How an Insurance Company Navigated Regulations to Recover Credit Card Fees with InterPayments

A major insurance company was experiencing a significant change in how it was getting paid: a significant increase in credit card-based transactions. While this wasn’t unusual in the space – it had become a topic of interest at industry conventions – the consequences were real: expanding credit card acceptance fees that were negatively impacting margins across a variety of business units.

After significant research, the company determined that surcharging credit card payments could be a fair solution to cover this new cost. But choosing the correct surcharging solution was critical. The insurance industry is heavily regulated, with strict rules around how charges can be added to transactions. The industry also has its own tailored AP and ERP systems – the company couldn’t change to a generic system just for surcharging, as it would lose all the benefits of its insurance-specific workflow. Finally, the solution had to be customizable. Not every insurance market needed or would accept surcharging, so the company needed a system where some business lines could be surcharged, but not others.

It was apparent to the company that surcharging was more than just a fee that required just adding a line item to an invoice. A dedicated program was required, with a Managed Surcharge Provider behind it 24/7. Only InterPayments was able to meet all of their needs, resulting in recoveries of most of its fees – over $800,000 annually.

About the Company

A major insurance company focusing on business insurance, the company is dedicated to protecting the dreams and investments of its customers by building coverage plans that are as unique as the organizations being covered.

Challenges

The company had a significant amount of revenue coming in from credit cards: over $50 million out of overall revenue of around $300 million. This was generating a staggering $1.3 million in fees per year.

Maintain Existing Technology

The company needed to maintain its existing payment technologies to avoid significant business disruption. Key to this effort was keeping their existing insurance industry ERP, Guidewire, in place. The company also wanted to keep the existing payment gateway and processor in place.

American Express Compliance

The company didn’t have a lot of customers paying with American Express, but it was enrolled in an American Express Direct program.The company needed to know if it was worth it to keep this program in place, because accepting American Express alongside other cards introduces challenges to maintaining compliance.

Selective Surcharging Control

Finally, the company also needed to know they were in full control of the program. They needed to be able to select what business lines would be surcharged, and the compliant rates being assessed. They also needed to be able to manage surcharges down to the transaction level, being able to waive them if necessary.

The Solution

After exploring available options, the company decided to move forward with InterPayments.

InterPayments understands that surcharging is more than just a fee, and that the company needed more than just a feature that added a line to an invoice. The company knew it needed a surcharging solution that was compliant, built into its ERP, and kept compliant and up to date at all times. InterPayments solved all of these problems, but it also provided a program for keeping the company’s policyholders satisfied. By providing a communications plan the company used early and often, they were able to get in front of the messaging with their customers so nobody was surprised.

InterPayments was also able to quickly build out the required customizations for the company. Together, they determined that surcharging would actually work for many types of policyholders. They also determined a way forward, given the American Express concerns that were specific to this company. After implementation, the payback period for the program was estimated to be 3 weeks, after which surcharging would contribute to massive margin recovery.

Results

In the end, the program more than met its estimates and was wildly successful for the company.

In its first year, the company saw recouped fees totaling $500,000, a reduction in fees of about 40%.

Changes in customer payment behavior resulted in even more savings. While there was no change to revenue, 25% of credit card customers moved to payment with debit or ACH, resulting in an additional savings of $335,000. Combined, this resulted in annual savings of $835,000 – more than 64% of the company’s credit card costs.

What the company didn’t see was any customer dissatisfaction.  With early, frequent customer communication, combined with InterPayments training that covered every customer-facing team, policyholders gained an understanding of the need for surcharging, and how it helped the company keep prices down overall. Customers seeking to avoid the surcharge simply moved to other payment methods.

InterPayments built a program that was unique not only to the insurance industry, but to the specific needs of the insurance company. In doing so, the company was able to see maximum returns from the program, with minimum risk, and no concerns from customers. The program was also fully compliant with card network rules, state laws, and regulations specific to the insurance industry. And with the system now in place, the company would be able to receive benefits from surcharging for years to come.

Interested in seeing how InterPayments can help your company? Contact us today.