British insurance firms may be missing out on significant savings by paying less than a third of all insurance pay-outs by Bacs Direct Credit. This is according to data released for the first time by Bacs Payment Schemes Limited (Bacs), the not-for-profit organisation responsible for managing Bacs Direct Credit in the UK.
In 2009, British insurance companies paid out in excess of £84 billion for insurance claims, equating to around £231 million each day*. However, data from Bacs shows that only £25.6 billion of this was paid via Bacs Direct Credit**, meaning that a staggering £58.7 billion may have been paid out by less efficient and more costly alternatives, such as cheques.
It is widely accepted that Direct Debit is the most cost effective way for organisations to collect regular payments, such as insurance premiums. However, many may not realise that Bacs Direct Credit offers similar administrative savings and can therefore help reduce overheads associated with making payments. In addition, Bacs Direct Credit provides a set date on which the payment will be simultaneously debited and credited to the relevant accounts, enabling businesses to plan and manage their cash flow more effectively. This sits in stark contrast to cheques, where the action of banking the cheque is at the discretion of the payee and completely outside of the payer’s control.
Dawneth Perry, market sector manager at Bacs, said: “There is clearly a significant opportunity here for insurers to improve their payment practices and benefit from the efficiencies and cost savings associated with Bacs Direct Credit. Many companies have put the emphasis on the efficient collection of monies, which is clearly an essential action, but in doing so they may have overlooked outgoing payments.
“Bacs Direct Credit is a highly reliable, secure and efficient method of making a wide range of payments. With insurers increasingly working with an approved network of repair providers, rather than settling direct with the claimant, now is the perfect time to adopt Bacs Direct Credit as the primary payment channel.”
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