Agents Sold on Electronic Billing.

Electronic funds transfer can help agents reduce service demands and focus on sales.

The increasing popularity of electronic funds transfer reflects growing interest among agents and customers.

Agents' fears have been quelled by experience with this process. They now see this as a means to free the agency staff of some service responsibility and to grow their businesses by shifting more of their agency resources and attention to sales.

Customers appreciate the convenience of this billing solution and are much more open to electronic commerce today than they were just five years ago. People in their 30s have few reservations about electronic commerce, and even boomers in their 40s and 50s have become accustomed to the electronic marketplace as the trend to direct deposit and online banking has increased dramatically over the past few years.

Agencies that implement these programs can significantly improve customer retention and their loss ratios. Allmerica's own data indicates that our retention is about 10% higher on electronic funds transfer business than on direct-bill business. Higher retention reflects customer appreciation for the convenience. Satisfied customers do not shop carriers and agencies.

Leading analysts and other industry observers believe that electronic funds transfer business produces better-than-average loss ratios. Generally, people who use this method are above-average insurance risks, with greater financial flexibility and no concerns about their ability to meet monthly payments.

This solution also lightens the administrative burden on an agency. To the extent that premiums are routinely paid through electronic funds transfer, agents and agency support staff spend less time resolving billing-related issues. In fact, this approach benefits customer-focused agencies the most, since those agencies tend to invest a considerable amount of time resolving customer issues.

Also, electronic funds transfer offers several distinct benefits to an agency's clients, helping to solidify the customer relationship. It enables customers to spread their premiums over 12 equal installments--rather than one, two, three or 10--ultimately lowering their per-installment expense. And some carriers waive service fees and reduce down payments of what can amount to 20% to 30% for customers who elect to pay premiums this way.

Agents who have used electronic funds transfer have become advocates. Many of the independent agents with whom we work now write 30% to 40% of their personal lines business through this method, and plan to expand on that base. Agents also are making increasing use of electronic funds transfer in small commercial lines. The keys to success: Make it a priority within the agency and actively market the benefits to policyholders on direct bill. Many of the agents who have had the greatest success here have positioned this as the way the agency bills its clients, only putting customers on direct bill if they decline to authorize electronic funds transfer. More customers accept this solution when it is positioned as an agency's standard method of billing, rather than an option.

Agents who succeed with this method also actively market the customer benefits. Billing stuffers and other marketing promotion tools have prompted policyholders to enroll in electronic funds transfer, and customer service representative incentive and training programs have proven effective as well. Customer service representatives are well positioned to direct customers to electronic funds transfer, since these employees often respond to billing concerns, and they frequently help customers make coverage and billing decisions.

In addition to conventional electronic funds transfer, carriers and agents increasingly are making effective use of the technology to help agents who write "cash-with-application" business and accept premium payments from clients. This is especially helpful in reducing the likelihood of policy cancellation for late payment.

In such cases, agents accept premium payments, deposit the payments in their accounts and apply the premiums to customer policies. Carriers use their electronic funds transfer capabilities to "sweep" agents' accounts, collecting premiums that agents have deposited.

The administrative efficiency gained through electronic funds transfer translates into a big time saver for agents, enabling them to control the application of the funds, and often, to enter banking information and establish a schedule for electronic withdrawals. It also eliminates policy-processing delays that have plagued some carriers and significantly reduces the amount of time agents spend tracking policy payments.

Electronic funds transfer has emerged as a valuable administrative tool that helps agencies reduce the amount of time they spend on customer service and to devote more time to growth initiatives.

Deborah Flanagan is a senior program director for Allmerica Financial, Worcester, Mass.