How Citi is helping insurers compete in an always on digital payments landscape

Today, traditional insurance faces mounting pressures from new technologies and market entrants, and digital transformation has become an imperative rather than an option. Kamiel Buow, Global Head of Insurance for Citi Treasury and Trade Solutions, joins the show today.  He brings extensive experience navigating this evolving landscape, where efficiency, data-driven approaches, and customer-centricity have become paramount. 

With traditional insurers working to adopt new technologies within legacy infrastructure, Buow describes how Citi has positioned itself  to strategically  support these organizations capture opportunities while enhancing customer experience.

Throughout the interview, Buow explores several transformative themes reshaping the insurance industry. He uses real life case studies to emphasize the tremendous opportunity in digitizing payment processes — both for premium collections and claims payments — highlighting how instant payments can create superior customer experiences while providing operational benefits. 

Buow also discusses how Treasury functions must evolve beyond their traditional role as financial settlement centers to become innovation leaders, engaging across enterprise-wide initiatives and providing expertise in risk management and end-to-end payment flows. 

Listen to the podcast to gain unique insights into emerging technologies like digital assets and tokenization and their growing role in insurance, and how organizations can start with small, focused use cases to drive learning and foster broader adoption of this new tech. 

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The big ideas

Challenges on the horizon: “Traditional insurance is facing pressures, both on the margin side, because of the opportunities these new technologies provide and the new entrants in the markets.”

The importance of digitizing down the value chain: “[They’re] digitizing claim payments, as insurance companies are looking to automate their entire claims management and claims processing. It would be terrible to have a check at the end. So we’re looking to work with insurers to implement these new digital payment channels into their workflow and create a better customer experience.”

The payments opportunity: “In insurance, there is tremendous opportunity: not only on the claims side, where an instant payment can provide a great claims experience, but also on the premium collection side, where, if you start to incorporate QR codes or it’s a payment solution like Request-for-Pay, the richer information with the instant payments and the irrevocability and certainty of collecting that payment is really critical in insurance.”

Treasury as an innovation leader in the org: “Treasury really is a horizontal function, so they need to engage with any enterprise wide initiative that is driving digital transformation around the organization and also with individual business units. In the past, payments were often seen as a financial settlement tool, and therefore in the Treasury’s domain. Now it’s clearly a customer engagement tool and critical to how you interact with your policyholders from a premium collection and claim payment perspective.”

Where to start with digital assets and tokenization: “No organization may be right to do enterprise wide digital assets type initiatives, those are very hard to get done. Or the instant payment side request for pay. But try to find small use cases, friendly business units where you can work together on some of these use cases and learn and potentially succeed in transferring around the organization.” 

How digital technologies are reshaping the insurance landscape

New digital technologies will continue to have a profound effect on insurance, and you will see it in a couple of areas. Firstly, efficiency: insurance companies are really more efficient [now]. [Secondly] they’re becoming much more data driven. And thirdly, probably most importantly, they have become much more customer centric. 

You see that all across different areas of insurance. For example, you see AI having a profound effect on underwriting. You see it used in fraud management. You see Generative AI in the form of chat bots or virtual assistants help with claims processing and customer service. 

Big Data, or IoT, is driving a lot of personalized products or uses-based solutions by leveraging things like smart homes or connected cars or wearable devices. You have new areas like parametric insurance, where the claim payment is directly linked to an event like weather or hurricane. So all of these technologies have a profound effect, and they are enabling other entrants in the markets. Some of these entrants, not burdened by extensive legacy platforms, can now set up digital only sales and distribution platforms. 

There’s a lot of new insurtechs, both in the underwriting space, but also in what we call MGAs – the digital distribution platforms. We also see big tech like Amazon and Google offer insurance through their platforms. I think Tesla offers usage based premiums based on their connected cars. So all around the insurance industry, you see these technologies having a profound effect. 

