Overcoming intricacies of premium processing in the insurance industry

By Piers Williams, Global Insurance Manager at AutoRek

Complexity is an unavoidable reality for the intricate world of insurance. For program administrators, including brokers, managing general agents (MGAs) and managing general underwriters (MGUs), accurate management of insurance premium payments and complex workflows like bulk payments and diverse data sources is essential – there cannot be room for error. Unfortunately, poorly executed and complex processes can lead to costly mistakes. This is especially true for essential financial control processes that directly impact the performance of insurance businesses such as premium payment processes – also commonly known in corporate industries as account receivable and payable processes.

In particular, the traditional, manual management of insurance premium payments is what can often lead to unresolved outstanding debt and large balances of unallocated cash. When you combine this with the 30% growth in delegated/program businesses (over 30%+ in the last 3 years), using Excel sheets and the ever-increasing policy volumes, the approach becomes unsustainable and inefficient.

This article will outline the transformative benefits automation offers and the key actionable strategies that will enable program administrators to optimise the management of insurance premium payments for greater efficiency and effectiveness in their financial operations.

Embracing automation: the future of insurance

The future of insurance lies in automation – this is where premium payment processing comes in. Automation enables businesses not to erode margins through write-offs but accelerate cash flow and protect revenue. The primary goal is to accelerate premium reconciliation and allocation by implementing an automated straight-through process, minimising the need for human intervention to ensure that minutes – not hours – are spent on the reconciliation process.

By leveraging automated systems and advanced data integration, premium payment processing has the potential to offer a more streamlined, accurate and effective insurance ecosystem. Automation minimises the likelihood of human error and delays in transaction times; ensuring that precision is at the forefront of the financial processes. This shift towards automation addresses one of the key challenges faced by the insurance industry – eliminating inefficiencies which can lead to costly mistakes and unnecessary delays.

Producing scalability in a competitive market

Program administrators are confronted with a multitude of pain points in their day-to-day operations. Given that program administrators handle a significant amount of insurance policies across multiple binders/programs in the market, considerable admin effort is required to process a vast number of internal and external data sources as well as payments and policy data. As a result, program administrators risk losing valuable time and resources – giving them less time for value-added tasks, like resolving breaks, addressing downstream issues, and creating better partnerships with insurance partners.  

The impact of such operational inefficiencies can impact not only accounts receivable, collections and credit control processes but also business profitability, binder/program performance, competitiveness and reputation to name a few. Without the adoption of more advanced technologies like automation, program administrators are increasingly at threat of not being able to produce scalability in a competitive market.

Whilst automation offers huge efficiency upside for businesses there are also many benefits delivered by simply having a single premium data control platform. One of the most notable challenges with premium payment operations is the often-large numbers of internal and external data sources that must be managed and processed. This data needs to be continuously processed to ensure reporting is up to date and management has a comprehensive view of outstanding premiums, allocated premium and cash positions at any point in time. The management of this data, if not performed within a platform, presents a huge risk from a control perspective, as often premium payments will not be allocated for 30, 60 or 90 days, therefore needing a solution to keep track of all data automatically to ensure efficiency and control to ensure.

The opportunities premium payment platforms unlock not only when reconciling and allocation premium but also from a financial data control, consolidation and audit perspective, can be transformative. When this is further combined with the new reporting that is unlocked and streamlined operations using features like workflows leads to a drastically enhanced and often very different operating model. This model, however, enables businesses to work in near real-time, enhance relationships and most importantly remain competitive.

Identifying and addressing inefficient processes

Investing in modern technology like automation is often the first step in streamlining operations and eliminating inefficient processes. The goal is to encourage program administrators to focus less on manual administrative tasks that are time-consuming and instead, focus on key business decision making to improve financial gain – automating manual processes does exactly that.

Likewise, the insurance industry is constantly evolving so the adoption of premium payment processing will be crucial in remaining competitive in a shifting market dynamic. With this in mind, legacy systems, once the backbone of insurance operations, must go. These systems are outdated and unable to meet the demands of a data-driven, regulated market, leading businesses to embrace digital transformation and no longer depend on inefficient processes.