Billing Software

Summary

Billing software is a critical aspect of any insurance business. Whether you have an advanced and comprehensive PAS or a humble, bare-bones billing solution, you need to have a way to ensure your customers pay on time and that your invoices are accurate. If this is not the case, you may see some negative consequences for your company.

Players

Definition

Whether you're a small startup or a large insurer, insurance billing software can help streamline your billing process. With features like premium calculation, invoicing, commission management, and payment processing, this software takes care of the mundane tasks so you don't have to. It provides a clear, concise breakdown of policy costs, allowing businesses and individuals to understand their bills and avoid confusion. With its ability to handle non-standard payment arrangements and reconcile accounts receivable, insurance billing software is the ultimate tool for improving the efficiency of your billing process. So why waste time with manual tasks when insurance billing software can do the job for you? Embrace the power of automation and see how it can help your insurtech grow and succeed.

Direct vs agency billing

Billing is comprised of direct billing and agency billing. In direct billing, the insurer bills the insured directly. In agency billing, the insurer bills an agency in bulk and agencies are responsible for collecting payment from individual insureds.

Insurers use something called a general ledger (GL) to keep track of all their financial information. The agency uses the GL to track commission calculations for various carriers.

Your policy administration system might handle direct billing, but it will likely need to integrate with a GL to handle agency billing. Let's look closely at both types of billing to see how they work.

Direct Billing

The most common type of direct billing is monthly installment billing, in which the insured pays a set amount each month. This amount is calculated based on the premium, any taxes and fees, and the mode of payment (i.e. annual, semi-annual, or monthly).

Some insurers also offer quarterly or semi-annual installment billing. In this case, the insured pays a larger amount every three or six months, respectively. This can be helpful for budgeting purposes.

Another type of direct billing is single payment billing. In this case, the entire premium is due at the time of purchase. This is less common, as it can be a financial strain on the insured.

Finally, some insurers offer pay-as-you-go billing. In this case, the premium is calculated based on actual usage. This is most common with auto insurance, where the premium is calculated based on how many miles are driven.

Agency Billing

In agency billing, the insurer bills an agency in bulk (usually once a month), and agencies are responsible for individual insureds. This can simplify the billing process for both insurers and agencies.

Leverage points

The ability to automate premium collection through direct billing or agency billing will allow the insurer to simplify its core operations and is crucial for insurers (especially startups).

Insurers can use automated ways of communicating with their customers to provide more efficient service. For example, they could consolidate multiple e-mails into one, or automate the process of calling clients. This will streamline the entire billing process, saving the insurer time and money. Automating accounting processes is another great way to save money. It can also help insurers be organized and avoid errors as they contact more customers.

As a startup in the insurtech industry, billing software has many benefits. First, the company will save money on manual processes. With a more advanced billing system, the company can automate parts of its business that can be done with a simple script. Examples include, automated payment collection (such as electronic bill payments) or automated billing methods (such as auto-billing monthly or quarterly).

In addition to saving time and money, automation can also help startups grow their business. Automation can reduce errors and mistakes and make it easier for clients to keep track of their payment schedules. By streamlining the billing process, startups can focus on other business areas, such as marketing and customer acquisition.

Capabilities

Your policy admin system might have the ability to handle billing. This means that the billing software is included in your policy admin system. However, most policy software vendors do not include agency billing in their systems. Instead, they integrate with the customer's GL or with an agency billing vendor. This is because handling billing can be complex and time-consuming, so it's best to leave it to the experts.

Agency billing usually involves sending invoices to customers, keeping track of payments, and following up on late payments. You'll need to use a separate billing software or service if your policy admin system doesn't have a built-in billing feature.

Billing software typically comes with a few features to make the process easier, such as creating and sending invoices, tracking payments, and following up on late payments. Some billing software also offers integrations with accounting software, so you can keep track of your finances in one place.

When choosing billing software, it's important to ensure that it integrates with your policy admin system. This way, you can avoid having to enter data in multiple places. It's also a good idea to choose a billing software that offers excellent customer support, in case you have any questions or problems.

In summary, billing software often comes with features that make the process easier, such as creating and sending invoices, tracking payments, and following up on late payments. You'll need to use a separate billing software or service if your policy admin system doesn't have a built-in billing feature. Make sure to choose a billing software that integrates with your policy admin system and offers excellent customer support.

Costs

While there are many different billing software options out there, most companies will have to pay for the product and monthly service.

The cost of the product will depend on what features you want. However, a good product should be able to handle your various billing needs at a reasonable price. Typically, companies can save money by choosing software that offers an annual payment plan instead of paying upfront. Many companies can choose a subscription-based model, paying a monthly fee, instead of purchasing the software outright.

Good billing software is also easy to set up and use, so anyone who has some accounting experience can use it without any problems. In addition, it's a good idea to choose software that integrates with your policy admin system, so you can keep track of your finances all in one place.