How Citi is helping traditional insurers keep up with competition

Traditional insurance is facing pressures, both on the margin side, because of the opportunities these new technologies provide and the new entrants in the markets. And so they’re facing their own digital transformation imperative. They really have to figure out how to adopt these new technologies in their own somewhat extensive legacy technology infrastructures, to take advantage of the opportunities that they bring in, providing a better experience to their customers, and also capture some of these possible efficiencies. 

At the same time, there’s a lot of change in banking, there’s changes in the payment landscapes, with instant payments emerging and banking has gone through digital transformation – [firms] are looking to innovate around cash management solutions. We’ve launched a virtual account platform and we have enabled real time payments. We’re now even using digital assets for cross border payments. So it’s actually a great time for insurance companies and banks to work together to enable digital transformation and capture some of those benefits. 

At Citi, we’ve designed our insurance strategy around three key pillars that we believe are important in this context for insurance companies. One is streamlining premium collections, which is where we’re looking to offer not only more options for policyholders to pay the insurers, but really look at the end-to-end process around reconciliation and cash application as well as virtual account structures. 

Then, secondly, if the money comes in quicker and is reconciled, cash applications are done. You need to ensure that you’re able to use the money and apply it into your investment portfolio. So there’s a lot of focus on optimizing liquidity through real time liquidity solutions. The third leg is around digitizing claim payments, as insurance companies are looking to automate their entire claims management and claims processing. It would be terrible to have a check at the end. So we’re looking to work with insurers to implement these new digital payment channels into their workflow and create a better customer experience.

These pillars seem fairly simple and high level. At Citi, we really tried to make a difference in that we understand that even within those pillars, flows by insurance sub-segments can be very different. It’s very different in commercial insurers, where there’s brokers and agents involved, versus direct to consumer insurance products. The value we’re looking to add is to delve deeper into the specific use cases. We work with our customers and co-create a combination of different tools that helps go for their specific use cases. 

How Citi is supporting embedded insurance

I think even outside of insurance across all industries, enabling digital commerce is a major initiative at Citi. We have a separate pillar. Some of the platforms we have designed around payment acceptance, like Spring by Citi or leveraging APIs in our global instant payment footprint, are already heavily used to facilitate e-commerce, including embedded insurance in other types of e-commerce platform where there’s a nuance around insurance. In some of these cases, it will create insurance-specific challenges around there being intermediaries involved or agent brokers. You have to pay commissions, and that’s where we take the infrastructure that we have across all segments on enabling digital commerce, combined with some of our expertise and experience in helping solve reconciliation challenges through virtual accounts payer IDs, and facilitate that into inflow.

Citi’s work with insurers to help with the claims process and customer experience

I’m a big believer in the power of instant payments. We hosted a webinar a number of weeks ago with the members of The Clearing House, who are one of the instant payment rails in the US,  to provide education to our clients around the usage in the US, where adoption has been slow. 

As part of that, I took the audience on a little bit of a trip around the world, showcasing how instant payments have gotten really great adoption in some markets, and how insurance companies have adopted them. In my research, one of the interesting quotes I shared was that in India, where UPI has driven Instant Payment adoption to over 80%, there was someone who compared the transformational power of the QR code for digital commerce in India with the emergence of the rail system, which I thought was an interesting analogy. 

While we’re certainly not there everywhere around the world, I do think even in insurance, there is tremendous opportunity, not only on the claims side, where an instant payment can provide a great claims experience. But also on the premium collection side, where, if you start to incorporate QR codes or a payment solution like Request-for-Pay, the richer information with the instant payments and the irrevocability and certainty of collecting that payment is really critical in insurance. 

[This speaks to] points I made earlier around cash applications and investments and that’s where I think banks play a big role in trying to mitigate some of the current friction points around instant payment adoption, such as fraud, for example, or lack of adoption by banks. 

