Fitting the bill: technological advances have made the elusive target of electronic bill presentment and payment for group bills an attainable goal.

Using the Internet for billing and payment for complex billing in group lists and commercial lines is at the nascent stage. Electronic bill presentment and payment, which is old news when it comes to individual insurance products or simple commercial lines, is a business-to-business communications tool that allows bills to be created, delivered and paid over the Internet. With industry experts like Celent Communications estimating that between 80% and 95% of carriers offering group life, health, or workers compensation will offer e-billing by 2006, this method of billing is becoming more than a "nice to have" luxury E-billing, or Web-billing, is quickly becoming a necessity for group insurers to remain competitive and respond to increasingly technology-savvy policyholders.

The early Internet deliverables to the insurance industry fell short of expectations with few insurance transactions taking advantage of electronic communications. Insurers aren't trying to change the process with this new communication and processing method, but they are using it to complement the existing process to let customers interact directly with their customer service and computer systems. Straight-through-processing is becoming commonplace as the industry strives to streamline the insurance process from new business application to final claim payout. The Internet provides greater opportunity for further automation and service enhancements, and the industry is standing up and taking notice.

Billing Is the Best Candidate

Determining where the Internet brings greatest value in customer interaction requires a review of the "customer touch points" in a typical insurance process. During its life cycle, each insurance policy offers three potential touch points with the customer: underwriting, billing and claims.

Insurers' best potential for return on investment is with the process points that require massive paper exchange, are labor intensive, and dependent upon timely information exchange and collaboration between customer and carrier. Underwriting, billing and claims all can be cumbersome, paper-intensive processes that will benefit from Internet-based straight-through-processing applications. But for most lines of business, underwriting and claims touch the customer infrequently

Billing, however, is a consistently frequent, often a monthly, interaction between insurer and customer. That frequency gives it the greatest potential to enhance customer service, while drastically reducing operating expenses. In addition, since the billing transaction is originated by the carrier, unlike new business applications or claims transactions, the opportunity to present a usable electronic document is much more under the carrier's direct control. This enables the customer to electronically manipulate the variable information and perform an automated and accurate recalculation.

Static vs. Nonstatic Bills

Electronic bill presentment and payment has been readily adopted for many lines of business with static bills, or those that typically don't require adjustments by the customer. At a minimum, the electronic payment portion has become commonplace with payment made via Automated Clearing House debits to customer accounts. Refining the electronic process for these simple, straight-forward bills has paved the way for electronic bill presentment and payment for the complex, commercial, or nonstatic group bills that typically require customers to adjust and recalculate the bill themselves.

In the past, payroll figures and employee information that are subject to continual change, made group and commercial billing automation a bit like trying to hit a moving target wearing a blindfold. For example, bills for products such as workers' compensation are directly related to payroll figures, while group life and disability bill calculations depend on the current employee census, plans and volumes. But, technological advances have made the elusive target of electronic bill presentment and payment for group bills an attainable goal.

Inaccuracy the Norm

Before the Internet, nonstatic group bill presentment was limited to the traditional hardcopy print-and-mail billing process. This system was expensive to process, and often by the time the client received the bill, the group census had changed, resulting in an inaccurate bill. This happens so often that customers and insurers expect inaccuracies in virtually every bill concerning large groups. What should be the inaccuracy exception, has become the norm.

Typically with group bills, the client's benefits manager would manually review the bill, make the manual corrections and go through the painstaking effort to recalculate the bill and process the adjusted payment. Unfortunately, the lack of timely and collaborative communication often resulted in "not-as-billed" payments by customers, which may trigger delinquency notices and additional paper communications from the insurer. And, the cycle of unnecessary, untimely, expensive and carrier/client relationship-damaging communications was well under way.

Delays in payment, unnecessarily high call volumes, undue stress on agents/brokers/policyholders, not to mention the unwarranted automatic terminations of some group policies, do nothing to enhance the customer/carrier relationship. While complex commercial bills may use different terminology, they follow the same obtuse process.

Whether it's the carriers who produce the bill or the customers who manage the bill, everyone would vote to change how complex commercial and group bills are presented, handled, deciphered, and ultimately paid.

Web-aBILLity

By taking advantage of timely, interactive electronic communications, the possibility for enhancing the complex commercial and group billing process is significant. The benefit model for reducing or eliminating operating expenses m processing costs is fairly straight forward. Electronic presentment eliminates the labor, materials and postage costs associated with the generation, packaging and processing of the paper bill, not to mention the labor intensive effort to reconcile billing inconsistencies and process remittances that were "not-as-billed."

