One of the biggest impediments to digitalisation in the insurance industry is a lack of standardisation in processes amongst businesses as compared to the consumer world, which leads to a lack of inter-operability, said Mr Gerald Sun, Vice President & Head of Sales, Commercial Payments, Asia Pacific at MasterCard. He noted that there has also been very little regulation to compel businesses to be inter-operable and standardised.
“There is a lot of room to grow, from a digitalisation perspective,” he said. “Any business that has very high volume of processing and a lot of information around the processing itself, like insurance, is best positioned to leverage the benefits we offer. That’s why we believe we are extremely relevant to the insurance industry.”
Need to create a new standard
The manual paper-based method has hit a wall when it comes to reducing costs as there is only so much centralisation, outsourcing and off-shoring that can be done to reduce overhead.
Mr Sun stated that in order to attain further scale savings most companies need to re-engineer and fully digitalise their processes in a manner that interoperates with industry, standards.
“Because so many businesses are networked today, being inter-operable means that you won’t have to keep upgrading or changing when someone on your network makes a single change. It also allows you to take advantage of network upgrades and this keeps your costs down in the long run.”
The MasterCard global network has the ability to carry deep and rich details about a payment within the payment itself; this eliminates the fundamental need to reconcile payments with the reason for the payment, like an invoice, or a claim. The need to reconcile payments against trade and business documents significantly limits the ability for such processes to be re-engineered into simpler digital, straight through processes. Paper documents, non-standard documents, batched and partial payments further complicate matters and add time and costs.
In addition, MasterCard’s robust and globally accepted payments network serves as a useful framework for managing multi market and cross border business and associated payments, perhaps form a centralised location, which many insurance companies employ.
Mr Sun believes that while MasterCard does not hold the magic solution, their payment and data standards provide the foundations for straightforward, more standardised and efficient business payments processes. However, making such benefits available on a broad basis requires industry participation.
While MasterCard’s payment and data standards can help insurance companies achieve greater operational efficiencies, with sufficient industry participation, a network effect will be created; this in turn will drive even greater efficiencies for all players, as it will dramatically reduce the costs of interoperation between insurance companies and their business partners. “Hopefully we can see this happen within the insurance industry in Asia within the next three to five years.”
Going digital enhances security
An enhanced level of security is another strong reason for insurers to go digital. Mr Sun shared some of MasterCard’s cybersecurity measures, but also said: “Nothing is impregnable. Staying best in breed with security technology and protocols helps us always stay a step ahead.”
He highlighted that while cybersecurity is a concern, the reality is that the most egregious “hacking” efforts happen in the paper-based process. “If you look at the overall scale of fraud that happens on the paper-based process as compared to the digital process, you’ll see that the paper-based process is so much more exposed to fraud. Digital is probably a 100 times more secure than manual processes and payment.”
He added that digitalisation would dramatically reduce the fraud compromise points, as it pares down a long process into a faster, safer and more efficient method. It also reduces the number of people who need to keep track of the process, as most of it will be digitised and automated, which then reduces the opportunity for collusion and human error.
An investment of knowledge and technical enablement
“For many businesses, digitalisation is something that is easy to visualise but hard to execute,” he said. “It is a huge investment, but this can be reduced by adopting ISO standards. Furthermore, MasterCard is willing to co-invest. We are saying to every insurance company out there: we will invest with you along this journey of change.”
Mr Sun is confident that MasterCard will remain a leader in their sector in the area of helping companies gain efficiency through collection and payment process digitisation. MasterCard’s vision, success, partnerships and continued investments in making it easier for businesses to digitalise will hopefully make MasterCard the go-to partner, he said.