Digital Payments Lag in Insurance Sector, says Adyen & EY
Fresh insights from Adyen and EY suggest insurance firms are not keeping up with the digital payment expectations of their customers.
This revelation stems from a comprehensive survey of 3,000 insurance customers and 200 industry experts across the UK, Spain and France, which uncovered a noticeable gap between traditional insurance providers and progressive insurtech competitors concerning online transactions.
The data show a significant preference among online insurance consumers for mobile-first purchasing avenues, with a notable two-thirds of individuals aged 25-34 expressing a preference for insurance subscription models. Despite these clear preferences, many longstanding insurers are finding it challenging to adjust to these new consumer habits.
Recognising the Payments Blind Spot
Adrian Davis, Commercial Leader for Financial Services and Insurance at Adyen, highlights a critical oversight in the sector, stating: "Many insurers have a payments blind spot. They don't realise that modernising online payments could drive significant benefits for their business in terms of selling more policies, reducing operational costs, and driving down fraud."
This blind spot is significant given that customers regularly compare their payment experiences in insurance to those in more digitally advanced sectors like retail and fintech, where retail leads substantially.
Chris Payne, EMEIA Financial Services Insurance Technology Leader at EY, observes a significant mismatch in the perception of new payment technologies. "There's a misalignment between what new payment technologies can do and what carriers think they can do," he points out. "The opportunity for insurers to enhance the customer experience, differentiate themselves, and innovate in this space is vast."
Insurtech Pioneering Changes
Research underscores that insurtech firms are at the forefront of reshaping product offerings and refining payment solutions. These new market entrants frequently incorporate data as a central element of their strategies and boast more cohesive systems, rendering them more nimble in aligning with consumer demands.
Despite the hurdles, it is suggested that all insurers stand to benefit from bolstering their payment infrastructures, which could enhance error detection, clarify payment status visibility and automate reconciliations.
While 78% of industry experts acknowledge payment processing as a crucial operational component, many traditional insurers seem slow in recognising its strategic importance. Peter Neufeld, EMEIA Innovation & Experience Design Lead & Business Transformation Lead at EY, suggests: "Insurers should seize the opportunity and implement intuitive, flexible payment experiences to stand out in a crowded online marketplace."
Enhancing Customer Satisfaction
The study sheds light on the importance of payment ease, now a top-three deciding factor for younger customers when selecting insurance, rating higher than traditional policy considerations like the claims process itself.
About 67% of 25-34-year-olds are drawn to insurance subscription models, while 65% show a preference for prepaid virtual cards to sidestep out-of-pocket expenses during claims.
For pay-ins, any friction can disrupt the initial purchase or lead to policy lapses. Regarding pay-outs, the long wait times, compounded by inflexible payment routes and rigid processes, often result in customer dissatisfaction.
Interestingly, while a whopping 92% of customers wish to use credit cards, debit cards or digital wallets for online payments, many in the insurance sector still rely heavily on bank direct debits.
Improving customer retention emerges as the highest strategic priority for 58% of insurance companies, closely followed by enhancing customer experiences. Other priorities include cost reduction, risk management, and digital transformation.
Jacqueline Quinn, Payments Transformation and Technology Leader at EY, concludes: "Payments are an integral part of an insurer's digital transformation agenda. With the correct focus, organisations can architect their payments capability to optimise engagement across customers and suppliers, drive operational improvement, and increase resiliency across the business."
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