Adyen & EY: Insurance Firms lag on Digital Payments

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Adyen & EY: Insurance Firms lag on Digital Payments
Adyen and EY research reveals a gap between customer expectations and industry capabilities in online transactions

Insurance companies are failing to meet customer expectations for digital payments, according to new research from Adyen and EY. 

The study, which surveyed 3,000 insurance customers and 200 industry professionals across the UK, Spain and France, highlights a growing divide between traditional insurers and emerging insurtech companies in their approach to online transactions.

The research found that over half of online insurance customers prefer to purchase policies through mobile-first channels, while two-thirds of 25-34-year-olds find insurance subscription models appealing. 

However, many established insurers are struggling to adapt to these changing preferences.

Payments Blind Spot

Adrian Davis, Adyen

Adrian Davis, Commercial Leader for Financial Services and Insurance at Adyen, says: “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.”

The study reveals that customers are increasingly comparing insurance payment experiences to those in other sectors, such as retail and fintech. Retail is ranked as the top industry leading the way in online payments, far ahead of insurance.

Chris Payne, EMEIA Financial Services Insurance Technology Leader at EY, notes: “There's a misalignment between what new payment technologies can do and what carriers think they can do. The opportunity for insurers to enhance the customer experience, differentiate themselves, and innovate in this space is vast.”

Chris Payne, EY

Insurtech Disruption

The research indicates that insurtech companies are leading the transformation in product offerings and payment solutions. These newer entrants often use data at the core of their operations and have more integrated systems, allowing them to be more agile in meeting customer preferences.

Despite the challenges, the study suggests that all insurers can benefit from improving their payment capabilities. Industry leaders say stronger payment capabilities offer insurers better error detection and resolution, clearer payment statuses, and automated reconciliations.

Strategic Opportunity

While 78% of industry professionals see payment processing as an integral part of operations, many traditional insurers have yet to fully realise the strategic importance of payments innovation.

Peter Neufeld, EMEIA Innovation & Experience Design Lead & Business Transformation Lead at EY, argues: “Insurers should seize the opportunity and implement intuitive, flexible payment experiences to stand out in a crowded online marketplace.”

Peter Neufeld, EY

The research suggests that modernising payments can help insurers improve customer experiences, reduce operational costs, and enhance fraud prevention. These benefits can be achieved without the need for massive system overhauls, according to the study.

Customer Expectations

The study highlights that ease of payment has become a top-three decision factor for younger customers when buying insurance, ranking above policy factors such as the claims process. 

Additionally, 67% of 25-34-year-olds find the idea of insurance subscription models appealing, while 65% prefer prepaid virtual cards to avoid being out-of-pocket during a claim.

For pay-ins, friction can cause customers to drop out of the initial purchase journey or for policies to lapse. In the case of pay-outs, customers often find them frustrating due to long waits exacerbated by inflexible processes and rigid payment channels.

The research shows that 92% of customers want to use credit cards, debit cards, or digital wallets to pay online, despite the insurance industry's heavy reliance on bank direct debits.

Industry Priorities

The study also reveals that improving customer retention is the top strategic priority for 58% of insurance firms, followed by enhancing customer experience (50%), cost reduction (38%), risk management (37%), and digital transformation (36%).

Jacqueline Quinn, EY

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.”

The research suggests that by leveraging insights from other industries, such as the subscription economy and online marketplaces, insurers can further innovate their payment strategies. 

This could include optimising billing cycles, experimenting with payment retry attempts, and implementing split payment capabilities to meet diverse customer needs.

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