Direct Insurance Billing
Direct Billing is a process in which bills are delivered directly to the end user of a service. This is in contrast to billing through an agent or credit card. Extending the same concept to Insurance, Direct Insurance Billing is a process where billing notices are directly sent to the insured instead of premiums being collected by the agent. This concept is quite old with many companies (like Dell, Amway, etc) applying the same to reduce middleman costs and to increase their profits.
Advantages of Direct Insurance Billing
As it is said, "A penny saved is a penny earned". Insurance companies realized the worth of this saying and introduced direct insurance billing. There are following advantages of direct insurance billing:
Cost - Cost is an obvious advantage and a significant one too. By taking direct insurance billing, insurance companies can reduce money spent on agents and can provide cheaper rates and earn more in the process. In today's world of break neck competition even a few dollars saved can make or break a company.
Avoid Managing Agents - Insurance companies used to face a lot of problems in managing agents. They needed to familiarize agents with the products and philosophy of the company which might be difficult to achieve when there are many agents.
Direct Control of Customers - Insurance companies do not need to depend on a third person to sell a product. They don't need to take a risk of whether the person is telling right things or whether he knows about the company and products well or not. There is also an agency problem where an agent might want to make profit at the cost of company's revenues as well as reputation.
An agent might promise something to a customer in order to sell a product (as his commissions are based on products sold) which in turn may result in a bad name for the company.
Disadvantages of Direct Insurance Billing
Though it appears that there are only advantages of direct insurance billing but there are also some disadvantages:
Easy Accessibility - If the company has many agents, they can be easily accessed. Agents can also help people in filling out forms and doing the formalities thereby making the life of the customer much easier.
Door Delivery - Agents can go to any place customers want them to and can deliver a service at their doorsteps.
Lack of focus - If a company manages all these activities, it cannot focus on its core business and their services might suffer because of that.
Automation of Direct Insurance Billing
Insurance is a volume business and companies handle many customers and hence to enable direct billing a company must automate all its billing processes. In order to achieve this, there are many software available in the market catering to the needs to insurance companies. These software provide end-to-end solutions which include business rule management across underwriting, policy administration, claims and billing. It helps in reducing costs and increasing efficiency. It also helps in automatically sending reminders to customers of expiry and renewal of their insurance.
Though there are certain disadvantages of direct insurance billing the benefits far outweigh the disadvantages.