Every part of the insurance payment experience, from how businesses collect premiums to how they pay out claims, affects day-to-day operations as well as customer satisfaction. The goal – and challenge – is to integrate payments intelligently across the entire policy and claims lifecycle, without adding cost or complexity. Below, we'll explain how insurance businesses are rethinking payment processing from the inside out.

What's in this article?

• What is insurance payment processing, and why does it matter?
  
• What payment methods do insurance businesses accept?
  
• How do insurers optimise recurring premium collections?
  
• How can insurance businesses reduce payment processing costs?
  

What is insurance payment processing, and why does it matter?

The global insurance market is projected to grow from USD$7.7 trillion in 2024 to USD$8.3 trillion in 2025. Insurance payment processing is how insurers move money, from collecting premiums to paying claims, issuing refunds, and distributing commissions. Payments are one of the most visible ways an insurance business interacts with its customers. A slow claims payout, clunky billing system, or limited payment options can hurt the customer experience and brand reputation over time. Fast, flexible, and reliable payments, on the other hand, can reinforce confidence and loyalty.

Insurance payments move in two directions:

• Incoming payments: These include premiums, deductibles, and policy fees.
  
• Outgoing payments: These include claims, refunds, broker commissions, and vendor payments.
  

Both are important. A missed premium might lead to lapsed coverage, while a delayed claim payment could damage the customer relationship. A well-run payment system eliminates unnecessary manual work and operating costs, reduces errors and delays, and helps maintain a healthy and predictable cash flow.

What payment methods do insurance businesses accept?

Insurers support a broad mix of payment methods. Customers typically expect to pay for insurance the way they pay for everything else: online, instantly, and with the payment method of their choice. When payments are hard to make, it can lead to policies lapsing, support queues filling up, and customer satisfaction dropping.

Here's what many insurers offer:

• Credit and debit cards: This is a common way to pay premiums. Cards are familiar, fast, and easy to update, and some customers prefer using them to earn points or rewards.
  
• Bank transfers: This is a lower-cost option for insurance businesses. It lets policyholders pay directly from their bank accounts. It’s widely used for recurring payments because of the predictable, low transaction fees.
  
• Digital wallets: Apple Pay and Google Pay are becoming standard checkout options, especially in mobile flows. With a payments provider such as Stripe, insurers can offer these with minimal effort and give customers a familiar one-tap experience.
  

Accepted payment methods also vary by market. What's common in the US isn't always popular or available in, say, Europe or Africa. For example:

• Single Euro Payments Area (SEPA) Direct Debit is the standard for cross-border payments in Europe.
  
• Boleto Bancário, Pix, or OXXO might be necessary to reach certain customer segments in Latin America.
  
• Mobile money, such as M-Pesa, plays a major role in premium payments and microinsurance in Africa.
  
• WeChat Pay and Alipay are popular in China. Customers in Japan favour a payment method known as Konbini, which involves convenience store payment codes.
  

If you're operating across borders or serving customers with global expectations, these differences matter. Stripe makes it easier to support local payment rails without rebuilding your backend for every new market.

Insurers also support different ways for customers to choose their payment method and input their payment details, including:

• Online portals and mobile apps: Many insurers offer a logged-in environment where customers can review bills, update saved payment methods, and pay directly, either manually or on a schedule.
  
• Autopay, also known as recurring billing: With this method, customers authorise the insurer to automatically charge their card or debit their account on a regular cadence (e.g., monthly, quarterly, annually).
  
• Payment links: These are helpful for customers who don't want to log in but are comfortable clicking a secure payment link.
  
• Retail or in-person payments: These types of payments are still necessary in some parts of the market. Some customers choose to go to an agent's office or use third-party payment kiosks – particularly for auto insurance – and pay with cash, cheques, or money orders.
  

How do insurers optimise recurring premium collections?

Recurring premium payments are the most important financial interaction for insurance businesses. Optimising premium collection means getting ahead of failure points, using smart automation, and making the payment experience invisible when it's working well.

Here's how insurers typically handle it.

Make autopay the norm

The most reliable collections happen automatically. Insurers that prioritise autopay enrolment tend to see:

• Higher retention
  
• More predictable cash flow
  
• Lower servicing costs
  

Insurers often build autopay into the onboarding process or offer small incentives, such as discounts or waived fees, to nudge enrolment.

Use intelligent billing infrastructure

A modern billing system should:

• Handle proration for mid-term changes
  
• Automate dunning (i.e., the sequence of follow-ups after failed payments)
  
• Support multiple billing frequencies and currencies
  
• Allow self-service updates when customers change payment methods
  

Stripe Billing, for example, powers recurring models for insurance platforms such as Inter.mx, including smart retries, usage-based billing, and embedded self-service portals.

