If an insured individual experiences an incident that requires them to file a claim, the sooner they get their money, the better it is for them. Although insurance protects people financially, delays between filing a claim and getting reimbursed are common. In the meantime, policyholders might need to use money from their savings to pay for things like auto repairs or a medical bill. If they don’t have enough savings, they might need to use a credit card to make ends meet until they receive the insurance payment.
A prepaid insurance card can streamline the process of paying insurance claims, putting money into people’s hands sooner. Along with speeding up the claims process, prepaid cards have other benefits for you as an insurer and for those you insure.
How Does the Insurance Industry Use Prepaid Cards?
The use of prepaid cards in the insurance industry is a relatively new thing. The traditional way of making claim payments is to issue a check to the insured. Now, companies that use prepaid cards to load the claim’s amount onto the card, allowing the insured to get their money much more quickly.
Some examples of the way you might use a prepaid card include:
- Pay medical claims upfront: When a person gets medical treatment and has insurance, they typically present their insurance card at the hospital or medical practice. Depending on the type of coverage they have, they may need to pay the provider for services the same day, then submit reimbursement paperwork to the insurance provider. If your insurance company issues a prepaid card to claimants, they can pay for the treatment or services they receive. You can then review the claim and make adjustments as needed.
- Pay for auto repairs: Similarly, you can issue prepaid cards to cover the insured’s cost of auto repairs immediately. Instead of paying out of pocket, the insured can use their prepaid card at the mechanic or dealer location. If you need to adjust the amount, you can do so later, after reviewing the claim and the repairs.
- Pay for emergency supplies and housing: Homeowners insurance often covers emergencies, such as having to book a hotel when a house is uninhabitable due to damage or paying for food or clothing when a homeowner has lost everything. After an emergency, you can load a prepaid card with a specific amount so the insured can get the supplies and shelter they need quickly.
- Pay for prescriptions: Just as a prepaid card can pay for medical treatment at the provider’s office, the card can also pay for prescriptions when a person picks them up at the pharmacy. Instead of waiting for reimbursement, the insured can swipe their prepaid card at the point of sale.
- Pay for repairs to a damaged home: You can also issue prepaid cards to cover the cost of repairs to a home, such as fixing a damaged roof after a storm or replacing parts of the home that have been damaged by fire. After getting the claim amount on their prepaid card, the insured can transfer the funds to their bank account, write checks to the contractor, or use the ATM card to get cash to pay the company doing the repair work.
How Does the Insurance Claim Process Work With Prepaid Cards?
Using prepaid cards for insurance claims changes the way funds get distributed to the insured. Otherwise, the process of completing an insurance claim is similar to the traditional method of filing a claim.
Usually, the first step in the claim process is for the insured to contact their insurance company as soon as possible. After an auto accident, the insured should call you right away. If the person uses health insurance to cover medical treatment, the practice or hospital will typically connect with you while the insured is in the office. Homeowners should contact their insurance company as soon as they realize they will need to repair something or in the event of an emergency.
When insured people reach out to you as soon as possible after an incident, you can get the ball rolling in the claim process, speeding up the time it takes to get the money needed to pay for a claim. Your company might also have deadlines for filing claims, so it’s important that the insured starts the process as soon as possible.
After the insured has reached out to you to begin the claims process, someone from your company reviews the documents. After the review, a representative from your company might ask for more details, such as an estimate from the mechanic or contractor. You might also send an adjuster to inspect the damage before deciding how much the policy will pay.
During the traditional reimbursement process, once you approve the claim amount, it can take a few weeks before the insured receives their check.
If you decide to use prepaid cards to pay for claims, you can issue the cards in a few ways. If you work for a health insurance company, you might issue people unloaded prepaid cards when they start a policy. The card won’t have funds on it initially, but once a person files a claim, you can instantly load the necessary amount onto the card, allowing the insured to pay for their prescriptions or medical treatments on the spot.
If you provide auto or homeowners insurance, you can give inactive prepaid cards to the adjusters who work for you. After the adjuster has inspected the car or property, they can give the prepaid card to the insured. The adjuster will activate the card and load funds onto it, usually for the amount they expect the repairs to cost based on their assessment.
The insured can then use the prepaid card to pay the mechanic or dealer or pay a contractor. If the insured’s company doesn’t accept prepaid cards, the insured can use the card at an ATM to withdraw cash. They can deposit the cash in their own account and write a check or pay the repair company in cash.
In cases where the amount loaded onto the card is insufficient to cover the cost of repairs, or if the adjuster determines the initial estimate wasn’t correct, you can quickly add more money to the card for the insured to use. If repairing damage or replacing a vehicle ends up costing less than expected, you can deactivate the card and redirect the funds on it.
