Most Small Insurers Set 12-Month Plan for Real-Time Payments

The insurance industry has faced challenges in implementing real-time payouts due to high costs and transparency issues, despite the potential benefits for insurers and customers, such as reduced delays and improved satisfaction.

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According to a PYMNTS Intelligence report, “Real Time Matters: The Imperative for Instant Disbursements for Insurance,” a collaboration with Ingo Payments, smaller insurers are particularly hindered by these barriers, although many plan to adopt real-time payment systems in the coming year. The report explores these obstacles and the strategies insurers are using, including partnerships with FinTechs, to accelerate adoption.

Challenges in Implementing Real-Time Payments

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A major barrier to implementing real-time payments for insurance companies, particularly smaller firms, is the significant cost of integration. According to the report, 82% of small insurers cite the expense of implementing real-time payments as a key issue. This challenge is compounded by concerns about fraud and data theft, with half of small insurers expressing reservations about the risks associated with adopting new payment technologies. Additionally, 32% of insurers highlight the lack of transparency in payment processes as a major obstacle. These concerns contribute to a slower adoption rate, despite the growing demand for quicker, more efficient claims processing.

Despite these challenges, 87% of small insurers who have not yet implemented real-time payments plan to do so within the next year. This reflects a growing awareness that the benefits of faster payments — such as improving customer satisfaction and retaining policyholders — outweigh the initial implementation costs.

Larger Firms Shift Toward Real-Time Payments

While small insurers face considerable hurdles, larger companies are quicker to embrace real-time payments. According to the report, 69% of large insurers view real-time payment capabilities as very or extremely important to their business. This contrasts with 33% of small insurers who share that view. Larger insurers have the resources to overcome the initial barriers of cost and integration, allowing them to implement real-time payment solutions more effectively.

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Most real-time payment adoption in the insurance sector comes from business-to-business (B2B) transactions, with small insurers using these systems for operations with partners rather than direct claimant payouts. For larger insurers, however, real-time payments offer a competitive edge by improving cash flow management and strengthening relationships with partners. The ability to offer faster payouts is viewed as crucial to maintaining a competitive advantage in the modern insurance landscape.

FinTech Partnerships: A Key Solution for Overcoming Barriers

To drive the adoption of real-time payments, many insurance companies are turning to FinTech partnerships. According to the report, 82% of large insurers plan to collaborate with FinTech firms to help reduce the high costs of implementation, simplify integration and provide the technological infrastructure necessary for seamless payments. Notably, digital giants like PayPal and Stripe are favored by insurers for their expertise in enabling real-time payments, with 81% of insurers indicating a preference for partnering with these companies.

In addition to streamlining claims payments, insurers are also leveraging FinTech partnerships to offer innovative embedded insurance products, such as digital coverage for travel or event ticket purchases. With consumer demand for instant payouts growing, these collaborations are seen as a way for insurers to meet customer expectations, drive revenue and enhance loyalty, positioning real-time payments as a key component of the industry’s future.