Recover more from failed payments

Even with autopay, things can go wrong. Cards expire, banks reject transfers, and customers forget to update card details. Instead of sending the same failed payment email or trying again at the same time the next day, smarter systems use AI to retry the payment when it is most likely to succeed, and adjust the retry schedule dynamically, rather than sticking to a fixed pattern.

Stripe's Smart Retries tool uses those features to help insurers recover more revenue without needing to escalate to collections or cancel policies prematurely.

Offer multiple ways to pay

Some customers want to use credit cards so they can earn rewards. Others prefer direct debit. In some regions, local payment methods are the default.

A good system supports:

• Flexible payment methods (e.g., cards, digital wallets, bank transfers)
  
• Preferred payment scheduling
  
• Localised payment rails where relevant
  

Stripe allows insurers to support a wide range of global methods through one integration.

Prevent unnecessary churn

Some churn is intentional, such as when a customer shops around, finds a lower premium with another insurance business, and switches. But a significant proportion of churn is involuntary, caused by failed payments that were never resolved. To reduce this, keep payment methods up-to-date automatically via a card account updater (CAU); alert customers early when a payment fails; and build in grace periods that give the system time to recover a payment before coverage lapses.

Make reconciliation easier

Recurring billing can create messy records, especially when payments happen in high volumes, across multiple channels, currencies, or entities.

Automated reconciliation tools can:

• Match incoming payments to invoices in real time
  
• Split revenue across partners or internal departments
  
• Feed clean data directly into accounting systems
  

Insurtechs such as Cuvva use Stripe to automatically split every incoming premium payment between themselves and underwriting partners, which avoids manual revenue distribution.

How can insurance businesses reduce payment processing costs?

Payment processing can be costly. You can reduce the associated costs by making smarter infrastructure decisions that preserve experience and compliance while eliminating waste. Here's how.

Shift toward lower-cost payment methods

Card payments are convenient, but they come with interchange fees that add up quickly on high-premium policies. Direct debits are much cheaper, and in many cases, they're just as effective. Nudge customers toward direct debits for recurring billing, especially for large or annual payments, with an option to switch. Provide small incentives, such as waived fees, for using lower-cost methods.

In markets with real-time bank payment networks (e.g., the US, the UK, India), insurers are also starting to use instant rails that settle faster and cost less than card-based transactions.

Go digital

Paper checks, phone payments, and manual disbursements are slow and expensive.

The costs include:

• Postage and printing
  
• Staff time for processing, tracking, and reconciliation
  
• Customer service follow-ups when something goes wrong
  

Insurers that switch to digital payments often see dramatic savings. And less paper means fewer delays, fewer errors, and more scalable operations.

Consolidate systems

Many insurers have layered systems that they've built over time – one for premium collection, another for agent commissions, another for claims. Each system brings its own costs for maintenance, vendor fees, duplicate data entry, and reconciliation.

Avoid these extra costs by consolidating around a unified payment platform that:

• Handles multiple payment types and directions
  
• Integrates cleanly with core insurance systems
  
• Centralises reporting and reconciliation
  

Fewer platforms means lower licensing costs, less IT overhead, and clearer visibility into spending.

Use automation

Manual intervention is expensive. Every payment that has to be reviewed, retried, reconciled, or escalated by hand takes additional time and effort.

Modern payment systems automate:

• Smart retries for failed payments
  
• Policy status updates triggered by payment events
  
• Reconciliation across entities, currencies, and accounts
  
• Revenue sharing or fee splitting – especially in embedded or multi-party models
  

These tools reduce human error and free up teams to focus on higher-value work.

Prevent failed payments

Payment failures cause policy lapses, re-engagement costs, and lost lifetime value from preventable churn.

Insurers can reduce this by:

• Using account updater services to keep card details current
  
• Setting up smart retry logic instead of rigid billing attempts
  
• Proactively notifying customers about payment issues before policies are cancelled
  

Stripe's Smart Retries and automatic updater tools help insurers recover revenue that would otherwise be lost.

Turn some payments into a source of revenue

When insurers issue claim payouts using virtual cards, they can earn a slice of the interchange fee when that card is used. It's the reverse of what happens with premium collection via credit card. This can add up for high-volume claims or vendor payouts.

Some insurers now use this model to:

• Offset processing costs
  
• Fund other parts of the payment infrastructure
  
• Create margin in parts of the business where none previously existed
  

Stripe Issuing enables this kind of payout strategy.

Avoid unnecessary penalties and chargebacks

Compliance lapses can be expensive. So can payment disputes.

Avoidable costs include:

• Payment Card Industry Data Security Standard (PCI DSS) non-compliance fines
  
• Regulatory penalties for delayed claims payments
  
• Chargeback fees and related losses
  
• Labour costs tied to resolution and documentation
  

To reduce these costs, build systems that are secure, auditable, and resilient by design.