How payments are driving global insurance innovation The insurance industry, once seen as a bastion of tradition, is experiencing a seismic shift in the tides of innovation. However, with the rise of tech companies and insurtechs comes higher customer expectations, especially when it comes to making claims. Customers are looking for a smooth and seamless payment experience, in addition to fast and flexible claim payouts – something many insurance companies still struggle to achieve. The insurance industry has the highest cart abandonment of any sector, currently standing at 84%. On average, that’s two in every 10 customers that fail to convert. Seeing as the main interaction insureds have with their carrier is bill and premium payments, the importance of mastering these interactions is vital to customer retention and business growth. So, what can insurance companies do to stay ahead of the rapid transformation across the industry and remain relevant in the digital age? Offer more payment methods According to a 2022 Accord report, fewer than 25% of insurance companies worldwide have truly digitized their value chain, and this includes the payment methods they offer. In the US, paper checks still make up a large portion of transactions in the insurance industry. Checks can be slow and expensive for insurers compared to digital payments, estimated to cost ten times more than ACH payments. Embedded finance is also becoming more popular across the insurance landscape. This involves seamlessly integrating options such as "buy now, pay later" (BNPL) or instant financing directly into the checkout, providing customers with convenient and instant financial alternatives. With the global BNPL market expected to reach $680 billion by 2025, it’s no wonder that embedded insurance is gaining prominence and is projected to exceed a value of $700 billion by 2030. Payment method preference can vary based on a variety of factors ranging from customer age to their location. Younger consumer groups such Millennials have a preference for digitally native wallets or payment apps (such as PayPal, Apple Pay or Google Pay) while older generations prefer cards. Adopting a strategy that incorporates a variety of payment methods tailored to your customers' preferences can pave the way for business growth and success. Prioritize instant and flexible payouts It’s not news that the insurance claims process can be complex and slow, leading to customer frustration and increased operational costs for insurance companies. An Accenture study found that 58% of surveyed claimants’ reason for dissatisfaction during a claim is how long they had to wait to receive a payout. A customer making a P&C claim may need those funds immediately and be unable to access a bank, say if they lost their home during a natural disaster. Instant payouts with multiple options are, therefore, critical to customer experience. Offering innovative and instant payout methods like RTP, SEPA Instant, Visa Direct or Mastercard Send can help prevent abandonments and boost customer retention. Some insuretechs and payment providers are also harnessing the power of artificial intelligence (AI) to revolutionize the way claims are handled. Through AI-driven processes, insurers can automate and expedite the evaluation of claims, as well as shorten the time taken for the claimant to receive the funds to their account.
Enhance security measures As the insurance industry embraces more technology across operations, prioritizing security and privacy becomes paramount. In 2021, UK insurance companies registered 89,000 fraudulent claims, valuing £1.1 billion, while in the US. insurance fraud costs consumers $308.6 billion every year. Robust security measures, such as Strong Customer Authentication, are therefore vital to protect against possible fraud and data breaches. Even in regions where 3DS regulation does not apply, it is still essential to invest in fraud detection that will protect customer data, such as a fraud and identity manager solutions. This would allow your business to connect to a broad range of identity management service providers worldwide, enabling you to keep up with the latest regulatory compliance requirements while protecting your business and customers against fraud. Leverage payment data to your advantage Payment innovation is revolutionizing underwriting and risk assessment processes in the insurance industry. Effective payment partners now use advanced data analytics and machine learning algorithms to analyze vast amounts of data and identify potential risks. Insurers can leverage this technology to make more accurate underwriting decisions, resulting in improved risk management and reduced costs for their customers. One way to do this is to invest in a Payment Orchestration platform, which provides businesses with a centralized hub for managing payments, as well as reconciliation and reporting and fraud prevention capabilities. By leveraging a Payment Orchestration layer, insurance companies can streamline operations, enhance customer satisfaction, cut costs, and drive business growth in a rapidly changing market – all via one integration. To learn more about how Payment Orchestration can transform your business, download our recent study. To conclude The insurance industry stands at a critical juncture where embracing innovation in payments is imperative for its continued relevance and success in a rapidly evolving market. Customer expectations have risen, and insurance companies must adapt swiftly to provide seamless, customer-centric payment experiences. By modernizing operations and optimizing the payments journey from end-to-end, your insurance business can not only meet these evolving demands but also thrive and maintain the trust of your customers while driving business growth. To learn more about how payments innovation can boost revenue for your insurance business, get in touch with our payment experts.
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