’ compensation sector, the reality is that an effective strategy requires a level of expertise and resources that many insurers lack. Building a digital strategy in-house necessitates knowledge of how to manage enrollment, oversee digital claims, comply with financial and privacy regulations and secure information. In addition, insurers must consider how to build the right portfolio mix (including introducing new technologies) and manage the digital experiences of claimants.

It’s a tall order that is easily overcome by engaging a third-party fintech partner. And the business case is easy to make due to the immediate ROI that digital payment produces in the workers’ compensation sector. Regardless of how an insurer chooses to move a digital payment strategy forward, those that employ a smart approach based on thoughtful understanding of available options will gain a competitive advantage.

UFCIC Accepts Cryptocurrency Payments for Commercial Surety Products