In summary, the cost of billing software is often based on the features you want and how much work you want to put into the product. While some companies will have to pay for the product and a monthly service fee, other companies might be able to save money by choosing a subscription-based model or an annual payment plan.

Determining factors

Your choice of software depends on what you are trying to achieve. If your goal is to get a company set up quickly and then leave them alone, then there is no need for advanced software.

Here are a few other reasons why you need it

1. A billing system generates invoices for insureds and keeps a ledger. Some PAS also include billing

This software ensures that the bills are paid on time with the insurance coverage provided. This function is essential, especially if there is a requirement to support multiple policy types and products. When there is a requirement for the payment of invoices, the accounts system needs to have the functionality to send and raise invoices.

In other words, it will generate invoices and not just enter the data. Finally, it gives you all the important information about the customer and payment history. All this makes the job of paying for all your customers much easier.

2. A payment processor just handles getting payments for policies. Most PAS work with a 3rd party like Stripe

Insurance companies have a large contingent of customers. These customers may be the same clients, or separate entities and not the same policyholders. As you add more and more policies, you will find yourself managing all these policies through one policyholder. With 3rd party payment processing, you can take the many payers and payment requests and put them all into one system for your company to manage. This is a huge time savings for your company.

3. An accounting system is much more than just a set of policies

It includes the amount of money set aside for reserves, money to pay out claims, operational costs, working capital for office space, technology, salaries, infusion of money raised from venture capital, and everything else involved in running a business. Most PASes do not offer this level of support, but your PAS may be different. Ensure your PAS covers everything you need to run your business. This includes everything from the initial policy setup to the final representation of your business. With a PAS, you can see it all in one place and support it with one billing system.

4. If you have multiple paid services and PAS, you will need a payment handler

This is the ability to accept payments from all the different processors and send them onto your invoicing system. Most large companies use a 3rd party provider to provide payment handling payments.

Best practices

To start, you'll want to ensure your billing software has a clear dashboard that shows you who you're invoicing and how much is due to each. For example, when a policyholder reaches their renewal date and you need to send them an invoice for their next payment, your dashboard should show them how much they owe from their previous payment. It will also make it easier for the customer to see where the money is coming from each month for the policy.

In other words, your billing software should send reminder notices or integrate with a tool to make it relatively easy to notify customers before their invoice is due. Your billing tool should notify your team about cancellations so that your team can see the date when the premium was last paid and begin the workflow for cancelled policies. If a customer does not pay their premiums on time, then they should be given a cancellation notice so that they are aware of the situation.

Also, installment payments are very common for insurance premiums. The software should be flexible enough to allow for the ability to pay for policies in installments you want the software to automatically send an invoice when a policyholder reaches their renewal date. Depending on how often you want to send out invoices, you might want this to happen every month or every quarter. To learn more details about companies that offer installments on your behalf please see our article on premium finance.

If a policyholder is on an installment plan and makes an endorsement in the middle of the policy term, it could cause them to owe more money. The insurance company has two options in this case: they can either charge the difference all at once or spread the difference over the remaining installments. The software you choose should allow you to set the terms of payments for each policy.

Your billing software should allow for a flexible payment schedule. For instance, if a customer makes a one-time payment, the billing software should be versatile enough to allow them to do so even if they're on installment payments. It will also let you adjust the payment schedule or add new installments on your own.

It is also integral to allow for manual changes to policies when necessary. If you need to change a policy without changing the payment schedule by hand, then you can do so directly from your dashboard. Also, if you want to add new policies, then the billing system should help you with this process as well.

If an insured has two policies with your company they may receive two bills. This isn't the best customer experience because it's confusing and difficult to keep track of. It would be much better if they could get just one bill for both policies regardless if this is a package policy. You can either offer to send multiple invoices or combine them into one bill for the account. Either way, the customer will have a much better experience. The ability to combine accounts is becoming more common, but it's still nice if you can have just one bill for their insurance.

Another great feature is if your billing software includes some sort of analytics. This will allow you to see how many policies an insured has with you and how much they pay each month.

Not selecting the right billing software for your company and needs could mean:

Increased costs

Customers who fail to pay their policy premiums promptly will increase your expenses. It is highly inadvisable to offer coverage for a policy you have not received payment for.

Inability to service the policyholders

When customers cannot pay their premiums or renew their policies, they will not be able to get the services they need. This can also lead to your policyholders trying to find new providers which could harm your reputation.

Decreased productivity

Manual efforts to balance the books/to see if a policyholder has paid will result in frustrating experiences for the insured. It is also a big concern to overcharge your insureds and if you do you must handle this compliantly with each department of insurance.

In conclusion, the best billing software will make your customers happy, help you keep track of certain aspects of your business and let you process your company's payments accurately.