Citi is looking to provide a lot of value there through our clients by an API and cloud based platform called Payment Express. We are not only enabling payment execution through instant payments via this platform, but  also  providing value-added services around Account Validation to help mitigate risk, bank reachability, APIs to make sure that you can actually pay through instant payments, and visibility about the payment. So our work in mitigating some of those risk or friction points helps drive instant payments further and hopefully, at some point, also in the US. 

How automation can help insurers enhance reconciliation and customer experience

Spring by Citi is a digital payment acceptance platform which provides a smooth and efficient experience for paying premiums. In the case of insurance, it offers a number of different channels, from bank channels through alternative payment methods, wallets to card acquiring in a CX environment that is much more akin to what people are used to in their daily lives, when they’re buying things from Amazon or Google.

A specific insurance challenge is that, in some cases, there are still a lot of checks and cash being accepted, and the cost of offering cards for insurance companies can be high. So again, in some markets like Hong Kong, we’ve been very successful in combining the power of providing this digital payment acceptance platform working with the associations specifically to reduce the interchange for premium collections to the insurer. 

So, we’re combining a great customer experience with an efficient place for the insurance in that case. Virtual accounts have a number of different use cases. I think a more general use case for virtual accounts is also used in insurance around in-house banking and the cash concentration. 

But a use case more specific to the insurance industry is that they can play an important role in cash reconciliation and cash applications, especially in flows where there are other parties, like brokers or agents. So, we have a great example of a large P&C insurer with extensive operations in the UK that is managing lots of accounts across different business units, different channels, like direct channels, agent channels, and broker channels. 

By implementing a virtual account structure that helped streamline their process, they were  able to automate reconciliation, increase control and transparency, segregate incoming funds by some of these virtual accounts, reduce bank accounts and therefore mitigate risk, and at the same time enhance the customer experience. 

When the cash is coming in for a policy and it’s reconciled and applied, then it’s enforced, and you don’t create that friction, that there may be a timing difference there. Recently, I also had another example where we combined both solutions in a similar use case, where a large carrier had a lot of broker collections. In this use case, we were trying to combine setting up a virtual account structure so the carrier would set virtual accounts for the broker. 

For the brokers, but then also when policies were agreed with a customer and confirmed with the carrier by the broker, the carrier would use Spring by Citi to send a pay by link so that the policy holder could automatically pay the premium. It would then be reconciled, because it would already be confirmed, and then on the back of it, we would even try to automate commission payments to the brokers. So, this is a benefit for the carrier, because they can reconcile payments and eliminate a lot of the manual effort. Benefits for the policyholders are more channels on how to pay their premiums and a benefit for the broker is that they get more timely commission payments. So, it’s a great solution that we’re working on. 

Kamiel’s experience in Treasury and Trade Services and Security Services

In insurance, it has always been very important to have connectivity between Treasury and Trade Solutions and Security Services. The insurance treasury function is generally also responsible for the general account investments and funding, so having accurate cash forecasting and efficient cash concentration to enable cash being put in the general account and generating yield for investment has been important. So, as security settlement timelines are shortening, we see more 24 by 7 real time payments. 

There’s a tremendous amount of opportunity to leverage the evolving cash management tools around real time 24 by 7 becoming more accurate forecasters having more real time cash concentration and funding of the general account. So, I’m actually extremely excited about the opportunities that a lot of these new cash tools bring to Securities. 

Virtual accounts [and custody structures] can be another one. I think there’s a lot of opportunity there. So yeah, applying cash management tools into a custody structure is a great opportunity. The one other area that I think is interesting is that both Security Services and Treasury and Trade Solutions are not just focused on enabling execution of either cash trades or securities trades. We are seeing ourselves as much more – as providing a lot of value through data and analytics. So in both organizations, there’s a lot of focus to become more valuable in providing real time, actionable data and analytics through our platforms, which are converging as well.

