Prepaid cards can streamline insurance claims payments
Some insurance companies have begun to switch their method of claims payment from paper to plastic, replacing traditional checks with prepaid claims cards. The cards can be more convenient for policyholders -- and for insurance companies as well.
How prepaid claims cards work
Traditionally, when claims payments are made, insurance companies mail checks. With prepaid cards, however, the payment is made in the form of a debit card with the amount of the claim already loaded onto it. The card typically has a unique PIN and can be used just like other debit cards.
InsurCard, a consulting firm that provides prepaid cards to the insurance industry, teamed up with Visa in early 2011. As such, its cards are accepted by most vendors, and customers can use them to withdraw cash from ATMs, according to Visa. In the event that a card is lost, Visa's liability theft protection which it extends to all its cards) kicks in, meaning the customer can get reimbursed for fraudulent transactions.
Benefits of prepaid claims cards
Prepaid cards let customers get their insurance claim money faster, as the cards do not need to be taken to a bank to be cashed or deposited. The cards also allow claimants without bank accounts to use the funds, as the cards can be used in physical stores or online, can be used to pay bills or simply can be used to withdraw cash from an ATM, according to InsurCard.
As for insurance companies, the cards can save time. Insurers can control and monitor exactly when funds are transferred into the card account, according to InsurCard. If the payment isn't a lump sum but actually is a series of payments, there's no need to issue and mail numerous checks.
This is especially convenient when it comes to workers' compensation payments, according to JP Morgan, which began offering workers' compensation prepaid cards in 2008. Instead of sending a check each time a payment is due, the insurance company can have recurring payments automatically loaded onto the cards.
Are there any downsides?
As with all debit cards, some fees like ATM withdrawal fees) may apply, so customers are advised to carefully read the terms and conditions associated with their cards before using them. Also, some bills like rent) often can't be paid with debit cards.
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