Claims Disbursements: The Insurer’s Strategic Lever for Policyholder Retention

A flood. A car accident. Something unforeseen. A crisis for policyholders is a moment of truth for insurers. It is here where the promises made to win a policyholder’s business must be fulfilled to keep a policyholder’s business.

For many insurers, however, claims payments continue to rely on legacy capabilities that are built around slow and costly paper checks. At these critical moments, insureds are likely at their most anxious and in need of relief. Frictional delays in the indemnity process can be enough to cause a policyholder to reconsider their relationship with an insurer. This is why we say that claims payouts are a carrier’s primary driver of lifetime value (LTV), and an undervalued lever in the insurance customer experience.

How Claims Payments Impact Policyholder Loyalty

From national carriers to regional insurers, today’s policyholders have more options than ever when it comes to who they choose for insurance coverage. Barriers to switching are few, making it easy for a consumer to cancel a policy and move to another insurer that better fulfills their needs or provides better experiences.

The interesting aspect is that insurance, unlike any other industry, is one where the consumer hopes to never need the product. Without some disruptive event like a rate hike, the relationship is more set-it-and-forget-it. As long as an insurer is offering an intuitive, self-service billing and payment experience, it is likely that they’re meeting basic expectations that keep a policyholder loyal.

That instantly changes once a claim is filed. In this time of need, those months and years of convenient policy payments become afterthoughts. The claim payout experience is all that matters, as evidenced by a recent report that shows delayed payments increase a policyholder’s intent to switch insurance providers even if they’re otherwise happy with their insurer.

What do policyholders want from their claims payout? While payment flexibility is valued, the most important capability is speed. Studies show that nearly half of all claimants rate speed as the most valued part of the disbursement process. That’s no surprise. Slow disbursements are often cited as the central failure within disbursements, one which causes them to switch insurance providers.

Consider the following scenario:

A natural disaster strikes. At this moment, the claimant needs their claims payout to cover everyday essentials. Any friction within this process invites churn. Accenture reports that 30% of unhappy claimants switched insurers, with 47% considering it. One unsatisfactory experience is all it takes to undo a relationship that might’ve been years in the making.

What Are the Hidden Costs of Paper Disbursement Checks

Paper disbursements cost insurers more than policyholder loyalty. After factoring in fraud exposure, escheatment, and dispute resolution, the cost to issue a paper check rises up to $8 per transaction according to Bank of America’s research on digital insurance payments. Essentially, insurers are paying to disburse funds that leave them and their policyholders vulnerable.

The most glaring issue with paper checks—beyond a lack of timeliness—is fraud. 63% of organizations experienced attempted or actual check fraud in 2024, with checks identified as the payment type most frequently targeted. It’s a risk with no reward.

Conversely, a McKinsey report showed that insurers deploying automated claims processing technologies showed profit margin improvements up to 40%. In more specific terms, an insurance company that issues 50K claims payouts a year may spend upwards of $350,000-400,000 when limited to paper disbursements. Digital disbursements can lower these costs between 60-80%.

How Paymentus Manages the End-to-End Digital Disbursements Process

The main point of difference between Paymentus and other billing, payment, and disbursement providers is that our solution is purpose-built to go beyond the claim. An insurer’s goal is not to simply pay a claim. The goal should be to reduce the cost of processing the claim while simultaneously providing a unified inbound/outbound payment ecosystem that drives loyalty and turns policyholders into champions of the brand.

Paymentus helps insurers achieve this through a wide-ranging set of policyholder-friendly payout options that include:

• ACH and eChecks
• Debit cards
• Digital wallets (PayPal, Venmo, Apple Pay^®, and Google Pay^™)
• Real-Time Payments^® (RTP)
• FedNow^®, eChecks
• Wire transfers

An added benefit is that of transparency. Claimants can stay connected to their claims payout status via automated SMS (text) and email notifications. Self-service notifications offer the greatest peace of mind when insureds need it most, and help offload call volumes associated with claims questions, freeing agents to handle other pressing concerns.

Multiparty disbursements are another key element of the full Paymentus disbursements capabilities suite. Paymentus enables multiparty check management under a single claim, with dual-signatory authorization approval and multiparty authorizations for greater security and control. This also accelerates payouts while reducing cycle times for complex, multi-claimant settlements.

Paymentus also offers insurers access to more than one million service providers through the Paymentus Vendor Portal. By providing and securely validating their account information to register and store tax documents, vendors (e.g., autobody shops) are set up to provide fast, direct disbursements when the time comes, improving the policyholder experience and optimizing the claims supply chain.

At a time when every second matters, a second-best option won’t do. Insurers must partner with billing, payment, and disbursement providers that can accelerate payout times while reducing fraud and complexity. By doing so, insurers can meet the moment and every policyholder expectation.

For more information on how Paymentus can deliver the speed, security, and simplicity to drive claimant satisfaction, visit paymentus.com/insurance/insurance-disbursements. You can also contact us to speak with one of our insurance billing, payment, and disbursement experts.