The impact of digital assets and tokenized cash solutions  

There’s a great convergence. In banking, we’ve launched Citi Token Services for cash. For using a digital asset platform to enable 24 by 7 real time, cross border payments in  several corridors now, in insurance, there’s been a fair amount of work being done on trying to leverage digital assets technologies for smart contract applications which are very prevalent in insurance. 

If this event happens, then this payment needs to be made. So, if you combine those use cases in insurance where there’s an abundance of smart contract blockchain applications, with the power of enabling a real time money transfer to those ledgers, there’s a great opportunity in this use case. I’ve seen them more on the commercial insurance: on the marine insurance side, we’ve done some use cases around captive insurance where you can create a transparency between carriers, captive insurers, fronters, and the multinational clients around policy. So there’s a lot of opportunity there. 

The role of the Treasury function in enabling a digital strategy for payments

I have a lot of conversations with insurance treasurers and their teams, and the first thing I generally try to stimulate is getting out of a Treasury silo and acknowledging that the skill sets around payments and the responsibilities around risk management and funding are really important enterprise-wide.

Treasury really is a horizontal function, so they need to engage with any enterprise wide initiative that is driving digital transformation around the organization and also with individual business units. In the past, payments were often seen as a financial settlement tool, and therefore in the Treasury’s domain. 

Now, it’s clearly a customer engagement tool and critical to how you interact with your policyholders from a premium collection and claim payment perspective. And so Treasury really needs to broaden their engagement with other stakeholders in the organization. When they do that, they have a very specific function to provide their expertise and some guard rails, including one around risk management. They need to work with the business units that, in some cases, may be more focused on a sharp user interface, but they need to understand, are these the right counterparties we work with? What is their business resiliency? How can we mitigate fraud? 

They need to impose that – you can’t just look at the customer engagement in that silo. You have to look at the end-to-end flow, including reconciliation funding, cash applications, and how these flows tie into liquidity management. So they have an important role there to play. That’s the first thing to do, make sure they are engaged. And then there’s a couple of specific things they need to ensure that Treasury technology is future proof. So as we’re talking about real time, which is the future potential of tokenization digital assets – they need to have a view on how that can be incorporated in their treasury technology, as they start thinking about treasury management systems, or any other technology that interfaces payment hubs and interfaces with their business. 

Then there’s going to be a fundamental shift. A lot of these trends and payments are driving towards, always on 24 by 7 real time. That is not how Treasury organizations generally are organized right now. So they need to prepare for that future. And then the last thing is they can also play a great role in providing opportunities for learning and experimentation with new technologies. 

No organization may be right to do enterprise wide digital assets type initiatives, those are very hard to get done, or the instant payment side request for pay. But try to find small use cases, friendly business units where you can work together on some of these use cases and learn and potentially succeed in transferring around the organization. So Treasury organizations have a big role to play in enabling their digital transformation.

Future outlook on payments in insurance

I’m not sure there’s a single innovation or a single new technology that is going to drive it. But as you look at the different technologies and how they’re applied within insurance and banking, it is obvious that the world is going to a 24 by 7, always on framework. 

In that framework, I think that payments are almost going to be expected to be done at any point in time. And they’ll be much less – hopefully – of a friction point, and almost like an unnoticed part of the customer experience, which it should be. It should be frictionless  and that is also where we’re working on at Citi: to enable that future where we almost don’t have to have a podcast on payments anymore, because it’s easy, it’s embedded in fantastic customer experience. It is certain, and it is just executed in a way that doesn’t create any of these functions.

Disclaimer: Any views, unless reflected in Citi’s Research Reports, are those of the individuals and may not necessarily reflect the views of Citi or any of its affiliates.   Although the statements contained herein based on outside sources are believed by Citi to be reliable, their accuracy and completeness have not been verified.  Any assumptions or information contained herein constitute an opinion only, as of the date of this presentation or on any specified dates and is subject to change without notice. Client experiences and results will vary.  Any forecasts or forward-looking statements may not be attained.