How faster payments can eliminate claims from insurance payouts
Providing simple and rapid claims payouts is a competitive feature in the property and casualty insurance industry. Both Visa and Mastercard see insurance payouts as a use case for their respective card-to-card transfer services, Visa Direct and Mastercard Send.
For the most straightforward scenarios, such as a travel insurance payout due to a canceled flight, the claim process itself can be rendered invisible as part of automating the payment.
Traditionally, insurance claims have been paper-intensive and reliant on check payments, resulting in high costs for insurers and delays for consumers. According to Aite Group, P&C insurers in the U.S. could save $22 million to $43 million by moving from checks to electronic payment methods for claim disbursements.
“Mailing a refund check costs an average of $5 to $7,” said Jay Sarzen, Aite Group senior P&C analyst. “While U.S. carriers do use ACH transfers for payouts, there are consumers who don’t have traditional checking accounts and just have prepaid debit cards. ACH transfers don’t work for them, so a card-to-card service such as Visa Direct is the answer.”
European and Israeli insurtech Setoo is leveraging Visa Direct’s real-time transfer capability with an underlying payment service provided by SafeCharge, a U.K.-based subsidiary of Canadian processor Nuvei, to provide faster insurance disbursements.
Setoo’s name is derived from the French ‘c’est tout’, meaning ‘that’s it’ and signifying simplicity. It specializes in insuring specific external risks such as bad weather and flight delays that can be rapidly verified without the use of claim assessors. Setoo’s insurance-as-a-service platform enables European and Israeli e-businesses selling flights, event tickets, and vacations to create simple insurance products that are personalized for their customers, with travellers receiving refunds that are automatically initiated by Setoo.
In 2018, Setoo, which has offices in Oxford and Paris and an R&D center in Tel Aviv, received €8 million in Series A funding from Kamet Ventures, AXA’s insurtech incubator and venture fund. AXA acts as the underwriter for policies issued by Setoo. Licensed by the U.K.’s Financial Conduct Agency and by French regulator ACPR (Autorité de contrôle prudentiel et de resolution/Prudential Supervision and Resolution Authority) in the EU, Setoo has clients such as LM Group, parent of Lastminute.com; Invia Flights Germany; and France’s Campings.com.
“As a venture builder and investor, Kamet helps entrepreneurs build start-ups from scratch,” said Michael Niddam, Kamet Ventures’ managing partner. “In the initiation phase, we work with entrepreneurs to agree a common vision and go-to-market strategy and to navigate through the insurance world. Once a start-up moves from idea to execution, we become very hands-on members of its board. At the stage where Setoo is now, the company is well equipped with a team that is driving the business effectively, so we’re less hands-on than we were.”
One way in which Kamet assisted Setoo was supplying the broad set of contacts that the venture fund has within the AXA and Kamet ecosystems.
“This made it easier for Setoo to build connections with top insurance executives and players,” said Niddam. “Currently, Setoo's reach has extended far beyond our initial contacts, and it’s operating very well independently.”
Setoo reimburses consumers without requiring a claim process, direct to their credit card or other payment account.
“If you buy a flight ticket from one of our e-travel agency clients and there’s a flight delay, you’ll be compensated,” said Noam Shapira, Setoo’s Co-CEO. “We track the flight and know when it’s supposed to depart. If it’s delayed, this triggers a text message to the consumer saying, for example, 'your flight was delayed so we deposited €400 into your bank account.' If you book a camping holiday plus insurance from our client Campings.com, and, three days before your vacation, the forecast says there’ll be rain during your holiday, you’ll get a text asking if you want to cancel. If you cancel, you get refunded immediately.”
This simple claim process also provides cost-savings and efficiency for insurers.
“Most insurance is based on manual processes, and consumers may not bother to request compensation from their insurer, as they think the process will be too tedious and require too many documents and emails,” said Shapira. “A key issue is to make the refunds as hassle-free as possible. We needed a partner that would allow us to use multiple payment methods to transfer refunds directly to the consumer’s preferred method — credit cards, PayPal, SEPA transfers, and many other payment methods in the future. We chose SafeCharge as our partner, as we were happy about their ability not only to collect payments on our behalf, but also to pay consumers by the same payment method that they used to pay us.”
If a consumer purchases Setoo insurance with a Visa card, Setoo can use SafeCharge to collect the funds and, if necessary, later refund the consumer, without the need for them to provide their credit card details a second time.
“We also allow consumers to be paid by a different payment method from the payment collection method,” said Shapira. “They can enter their payment information in order to get their money. With Visa Direct, the consumer instantly sees the refund in their card balance, unlike other methods that take longer.”
Where a customer used PayPal or a SEPA bank account transfer to purchase Setoo’s insurance, if they need to be compensated, they get paid using these methods via SafeCharge.
Aite Group’s Sarzen said that Setoo’s use of Visa Direct is ideal for low-cost insurance products such as travel insurance where there is no need to use claims assessors, as payouts for delayed flights or bad weather are typically not high.
In addition to Setoo, SafeCharge provides insurance payout services to other companies in Europe and internationally.
“Setoo partnered with SafeCharge on a holistic, all-inclusive platform for pay-ins and payouts,” said Yuval Ziv, SafeCharge’s managing director and Nuvei's head of global acquiring. “We not only provide them with an end-to-end payment solution, we also support them in meeting regulatory requirements and advice on best payment practices. We currently offer Visa Direct, a real-time push payments platform that allows for funds delivery directly to financial accounts using card credentials and we're exploring adding additional card schemes and alternative payments methods to the mix.”
In the U.S., Erie, Pennsylvania-based Erie Insurance and Madison, Wisconsin- based, American Family Insurance, are both offering Visa Direct payouts to their customers, while Allstate Insurance is using Mastercard’s rival platform Mastercard Send.
In 2018, Visa announced a partnership in 2018 with Canadian payments processor Peoples Payment Solutions and Telus Health, a healthcare subsidiary of Canadian telco Telus, to use Visa Direct for insurance payouts.