046 – How One Insurance Agency Successfully Implemented Electronic Payments (Featuring Eric Wistrand)

HOW ONE INSURANCE AGENCY SUCCESSFULLY IMPLEMENTED ELECTRONIC PAYMENTS (FEATURING ERIC WISTRAND) – EPISODE 046

In this episode of The Digital Broker, Steve and Ryan talk with Eric Wistrand, IT Director at the Couch Braunsdorf Insurance Group, and learn how his agency successfully implemented an electronic payment solution. By listening to this episode, you will learn:

  • How the order-to-cash cycle is riddled with failure points, what they are, and how they affect different payment methods
  • What your options are to mitigate or eliminate those failure points, and what to look for when evaluating those options
  • What the payment process looks like when it is optimized, and how it saves your agency time and money

Clients are still in the habit of paying an insurance agency by check, but take a look at everything that has to happen for that check to clear. (9:20) The check has to arrive in the mail. Someone has to break it open, time-stamp it, and reroute it to the accounting department, assuming an account manager doesn’t have to get involved first. Someone in accounting then tags the check to the client’s file before sending the check out to be deposited. This is typically a batched process—checks accumulate until a batch is deposited all at once, prolonging the clearance of the funds further.

That’s a heck of a process to clear a single check, and it assumes that nothing goes wrong. Imagine everything that could, and multiply it for every check you receive. The check might not arrive in the first place, getting lost in the mail. In and out of accounting, it could get tagged to the wrong file. Most awfully, it could bounce—but you don’t find that out until after you’ve put in all that work, literally for nothing.

Eric Wistrand was tired of this process costing his agency time and money. Could a payment go directly from the client’s account to the agency’s, while simultaneously alerting the AMS about it? (13:08)

Automated clearing house (ACH), an electronic option, was no savior, as it is not a real-time transaction. ACH functions much like a regular check, carrying over many of the same failure points, such as no upfront validation: if a client enters incorrect information, it voids the whole process, but not before the process has already started.

Ideally, the client could pay with a debit or credit card, a method that does require pre-authorization, putting the onus on the client to make sure all the information is correct. But the complications insurance agencies face when accepting credit cards are so numerous, we had to dedicate a whole episode to them. In brief, the transaction fees that accompany most card transactions can devastate an agency’s commissions and eat into the bottom line. An additional web of fee-related regulations that vary from state to state further discourages agencies from processing cards on their own.

In the same episode about payment challenges, we determined that you’re better off extricating yourself from the payment process and delegating it to a qualified, PCI-compliant third-party who can accept most methods of payment and remit the funds to you. (20:39) This is what Eric did, and here’s how it works: the third-party his agency has partnered with integrates into Sagitta so that, upon signing into the client portal, the client is informed of all outstanding invoices and told how much there is to pay. The client can choose to pay any amount, in full or in part, using any method, including ACH, debit, or credit card. The third-party comes equipped with tools that validate information upfront, such as routing, checking, and account numbers, prohibiting the initiation of a bogus payment that won’t go anywhere. As soon as the payment is made, the client gets a receipt and the agency gets a confirmation of the payment, enabling the agency to go ahead and bind the corresponding policy.

Of course, collecting payments isn’t always this straightforward. The client either forgets to make a payment, requiring the agency to employ costly “dunning” techniques or is not even aware one has to be made, like when a midterm endorsement alters the policy somehow. The third-party in question has thought of that as well. If the client falls behind on a payment, or an endorsement halts the policy until a new payment is made, the third-party generates an automated email that pings the client about the situation and delivers instructions on how to proceed, copying in any producer or account manager as needed.

(26:58) After switching to this system, the agency’s gains have been plentiful, tangible, and measurable, Eric says. Order-to-cash cycle has gone from 45 days to just under 30. Accounts receivable is in better shape than ever, now that many of the previous failure points have been thrown out altogether. Clients had been clamoring to pay with credit card for a while; now that they can, they pay more willfully, expediting the process further. All of this with minimum interference by the agency.

Sometimes, operational friction is a cue that you need to look outside for a solution. We see this increasingly being the case with payments. Just make sure you do a proper vendor analysis and query the right people, in your organization and outside of it. There are people out there who are passionate about operational excellence and ready to talk about it. You can meet a bunch of them, including Eric, Steve, and Ryan, in our own Digital Broker LinkedIn group. Which failure points are bogging down your operations? Have you partnered with an outside vendor yet? Why or why not? Join the discussion here.


Indio Technologies

Indio simplifies the insurance application process for brokers and their clients. We make it fast, easy, and E&O free, saving your agency time and money. The white-labeled platform comes pre-loaded with a library of 5,000+ digitally enhanced "smart" insurance forms and applications, a full e-signature solution, and secures document sharing. To date, thousands of brokers, big and small, use Indio to service more than 300,000 business clients. In total, Indio has raised over $30M in funding from Menlo Ventures, 8VC, NFP Ventures, 500 Startups, Merus Capital, and Compound.

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