Insurance Electronic Billing Practices Slow to Take Hold, According to Ward Group Study


CINCINNATI, OH--(Marketwire - December 8, 2010) - Ward Group®, the leading provider of benchmarking and research studies to the insurance industry, recently published its findings from an in‐depth study of billing and collections practices for insurance companies.

A diverse group of 74 companies participated in this study, which was sponsored by Fifth Third Bank. Key findings of the study were recently presented to participants in a webinar hosted by Jeff Rieder, President of Ward Group, and Jodi McIntosh, vice president, Treasury Management Officer at Fifth Third Bank.

For most insurance companies, billing and related activities represent the most frequent types of interactions with policyholders. Ward Group conducted this study to assist companies in measuring their performance, develop staffing comparisons and establish operating benchmarks in this important area. 

The study identified several notable payment trends. The majority of personal lines premium is paid on a monthly basis (40 percent), followed closely by annual payments. However, nearly 58 percent of personal premium is paid via paper check transactions and only 33 percent is collected electronically via electronic fund transfer (EFT) or credit card. For commercial lines, 31 percent of premium is paid on a monthly basis, however less than 14 percent is collected electronically.

Mr. Rieder observed that electronic payment options in the insurance industry are often under-marketed, either due to the belief that policyholder preference is to pay via paper check or companies want to avoid paying credit processing fees. "Electronic payment options such as EFT and credit card had more than two times the number of annual transactions than other payment methods," noted Mr. Rieder. "However, companies should also consider the benefits of higher policy retention with pre-authorized monthly payments against the costs of processing fees or additional service requirements."

Ms. McIntosh discussed important trends relating to electronic bill distribution and noted that less than one percent of both personal lines and commercial lines policyholders receive bills electronically. "While most other industries have implemented green initiatives to reduce paper billing, the insurance industry significantly lags in this practice," noted Ms. McIntosh. Driving factors for the lack of paperless billing included system limitation, policyholder preference and lack of prioritization for this practice. "Companies may want to consider the benefits of offering policyholder discounts to move to paperless billing," added Ms. McIntosh. Less than 6 percent of personal lines companies and two percent of commercial lines companies offered discounts for paperless billing.

Other notable trends identified in the study included:

  • Less than 15 percent of payments were made online.
  • Interactive Voice Response (IVR) payments were small, contributing to less than 3 percent of payments.
  • A majority of companies surveyed accept credit card for personal lines payment.
  • Credit card usage is gaining more acceptance for commercial lines payments.
  • Companies with more than $500 million premium had half the number of staff relative to premium.
  • About 48 percent of companies involved in the survey plan to replace the billing system in the next five years.
  • Direct bill is the dominant practice for both personal and commercial lines.
  • Large companies outsourced delinquent payment collection efforts more frequently.

Mr. Rieder predicted that credit card and EFT will continue to grow as a percent of payment collections. In addition, the number of payment processed online will grow significantly in the next five years. The ability to view policy documents online, provide paperless billing and allow for online payment will be critical for future system enhancements and replacements. "Companies that provide easy payment services to policyholders and agents are likely to achieve the best operating results," summarized Mr. Rieder.

The full study provided detailed benchmarks by distribution channel and business mix. To obtain the complete results, visit www.wardinc.com.

About Ward Group

Ward Group is the recognized leader for insurance company benchmarking and best practices and a major sponsor of primary operational research studies. Ward Group analyzes staff levels and expenses for all areas of insurance company operations. The firm's professional staff is uniquely qualified to help companies measure results, optimize performance and be more profitable. For more information about Ward Group, visit www.wardinc.com.

About Fifth Third Bank

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. The Company had $112 billion in assets and operated 16 affiliates with 1,311 full-service Banking Centers, including 103 Bank Mart® locations open seven days a week inside select grocery stores and 2,435 ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Pennsylvania, Missouri, Georgia and North Carolina. Fifth Third operates four main businesses: Commercial Banking, Branch Banking, Consumer Lending, and Investment Advisors. Fifth Third also has a 49% interest in Fifth Third Processing Solutions, LLC. Fifth Third is among the largest money managers in the Midwest and, as of September 30, 2010, had $190 billion in assets under care, of which it managed $26 billion for individuals, corporations and not-for-profit organizations. Investor information and press releases can be viewed at www.53.com. Fifth Third's common stock is traded on the NASDAQ® National Global Select Market under the symbol "FITB." Member FDIC.

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Betty Cornelius