Rethinking payment defaults strategically: How insurers are using AI and digital solutions to retain customers while reducing costs

It’s an experience that many people are familiar with. And it exemplifies a structural challenge facing the industry: according to a study by ibi research, short-term financial bottlenecks are responsible for around 43 percent of all payment defaults, with a further 17 percent simply resulting from forgetfulness. Nevertheless, many insurers still rely on analog processes, send reminders by letter, and do without digital contact channels. This not only slows down internal processes, but also prevents modern customer service.

The crisis: Lack of digital communication channels

As long as reminders are sent by post rather than via digital channels, response times, processability, and dialogue capabilities remain significantly limited. Why do many insurers still cling to old processes when it comes to payment defaults? Often simply because they do not have their customers’ email addresses or mobile numbers—until now, this has often not been a requirement. But speed and personalization are now crucial for customer satisfaction. Those who fail to keep up run the risk of falling short of their policyholders’ expectations. Digital communication channels, which have long been standard in other industries, can speed up processes and significantly reduce handling costs.

atriga Managing Director Christoph Ruoff: “Insurers who are now relying on automated processes and AI-supported systems for collections and payments are not only securing efficiency gains, but also the trust and long-term loyalty of their customers.”

Lack of customer focus

However, technology alone does not make a difference. The EPAM study ‘Insurance: The Paradox of Digitalisation’ clearly shows that the success of digital transformation depends above all on alignment with customer needs. Those who digitise processes but do not make them customer-friendly will lose relevance. Policyholders expect fast and simple processes, but many providers are still lagging behind in this area. Automated processes and self-service offerings can close the gap: according to Bain & Company, efficiency gains of up to 30 per cent are possible.

Save millions through digital invoicing and dunning processes

A glance at the manual processing of returned direct debits or unpaid invoices illustrates the potential: insurance companies with high communication volumes waste tens of millions every year by continuing to rely on paper-based invoices, policies and reminders.

A simple calculation example shows how large this sum can be: an insurer with approximately ten million customers sends around twenty million letters per year. The average cost per item in the ideal case (consolidation effects already taken into account) is around one euro, including postage, printing, paper and organisation. That amounts to around twenty million euros per year. If the proportion of postal deliveries is reduced by fifty to sixty per cent, these costs alone will immediately fall by ten to twelve million euros per year!

Digitisation pays off right from the moment the contract is signed

This potential for savings does not end with dunning, because sending extensive contract documents for new business also incurs high costs. However, a process that is managed digitally from the outset is most beneficial in follow-up processing: if all data is available in a structured form, significantly more process steps can be fully automated or part of the processing can be transferred to structured self-service offerings that function without additional effort for the company. This results in considerable savings in personnel costs, while employees can concentrate on more complex tasks. For customers, this means greater flexibility, transparency and speed – similar to self-scanning checkouts in retail, which are considered convenient even though some of the work is done by the customer themselves.

Email-based dunning process: cost-efficient, fast and image-enhancing

Reminders sent by email are not only cheaper than sending letters, they also open up new possibilities: interactive elements such as links to customer portals or individual payment pages speed up payment receipt and improve the customer experience.

Examples from other industries show that this approach pays off:

• Deutsche Telekom: Since 2002, over 15 million invoices have been sent by email instead of post every month, resulting in savings in the tens of millions per month.
• Swisscom: Switching to eBill and PDF has significantly reduced the annual costs for paper invoices, which previously ran into tens of millions.
• Austrian Federal Administration: Mandatory e-billing saves around €7 million annually.
• Free Hanseatic City of Bremen: Consistent electronic invoicing reduces costs by up to €2.7 million per year.
• Billentis benchmark: Savings from automated e-billing amount to 60 to 80 per cent of previous process costs, with an ROI of six to eighteen months.

Technology that builds trust

The figures leave no room for doubt: digital communication and automated processes generate millions in savings, faster payment flows, reduced workloads for employees and a service that matches the brand. Those who stick to paper-based processes incur avoidable costs.

For customers like Irene Müller, however, the digital transformation of the collection and payment process means much more than convenience. It shows that her insurance company is responding to her individual situation and offering suitable solutions.

How can this be implemented in practice?

In order for insurers to not only meet this requirement, but also to implement it in a measurable way, they need tools that are both advanced and proven in practice. Claims managers such as atriga achieve a fast and market-oriented solution for their customers by combining SaaS-supported dunning processes, an innovative white label online customer portal and generative AI-based chat and voice bots, which, for example, also process complete instalment payment agreements on a case-by-case basis, all in the customer’s brand identity.

The atriga solutions in detail: Starting points for advanced receivables management in the insurance industry