The Adyen Index
Navigating insurance industry trends and driving growth with payments
The insurance industry is facing rapid change, and 2025 presents a pivotal moment. Insurers have a unique opportunity to leverage payment technology to enhance customer experience, improve policyholder retention, and reduce fraud. Discover how payment innovations can help insurers meet rising expectations and unlock growth in an increasingly digital world.
The digital transformation of insurance
The insurance sector is undergoing a major shift, driven by digital disruption and evolving customer expectations. As consumers move more of their lives online, the standard for seamless digital experiences is rising. With younger generations like Gen Z and Millennials becoming key drivers of the market, insurers must rethink their operational strategies and embrace payment technology to stay ahead.
Digital-first insurers are seizing this opportunity, building agile, customer-focused models that capture market share and redefine industry standards. Meanwhile, traditional insurers often face the challenge of adapting legacy systems to meet these new demands, while also facing challenges to optimize their cost to serve.
This report shows how strategic investment in payment technology can help insurers address these challenges. We’ll explore how modernizing payment processes can improve policyholder experiences, improve retention, and reduce claims fraud. By understanding these key opportunities and leveraging the right technological solutions, insurance companies can drive growth, enhance operational efficiency, and secure a competitive edge in a rapidly evolving market.
The insights in this deep dive come from the Adyen Index: Digital Report 2024, which combines both business and consumer data across 23 markets.
Adapting to digital customer expectations with modern checkouts
The oppportunity:
Modernize the checkout experience
Insurers are operating in an environment where digital experiences in ecommerce and fintech are shaping customer expectations. Today’s customers expect the same level of seamlessness and convenience when interacting with their insurance providers. A key way to meet these expectations is by offering preferred payment methods across all customer touchpoints. Research shows that 78% of customers are deterred from completing a purchase if their preferred payment method is not available. This presents a significant opportunity for insurers to improve customer experience and drive conversion by expanding their payment options.
Our data shows
45% of consumers prefer credit cards
40% of consumers prefer debit cards
27% of consumers prefer digital wallets
Additionally, Gen Z and Millennials are increasingly opting to pay for insurance from their mobile device or tablets. However, many insurers are blocked by legacy systems that prevent them from offering these payment options, missing out on opportunities to maximize conversion and customer satisfaction.
The solution:
Seamless checkouts that maximize conversion and experience
To deliver a seamless checkout experience, insurers must focus on two core areas: payment method diversification and channel optimization.
Payment method diversification: To stay competitive, offering a range of payment methods is essential. Customers expect a variety of options– credit cards, debit cards, digital wallets, and direct debit. But it’s also important to consider local payment preferences, especially in regions like the EU, LATAM, and APAC, where traditional card payments are less common. By integrating local payment methods, insurers can enhance customer experience and lower payment costs.
Channel optimization: Ensuring a consistent and frictionless payment experience across all channels is crucial. Digital wallets, such as Apple Pay and Google Pay™, can significantly enhance mobile conversions by providing intuitive and streamlined payment processes. For customers who prefer telephone interactions with a service agent, offering Pay by Link options via email or SMS can simplify the purchase process, while maintaining compliance standards.
A payments provider like Adyen can guide insurers on which payment methods work best for different markets and demographics, supporting all key payment methods globally.
“Many insurers have a payments blind spot. They don’t realise that modernizing online payments could drive significant benefits for their business in terms of selling more policies, reducing operational costs, and driving down fraud.”
Enhancing customer retention with optimized payment solutions
The opportunity:
Support recurring and subscription payments Efficient subscription management is becoming increasingly important for insurers as the industry evolves. While fewer than 30% of insurance businesses globally offer subscription payment models, there is a strong trend toward increased investment in this area. In fact, 79% of insurance businesses plan to invest in subscription services over the next year.
