March 12, 2018 by David Gambrill
Northbridge Financial, a Fairfax company, anticipates substantial savings by doing away with paper cheques for claims payments, the company told Canadian Underwriter Friday.
Northbridge currently makes claims payments to its customers and suppliers using paper cheques that are mailed or couriered across Canada and the United States. Customers will still have the option to receive payment by cheque, but the plan is to phase in electronic payments over the next few years.
“As far as efficiency gains, we’ll benefit from reduced cheque processing costs and reduced payment lead times, and related ancillary costs like storage and rental fees while customers are waiting for payment,” reported Ilda Dinis, senior vice president of customer innovation and experience at Northbridge Financial Corporation. “Postage and courier costs are another area where we’ll save.”
How much will the insurer save?
“We’ll see increasing savings as we roll [electronic claims payments] out, however we’re expecting at least 50% in cost savings per cheque payment, and we issue over 100,000 cheques a year,” Dinis said.
Northbridge announced earlier this month that it would be the first insurance provider in Canada to leverage a global partnership between Mastercard and Dream Payments to offer a paperless way to send claims payments to its insureds.
“Mastercard and Dream Payments are helping to digitize payments for insurance providers of all sizes,” Brent Ho-Young, CEO of Dream Payments, said in a statement at the time. “Insurance customers deserve to receive their claims payments quickly, electronically, and into the financial accounts of their choice, whether it be a bank account, debit card, prepaid card, or mobile wallet.”
As of now, Northbridge is able to send Electronic Fund Transfers to a claimant’s bank account. There is no limit to the size of the payment. “Once MasterCard Send functionality is added, anyone with a debit card can have money directly deposited into their bank account,” Dinis said. “With electronic transfers, senders and recipients have better visibility of the status of payments, which reduces call centre interactions related to claims payment issues, and immensely improves customer experience.”
The offering is not limited to a certain line of business; it applies to home, auto and commercial lines claims payments. The company said the current process of notifying brokers when their clients have been sent their claims payment remains the same.
In addition to speeding up claims disbursements, Mastercard and Dream Payments intend to expand card and account-to-account payment solutions to other flows such as insurance premium payments’ collections, supplier and worker payments. Northbridge said its electronic payments are currently limited to the claims arena, but the solution can be applied to all types of payments (e.g. vendor payments, third-party payments, etc.)