Electronic bill presentment and payment improves billing accuracy. Additionally, where bills are not completely accurate the client has an efficient means to correct and recalculate the bill, thus improving the customer relationship.

The initiation of a billing transaction is based on a snapshot of a customer's policy/billing information at the close of the billing cycle. The closer this snapshot is to the delivery of a bill, the more accurate the bill. With the traditional paper generation and mail lags, the time from snapshot to bill receipt can easily be a week or longer. The snapshot is particularly important at delinquency notification cut-off, where there is a similar remittance process lag. If a delinquency notice is sent after the customer has mailed his or her remittance, but before it is either received or processed by the carrier, the notice is redundant. This can begin a chain reaction of frustrating and time-consuming activities, as the customer verifies the receipt of the payment and the billing system is updated with manual adjustments. If all goes well, the monthly billing/payment transaction is resolved before the cycle begins again for the next month's billing period.

With the slowdown in bill processing and the remittance-processing lag, the snapshot relied upon for billing is likely to be inaccurate for almost half of every month. With electronic bill presentment and payment, the snapshot is taken just prior to bill presentment and any necessary adjustments can be made electronically and accurately recalculated by the client. So, even if the inevitable changes occur after the snapshot, the customers have a proactive and simple way to quickly adjust and recalculate. The results significantly enhance customer service by eliminating lag time and creating, an "as-accurate-as-possible" bill.

Driving Customer Adoption

Most carriers anticipate that a 15% to 20% customer adoption of group e-billing will yield a positive return on investment, according to Celent Communication's research.

While the benefits are plentiful for the insurer in reduced print, mailing and staff costs, and offer an attractive return-on-investment model, facilitating customer adoption will require more than the insurer's promise of a more accurate bill. Insurers will need to be proactive in introducing the clients to the benefits of Web-billing, including improved workflow and bill detail management combined with overall process simplification. While the insurer would ideally like a simplified billing process to result in quicker payment, the reality is that most commercial customers will delay payables to meet the payment due date in order to continue to maximize their own cash flow.

Once a decision for Web-billing is made, the insurer can build its own Web-billing system or look to the outside for Web-billing solutions that have recently become available from a few software vendors. Whichever path is chosen, the insurer must ensure that its Web-billing solution generates accounting transactions that easily integrate and communicate with the existing general ledger or accounts receivables/payables. Regardless of the billing functionality provided, unless the Web-bill solution provides this level of integration, the insurance industry will continue to exacerbate the traditional problem of systems and business processes pushed into silos rather than moving toward the ideal straight-through-processing for improved operational efficiencies.

Consolidation into a single customer bill is also a natural byproduct of an electronic bill presentment and payment capability, and an important one, in that it provides another level of service and efficiency to the most important customers--those that have multiple policies.

Audience-of-One Services

While the Internet offers the potential to touch large numbers of customers more quickly, it is necessary to refrain from the "service in mass" approach. As customers increase their electronic transactions with agents and carriers, they will come to expect services designed specifically for their coverages, work habits and needs. Once again, the benefits of Web-billing to the insurer are obvious-- improved customer service at significantly lower cost--but without this audience-of-one service for the customer, the adoption of Web-billing as a commonplace tool for complex and group bills will suffer.

In spite of a few false starts, the Internet is finally ready for prime time in its application for true business transactions. And with Celent Communications estimating that insurers will spend approximately $220 million on group e-billing projects over the next four years, the industry appears ready to invest to glean real business value from the Internet for themselves, their distribution channels, and their customers.

Checklist for Web-Billing Solutions

Capability                        Description

Recalculation                     Automatic recalculation of the bill
                                  based on the customer's additions,
                                  changes and deletions.

Customer Workflow and Processing  Provides customers workflow
                                  functionality to process, route and
                                  approve bills throughout the
                                  various departments and individuals
                                  as they require.

Download                          Ability to download the bill to a
                                  standard format, usually Excel
                                  spreadsheet, to prepare journal
                                  entries, analyze, report and
                                  archive.

Notes and Annotation              Allows the customer to attach notes
                                  or annotations directly to bill
                                  line items for internal
                                  communications and historical
                                  reference.

Consolidation                     Aggregation of bills for customers
                                  that have multiple policies.

Communications and Help           Direct communication between all
                                  involved parties including
                                  attachment of in-process bills and
                                  adjustments to facilitate
                                  completion of the customers'
                                  processing.

Integration                       Generates accounting transactions
                                  that easily integrate and
                                  communicate with the existing
                                  general ledger or accounts
                                  receivables/payables.

Ron Lang is director, insurance solutions, with WorldGroup, based in the San Francisco Bay Area.