In an effort to cut costs and disperse payments more effectively, many industries have migrated away from issuing paper checks to network branded prepaid cards. Companies that offer prepaid cards say the idea is catching on in the workers' comp industry. One such program is the InsurCard Visa prepaid card issued by The Bancorp Bank.
InsurCard works directly with insurance carriers to provide a customized solution to meet their needs. These prepaid debit cards typically function like normal debit cards. They're issued by a bank, carry the Visa logo, and can be used to withdraw funds from ATMs or make point-of-sale purchases.
According to Visa, claimants enjoy the security and convenience of immediate access to funds even if they do not have a bank account. Insurance carriers can reduce the time and cost of claims payments.
Here's how the prepaid cards work:
- The adjuster authorizes the claim payment through the insurer's claims system.
- The insurer instructs the bank to issue a payment by sending claim system output datafiles.
- The bank sends a personalized, branded prepaid card to the claimant.
- The bank loads the payment onto the card.
- The claimant receives the prepaid card and activates it by phone, ATM or Web and uses it at ATMs and merchants.
Once the claimant's adjuster authorizes payment through the carrier's claim system, the bank is automatically instructed to load funds onto the recipient's reloadable prepaid card.
InsurCard officials say prepaid cards could reduce or eliminate costs related to paper checks, including check issuance expenses, rush check mailing fees, and fines and penalties for late check payments. Also eliminated would be post-issuance costs, such as:
- "Where's my check?" calls to adjusters.
- Returned, voided checks and reissuance.
- Stop payments.
Transitioning to a paperless system for indemnity payments takes approximately three to six months. According to InsurCard, many companies find the implementation process straightforward and simple. Minor changes to procedures and systems may be required, along with training adjusters how to properly present prepaid cards to claimants and how to answer their questions about cards.
The changes start with the insurer determining the required system changes and modifications to claim payment processes and procedures. The card design and website modifications are next.
The project implementation phase is the longest, taking an estimated two to three months. It involves the insurer modifying its systems, building data links with the bank involved, and developing training. The bank develops the card and fulfillment package, establishes account processing and settlement, sets up 24/7 bilingual customer service with a toll-free number, and establishes program reports.
According to InsurCard, by managing the process through the insurer's claims system, the insurer remains in control of the payment process. The transition from checks to prepaid cards is straightforward, and retraining of adjusters is minimized.
Efficiency, timeliness and significant savings are the benefits identified by the advocates of using prepaid cards. It gives workers' comp payers control since the funding is done electronically. It also provides brand recognition since the cards have the insurance company's name on it.
For claimants, it means funds are immediately available, there are no check cashing fees, and the cards can be used at ATMs, merchants, and online.
The BanCorp Bank officials say insurance industry statistics confirm that it costs the average insurance company between $7 and $14 to issue a workers' comp claim payment check. Prepaid cards can eliminate most of these costs. The savings for an average workers' comp claim can amount to the costs of at least six checks, or about $60.
Read more at the WorkersComp Forum homepage.
November 15, 2010
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