ACH Pull for Insurers: A tool for driving growth during economic uncertainty
Last editedMay 20233 min read
In an uncertain economy, you can make collecting premiums a certainty with ACH Pull.
The current economic climate has elevated the pressure for businesses to transform and adapt to protect vital revenue. This is no more prevalent than for insurance businesses who felt the impact of claims throughout the pandemic and continue to feel the economic strain.
The combined ratio for the Property and Casualty insurance sector increased to approximately 99.7% in 2021 from 98.8% in 2020, reflecting losses overtaking premiums. The Insurance Information Institute projects similar figures for 2023. The auto sector specifically has been the hardest hit with a return to the roads after the pandemic and the number of claims spiking.
That’s why reducing costs and inefficiencies should be top of mind. Payments is an area that's often left forgotten, but it's an area that has a direct impact on both your bottom and top line and cannot afford to be overlooked. Collecting payments is fundamental and even small changes to strategy and technology can have enormous benefits on revenue and profitability.
Instead of hindering your bottom line, payments should be a vehicle for growth. We want to show you how to turn payments into a tool for driving growth.
What is ACH Pull?
An Automated Clearing House (ACH) is a digital network for processing transactions. Money is moved directly between bank accounts. ACH Pull, or ACH Debit, is a type of ACH payment that is automatically pulled from your customer’s account after they’ve authorized you to do so.
Unlike other methods, once set up, payments are automatically collected on the due date without any manual processing. It means you can simplify the whole process of collecting insurance premiums to maximize efficiency and reduce the impact of payout losses.
The benefits for insurers
Get paid faster
ACH Pull with GoCardless means you receive money into your account in just 4 days. You can schedule the payment at a time that suits you so that you get paid on time. What’s more, because payments are automatically pulled from your customers’ accounts, you’re not waiting on customers to send payments. The whole process is up to 86% faster than other payment methods such as checks or cards.
Getting premiums into your account faster means you can free up working capital and better understand where you’re at financially.
Reduce your costs
ACH Pull can help you reduce costs on two fronts. First, ACH Pull fees are lower than credit card fees. ACH Pull fees with GoCardless, for example, are 1% + $0.25. The average domestic cost for credit card transactions in the US is around 2-2.5%.
What's more, with ACH Pull, payments are taken automatically meaning less time and money spent managing your payments process compared with more manual payment processes such as cards or checks. Because of this, ACH Pull is overall 56% cheaper than other methods.
Any reduction in costs contributes directly to your bottom line. Any time savings means your team can focus more on what will directly impact growth.
Reduce payment collection failure
Card payments, due to card expiry or loss, fail 8% of the time. Because ACH Pull takes payments automatically from your customers’ bank accounts, which don’t expire or get lost, ACH Pull payments with GoCardless only fail on average 2.7% of the time. You can easily mitigate the number of payments that fail by simply choosing a system that performs better.
Payment failures mean you’ve got premiums left uncollected, and, if you’re chasing payers manually, that costs time and money and creates a negative experience for your customers.
You can easily mitigate the impact of payment failures by choosing a payment method that simply performs better and collects payments on time.
Reduce customer churn
Fewer failed payments mean you’re less likely to lose customers because their payment has failed. 11-15% of failed payments turn into customer churn. This is a type of involuntary churn and means you're losing customers who still need access to insurance and want to be using your services.
With ACH Pull, the percentage of customers lost to churn is a lot less at around 4%, compared with 14% of credit card payers and 16% of digital wallet users. This can lead to a loss of revenue and even bad debt, with 10-15% of failed payments leading to bad debt.
When combined ratios are on the rise, retaining valued customers is crucial in making sure you keep losses to a minimum.
It’s time for a better way to get paid
In an uncertain economy, you can make collecting premiums a certainty. By using a robust and reliable payment method, you can protect vital revenue and better position yourself for growth.
ACH Pull, with immediate cost savings of lower fees and time saved managing payments and chasing payers, the savings and efficiencies really add up. By adding ACH Pull into your payment mix, you can quickly start to mitigate the effects of payment inefficiencies and meet the challenges currently facing insurers.