Fees and Limitations With a Prepaid Insurance Card
Prepaid claims cards let insured people get the money they need to quickly pay for treatments, repairs, and emergency services. Although the cards offer notable benefits over getting paid by check or direct deposit, there are some limitations people should know about. Some cards charge fees to the people using them. It’s important to explain any fees and charges to your clients before they agree to use a prepaid card.
The person who uses the card often has to pay any fees associated with it. For example, some cards might charge a fee to withdraw cash at an ATM. Depending on the terms of the card, the user might have the option of making one fee-free withdrawal from an ATM. After that, a per-use fee might apply. Some cards only charge ATM fees when used at particular terminals, such as machines in a different network. Typically, the cards don’t charge fees when a person uses them at the point of sale.
Although many companies accept payment with prepaid cards, not everyone does. Some smaller businesses might only accept checks for payments or charge an additional fee when people pay with a card. In those cases, the insured can withdraw funds from the card and either pay the company directly with cash or write a check.
Another issue that can limit the use of insurance prepaid cards is that some states require insurance claims to be paid by check. Insured individuals who live in certain parts of the U.S. might be left out of getting paid for claims by card based on their state laws.
Benefits of Using Prepaid Cards for Insurance Claims
While prepaid cards do have some limits, overall the benefits of using them far outweigh the drawbacks. For insurance companies, some of the benefits of issuing prepaid cards include:
- Reduced costs: Paying claims by check can be expensive for insurance companies. You need to print the checks, mail them, and make sure the right person receives and cashes the check. If a check goes missing, you might have to issue a stop payment for a fee. If you make recurring payments to the insured, the cost of issuing checks really adds up. Meanwhile, your company only needs to issue one card, one time, to the insured. It also costs a lot less to reload the card than to print multiple checks.
- Improved fraud protection: Prepaid cards often have better fraud protection than checks. If the insured misplaces the card, they can cancel it immediately, locking any funds that are on it. You can quickly issue a new card with the same balance as the original one.
- Option of branding the card: When your insurance company issues white-label prepaid cards to its policyholders, it has the option of branding the cards with its logo. The branding can act as marketing for your company, potentially attracting new clients who want to streamline the reimbursement process or improve their insurance experience.
- Streamlined claims process: Using prepaid cards to make payments for claims helps to streamline the process. It reduces paperwork, as there’s no need to write out and mail checks. Often, the funds on the cards can be used immediately, so the insured doesn’t have to wait for reimbursement or submit receipts.
- Improved customer satisfaction: Streamlining the insurance claim process and reducing wait time for payment are bound to make customers happier. When people feel their needs are met, their insurance coverage is adequate, and their coverage is protecting them, they are more likely to continue to work with an insurance company. Improved customer satisfaction can also lead to more referrals from clients, helping your company grow.
Prepaid cards also benefit policyholders. Some of the benefits of using prepaid cards for the insured include:
- Reduced wait time for payments: Money gets loaded onto a prepaid card and is available for use right away. In contrast, when a policyholder receives a check payment, they often have to wait for the check to clear before using the funds.
- Improved access to payments: Not everyone has access to a bank account to cash or deposit a check from an insurance company. People who don’t have bank accounts can easily access funds on a prepaid card without working with an intermediary, such as a check-cashing company.
- Better fraud and theft protection: Checks can get lost or stolen and can be difficult to replace. If a check gets lost in the mail, the insured might not even realize they are waiting for payment. When a person has a prepaid card, they can easily report it if the card gets stolen or misplaced.
- Option of earning rewards: Some prepaid cards have rewards programs attached to them, which let people collect points they use for gift cards or cashback or give them discounts at stores they shop at frequently.
- Reduced stress: People typically need insurance during challenging times, such as after an auto accident, following a natural disaster, or during an illness. They have enough on their plate already and most likely want to reduce their stress levels. Streamlining the reimbursement process with prepaid cards can help lower client stress levels, giving them one less thing to worry about.
You can issue prepaid cards to make single payments, such as to pay for repairs or a single medical treatment. You can also issue the cards to make recurring insurance payments, such as workers’ compensation payments or disability payments. In either case, the cards allow for faster payment times and reduced administrative costs.
Hydrogen Can Help You Create Prepaid Insurance Claim Cards
If you work with an insurance company that wants to simplify the payment and claims process, Hydrogen can help. Our card-issuing service makes it easy to create and issue prepaid cards to your policyholders. You can issue the cards when people start a policy or provide adjusters with inactive cards to activate after reviewing a claim and the property damage.
You don’t need to have a technology expert on your team to start issuing prepaid cards. Our no-code platform is designed to get you up and running quickly. You can brand the cards with your company’s logo and set spending controls. To learn more, sign up to Hydrogen today.