The Future of Payments in Insurance - Mastercard & Davies Group

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Podcast
  • Why Mastercard is so enthusiastic about the opportunities of working with partners in insurance 
  • Lessons from the banks and fintech - and relevance for insurtech
  • Why data will change perceptions of insurance
  • How insurers can collaborate with Mastercard
  • The benefits of virtual credit numbers (VCN) to speed up payments to policyholders

And other highlights from the InsTech London "Future of Payments" evening.

Ian Slater - Senior Vice President, Enterprise Partnerships - Mastercard

Mastercard is famous for credit card payments, so why are you sponsoring an insurance event?

Insurance is an industry we're massively excited about. In terms of transformation, in terms of the things happening at an industry level, I've never seen an industry like it. It's global, it's fast-moving, it deals with some fascinating real-life problems.

What does Mastercard see in terms of opportunities?

We've watched the banks deal with fintech and innovation over the past 10 years and we have been at the forefront of that process. I don't think the banks did a very good job of it, they struggled with that level of innovation. 

The insurance industry has taken a very different approach to the process, a much more collaborative and less antagonistic approach. Mastercard's role is to learn from what we saw in fintech and say, "What can we take from that perspective and apply to insurtech and do so globally?”

Are you finding the insurance industry open to innovative ideas?

Traditionally, we focus on the payment, but one of the things we ignore is that people only move money at the end of a process. Other things have to happen to get to that point. We're trying to work out what those other things are that have to happen to facilitate the movement of money. We want to learn about your industry and we want to partner to get to a better place.

What lessons from other industries do you think can help insurance?

To be effective, we have to find the right people to partner with. We need to work out what the components need to be for any solution and make sure that we have the right components.

From an insurance perspective, we ask “are we're partnering with the right people?” Are we partnering with the right claims agents? Are we partnering with the right technology companies? Do we know how that process works? We're starting to get to a point where we can put together holistic solutions to address this stuff.

What are your ambitions, in terms of partnerships with the insurance industry, for tackling financial inclusion?

When we work with our bank partners to provide payment products and in many cases, credit products, the underlying provision of an insurance product secures that process. The banks want to engage with consumers and businesses, but they don't understand them, or the risk associated with them.

We want to digitize the payments, we want to take cash out of the economy, we want to make it a more transparent environment, but we can't do that unless the banks step in. Having the ability to provide a bedrock layer of insurance underneath it is a fundamental component of that insurance. We can't do it without having insurance involved.

Ruth Polyblank - Vice President, Insurance - Mastercard

You’re working on a new project, the Mastercard Money Map. What can you tell us about the project?

We know that claims are the acid test of insurance. What do claims mean to our end customers? It means getting the money. But without understanding everything that goes into the end payment, how can we improve, disrupt or innovate that process?

We set out to create a map of how money flows in insurance but quickly realised that it was far too ambitious.  We narrowed it down to focus on a very particular claim scenario, which was an SME claim for a flood Even within that, the complexity was so great, the friction and the attributed costs so high it proved to us the need to focus on claims innovation in insurance.

As you've worked through the Money Map, has there been anything that stood out?

Insurers get criticised for delaying paying claims to make money, but it's possible to make money by paying claims quickly. Often the VCM partners and organizations that we work with reward people for transacting very quickly. 

What insures have to do is behave like organisations in other industries and deliver the kind of service that keeps them moving going forward. Part of the job I'm doing now is working with insurance to help them get there.

What does data mean to Mastercard?

Data's incredibly important to everybody in the insurance industry. Coming into Mastercard and having never worked for an organization like them before, I was so impressed with the data capabilities that they had.

If we're talking about good customer-focused, clean payments, that means that the process leading up to that payment has to be clearly defined and work well. That means making as much of the process as binary as possible without compromising it. Data allows us to do that.

A really good example is the growth of parametric insurance. If you have finite measures and triggers to establish where there is a loss, and you can make a payment quickly in a way that the customer wants, that a really good experience in insurance.

For anybody not familiar with how parametric insurance works, can you give a very quick overview?

Parametric is where there is an agreed trigger for insurance payment if a certain event happens. If it's flooding, it might be the depth of water. It could be for Business Interruption cover, or a retailer’s data, based on a year to year comparison of sales. 

Ultimately, anyone who's insured has bought insurance because they want to know that they are going to get paid for their loss. If an insurer can clearly articulate the metric and the time frame, that's a positive way forward.

In terms of disruption, what is Mastercard’s view on the threat of people challenging you versus the benefit of partnering with organisations?

We look for collaboration rather than see other organisations as a competition. There are a lot of challenges in the industry, some are readily solvable, and some need more work. 

If people have ideas for how we can work with them to solve industry problems, we want to sit down with them and work out where we can interact to create a broader more novel solution, rather than reverting to the sort of product innovation that we tend to adopt in insurance.

If people do have ideas, how does Mastercard bring them into the organisation?

We're looking for people to come to us with their ideas and problem statements. We don't mind problems because quite often we can put different organisations together that have the distribution or the capacity or whatever other aspect is required. The key is just to be open, have conversations and see where they might lead.

We also have the labs that are collaborating on innovation and we have the Start Path program, or you can contact me directly via LinkedIn. 

Laura Harvey - Strategic Accounts Director - Davies Group

Can you explain what virtual credit numbers are and how they work?

A virtual credit number is a way of transacting payment without the need for a physical transaction or card. It takes a lot of time out of the process and gets funds to people who need it quickly and seamlessly. 

We often think about payment coming at the end of a claims process. In reality, if your house has just burned down, you're going to need money to get essentials for you and your family. 

In a traditional payment process, card details are needed from a policyholder. But if you’ve had a significant loss, you won’t have those details to hand or want to spend time on the phone giving them out, so that I can make a payment that lands with you in three to five working days. VCNs speed up that process and get funds to policyholders when times are really tough.

Where have you seen VCNs making a real impact on? Are you concentrating on certain niche areas?

There are really strong cases for it to be used on high volume, low-value claims, like travel claims for instance and gadget claims. If somebody drops their phone, that all of a sudden becomes their most urgent claim. If their phone needs repairing now, not everybody's got the funds to do that straight away.

Large scale losses like floods and fires benefit from this process as well. Insurers get a bit of a bad rep in terms of paying claims out and delays in paying those claims. If you’ve been flooded and you've got no clothes or food, we need to get funds to you quickly.

Can you sell them easily to an insurance company as a solution? 

Some insurers are open to innovative approaches to claims handling, others take a little bit more convincing. When we sit down with insurers or MGAs or brokers, or start-ups, we find innovation means something different to each of them.

Insurers are getting there. It takes time and convincing, and the key to this is having some really strong data which supports why we should be doing it. We're just getting to that point now.