A significant challenge associated with recurring payments is the issue of failed transactions. These failures can occur due to:
Outdated payment information
Insufficient funds
Lost or stolen cards
Technical failures
Transactions can fail for a variety of reasons, often requiring manual intervention for recovery. These failures increase the risk of involuntary churn and can lead to customers experiencing lapses in coverage. However, with the right tools and techniques, many lost payments can be recovered, resulting in less churn and reduced financial exposure. Additionally, optimizing the subscription setup can lower operational costs by reducing the manual effort involved in recovering failed payments and reinstating policies.
The solution:
Minimize involuntary churn and manual payment recovery To ensure uninterrupted insurance coverage and increase customer retention, minimizing payment-related disruptions is crucial. Several strategies and technologies can assist insurers in achieving this:
Automated Card Updates: To address the issue of expired, lost, or stolen cards, leading to outdated card information and recurring payment failure, solutions like Real Time Account Updater can be implemented. This technology automatically checks for updated card details and retries payments with the new information, all within a single transaction.
Intelligent Payment Retries: To limit the impact of payments that fail because of an outage or downtime in systems, it’s worth retrying payments that fail because of technical reasons. A feature that Adyen offers for this is Auto Rescue. This uses smart logic to decide which declined payments can succeed when retried later, and performs these retries at optimal times.
Secure Payment Tokenization: To create a seamless and secure card-not-present checkouts, Network Tokens let repeat customers pay without entering their payment details and replace sensitive information with secure and easy-to-use tokens. Leveraging Real Time Account Updater
With Adyen's Real Time Account Updater and Intelligent Payment Retries, HDI Seguros boosted its authorization rate by 3%, from 88% to 91%. By automatically updating consumer card data, they saw a 0.66% rise in approvals, translating to an estimated revenue increase of about R$1.2 million annually. Automatic processing retries further contributed to an average revenue growth of 0.20%.
Reducing insurance fraud through modernized claims Payouts
The opportunity:
Reduce claims fraud Claims fraud represents a substantial challenge for the insurance industry. An estimated 74% of insurers worldwide report steady or increasing fraud cases. In the US alone, the cost of insurance fraud is estimated to be approximately 1.5% of the GDP annually, resulting in an additional $400 to $700 in premiums per year for policyholders.
Fraudsters are often attracted to claims fraud due to the potential for significant financial gain. This type of fraud involves intentional deception during the claims settlement process and is commonly perpetrated through the exploitation of traditional payout methods, such as cash or checks. For instance, a fraudster might submit a claim for a vehicle repair and receive a cash payout from their insurer, but then fail to carry out the necessary repairs and retain the funds for personal use. This is known as claims fraud.
The solution:
Transform claims Payouts to curb fraud Insurers can effectively reduce claims fraud by changing their claims payout methods. Solutions such as Adyen's virtual card issuing offer a secure, efficient way to manage claims payouts while reducing fraud risks.
For instance, in the case of a car repair claim, instead of providing a cash payout, the insurer can issue a pre-paid virtual card to the claimant's mobile device. This card can then be used exclusively at approved auto repair shops.
This approach offers several key benefits in today's insurance market:
The virtual card restricts the use of funds, preventing fraudsters from using the payout for anything other than the intended repair.
Policyholders gain quick and easy access to funds for legitimate repairs, streamlining the claims process.
Insurers can benefit from virtual card interchange fees, creating additional revenue streams.
“The word ‘payments’ is almost never discussed around the boardroom table. Insurance leaders are rightly focused on delivering better digital experiences, reducing the cost to serve, and managing risk and fraud. But payments can play a central role in helping them achieve all three of these corporate priorities.”
Conclusion
Powering insurance growth and efficiency with optimized payments
The insurance industry is undergoing a profound transformation, driven by market pressures and evolving consumer expectations for personalized and seamless digital interactions. Whether you’re a digital first challenger or an established player, the opportunities to leverage financial technology to drive growth and efficiency are vast.
The good news is that these improvements don’t have to come with higher costs. In fact, by partnering with a comprehensive solution provider like Adyen, insurers can reduce their cost to serve, enhance operational efficiency, and improve customer engagement, fraud management, and payment conversion, all without significant additional investment.