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As the leader at an insurtech platform, you’ve been tasked with finding the right payments solution for insurance companies and their customers.

With insurtech platforms rising in popularity, you need a payments solution that will differentiate your platform from others in the market. And the market is getting crowded. A 2019 report from Deloitte found insurtech platforms over the past decade have drawn more than $16 billion in investments to spur innovation in the insurance industry.

Insurtech platforms need to facilitate payments between insurance companies and their customers, while legacy insurance companies want to facilitate payments between their own agents and policyholders.

Whether you’re leading the product organization inside a legacy insurance company or building the payments experience at an insurtech platform, your payments experience can be the differentiator in a competitive field.

Facilitating Payments Between End Users

Fund flow - faciliate: End Users with arrows point both ways to another set of end users.

Insurtech platforms often come to us asking about payment facilitation. Insurtech leaders like you want to know what it means to facilitate account-to-account payments between end users.

But before we go any further, we want to note the difference between a business acting as a payment facilitator and a business facilitating payments on Dwolla’s platform.

Becoming a payment facilitator, also known as a PayFac, involves registering with an acquiring bank, choosing a payment gateway, obtaining a PCI DSS certification and more. PayFacs are often the ones providing the infrastructure necessary for their sub-merchants to begin accepting credit card payments. This blog post is not intended to provide advice on becoming a PayFac.

With Dwolla, your insurtech platform can integrate with our modern API to facilitate account-to-account payments between insurance companies and their customers without taking possession of the funds. In this blog post, we’re talking about integrating an API to facilitate insurance payments.

By facilitating payments, insurance companies on your platform can be onboarded as a Verified Business and transact with policyholders via multiple payment methods that can settle in days or in real time. Policyholders can set up recurring payments with the insurance company—through your platform—to pay premiums from their bank account rather than with a card or paper check. Programmatic payments for the win!

Gone are the days of writing checks and waiting for them to be delivered and deposited. With the Dwolla API for insurance, platforms can digitize payments for insurance companies and their customers. By embedding the Dwolla API into your platform, facilitating payments is possible no matter where your insurance company clients and their customers are banking.

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To better understand how facilitating payments works, let’s walk through an example.

This innovative platform in the health insurance industry helps employees and insurance brokers navigate health reimbursement arrangements by facilitating payments on its platform.

The platform’s clients are companies that don’t provide group health insurance to their employees. The platform facilitates payments between clients’ employees and health insurance carriers to provide the look and feel of group health insurance without the high costs and administrative burdens.

To do this, the platform uses a combination of ACH payments and Dwolla’s Virtual Account Number (VANs) feature. Each VAN acts as a unique virtual routing and account number. The employee is given access to a VAN that they can use to pull funds from their employer each month to pay for health insurance costs. The insurance company is able to pull funds using the VAN provided to it by the employee on a recurring basis.

Fund Flow: 1. VAN Assigned to Employee 2. HRAs Assigned 3. VAN Preloaded 4. Employee is Billed for Services 5. Insurance Company Debits VAN

As monthly transaction volume on the platform grew, the company upgraded their payment speeds to Next Day ACH and deployed VANs to support more volume across the platform. With Next Day ACH, an employer using the company’s platform can initiate a transaction into its platform that will clear and settle on the next business day.

Since launching Next Day ACH and VANs, monthly transaction volumes on the platform have scaled to several million in payments for insurance expenses.

“Next Day transfers were one of the features that helped give our team peace of mind during open enrollment. It’s a six-week period where we need to move a lot of money quickly. Next Day ACH helps us onboard clients and support new users during that critical period of open enrollment, when our transaction volume peaks.”
Director of Product, Take Command

Digital Pay-ins, Payouts for Insurance Companies

Fund Flow - Send: Bank Account to Dwolla Balance with arrows pointing to End Users

While facilitating payments is particularly useful for insurtech platforms, legacy insurance companies—while also finding value in facilitation—oftentimes present use cases for pay-ins and payouts.

The send (payout) and receive (pay-in) funds flows are pretty straightforward from a customer onboarding perspective.

For example, consider Koala Insurance Company. By integrating the Dwolla API, Koala Insurance Company is able to initiate a payout from its Dwolla Balance to issue a reimbursement to a policyholder’s bank account. From our clients’ perspective, this is a send funds flow.

A pet insurance company, for example, improved reimbursement efficiencies by more than 800% by sending reimbursements directly to a policyholder’s bank account via ACH, instead of issuing paper checks.

When it comes to disbursements, consider the value of mass payments. With mass payments, your business can send thousands of payments at once with one API request.

A receive funds flow looks like this:

Fund flow - Receive: End Users to Dwolla Balance to Bank Account

  • Ella End User pays her monthly premium to Koala Insurance Company by attaching a bank account to the platform, completing the verification process and authorizing Dwolla to debit her bank account via ACH on the Koala Insurance Company platform.
  • The funds Koala Insurance Company collects from Ella End User arrive in the insurance company’s branded digital wallet in a matter of days or hours depending on the speed of the ACH transaction.

Here’s an example from a Dwolla client’s perspective: a life insurance company offering direct-to-consumer annuities. Using account-to-account transactions, the life insurance company can collect annuity payments on a recurring basis via automated processes through a convenient payment portal for the user.

With account-to-account payments, insurance companies can send and receive funds quickly and at a low cost compared to paper checks and wire transfers.

Modern Payments Technology To Power an Insurance API

We started this blog post with a scenario: You’re a leader at an insurtech platform tasked with finding a payments solution. After reading this article, you should have a better understanding of what it means to facilitate payments as an insurtech platform and the value of building a flexible solution that supports multiple funds flows–pay-ins, payouts, and facilitation.

Dwolla can help your business eliminate the need for paper checks and improve operational efficiency, treasury management and cash flow—without having to restructure your internal systems.

As you consider the possibilities of an API integration for the various insurance payments, use this resource as a roadmap to a Dwolla integration. We break down step-by-step what is needed to go-live with an account-to-account payments solution.

View the Roadmap


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