Chargeback Challenges in the Supplemental Insurance Industry
Health care costs in the United States keep going up, and new industries are forming to meet the needs of patients struggling to keep up with prescriptions, co-payments, and other medical expenses that their insurance doesn't cover. The supplemental insurance industry was created to sell coverage for these out-of-pocket medical expenses, but some of their customers question how much value these companies are really providing.
Unfortunately for supplemental insurance providers, chargebacks are starting to become a big problem in their industry, and not all of the players even seem to realize the extent of it yet. Many of their customers are confused or dissatisfied with the coverage they're getting, and large numbers of them are registering their displeasure by filing chargebacks against their supplemental insurance premium payments.
Why Customers Are Unhappy
Analyzing data from chargebacks paints a clear picture of why customers are disputing credit card charges from their supplemental insurance providers. According to the customers themselves, here are the top three reasons why they asked for a chargeback:
- 51% expected more savings on their medical/prescription bills
- 29% felt the service and benefits weren't properly explained to them
- 11% were unclear about the cancellation and refund policies
Many supplemental insurance plans offer lump-sum or scheduled payments only under certain conditions, and do not necessarily pay out immediately. Customers whose expectations don't match the actual benefits they end up getting are very likely to file chargebacks.
Let's look at it another way, going by the raw data and leaving subjective explanations aside. Issuing banks report that these are the most common reason codes for chargebacks against supplemental insurance providers:
- 36% Fraudulent – Not Authorized
- 31% Cancelled Services/Cancelled Recurring Billing
- 21% Merchandise/Services Not Received
These reason codes tell a story that should be of great concern to the supplemental insurance industry, but even more worrying is their typical chargeback rate: 2% to 3%, when most companies should be trying to keep their chargeback rate below a single percentage point to avoid being classified as "high risk" by their payment processor.
It's clear that supplemental insurance providers must pay closer attention when it comes to explaining their customers about their service benefits and improving customer satisfaction rate .
Most supplemental insurance plans are sold over the phone, which makes it difficult to prove what the buyer understood at the time of purchase.
Phone orders are also more susceptible to friendly fraud. As the complaints pile up, trust becomes an ever-growing problem for this industry.
What Should Supplemental Insurance Providers Do?
If the supplemental industry doesn't wake up to its chargeback problem before it can establish a higher degree of trust with its customers, it will struggle to maintain healthy financials. However, we certainly don't think that all hope is lost for them. If the industry can adopt policies based on transparency and customer satisfaction, they can profit by selling insurance products with clear benefits that are thoroughly explained to their customers prior to enrollment.
Here are some other actionable steps that the supplemental insurance industry can take to reduce their number of chargebacks:
- Provide a secured education portal for customers to learn more about the insurance plan, how much they can expect to save, and what the plan does and does not cover.
- Make it easy to reach out to customer service to cancel the insurance plan at any time.
- Use a secured phone order validation system to prevent fraudulent transactions.
- Conduct customer satisfaction surveys after enrollment to learn about any issues the customer may have had with the enrollment process.
- Read Google or BBB reviews to get customers' unfiltered opinions.
- Enable 3-D Secure to prevent fraudulent transactions.
- Create strategies and implement action steps to address customers' key concerns.
It can also be worthwhile to use a chargeback prevention alert service to proactively prevent chargebacks, or to hire a company like Chargeback Gurus to help fight and analyze your chargebacks. When you have expert help with analyzing your chargeback data and identifying the root causes behind them, you can understand what specific actions or operations in your business are alienating your customers.