Why the insurance industry needs bulletproof payment solutions

South Africa’s economy has seen positive growth in the past year, and decreasing inflation and lower interest rates are easing consumer financial pressure. 

However, the cost-of-living crisis remains a challenge. Many households have looked to debt products for relief but struggle to keep up with repayments. It is estimated that South Africans allocate as much as 75% of their income to debt repayments. Preventative solutions like insurance are beginning to gain traction as a result, as insurance companies become more creative in designing products that better suit the varying needs of South African consumers. 

While it’s a positive sign that more consumers are receiving coverage, for insurers, the financial pressure many consumers face may lead to higher risk of fraudulent payments and failed collections. According to KPMG’s South African Insurance Survey, sales fraud and fraudulent life insurance claims made up 86% of fraudulent reported incidents made in 2022. In 2023, ASISA reported  R70 million in life insurance fraud losses.

In addition to mitigating rising fraud rates, insurers face challenges with high competition, even as demand rises. To stay competitive, they need to think about how their operations can outperform others and how they can continue to provide the best customer experience. Addressing pain points in payments processing is a key place to start to protect and drive revenue growth. 

Understanding payments challenges in insurance

Payments in insurance go beyond simple collections and claims payouts. Inefficient processes can lead to compliance blindspots that increase fraud risk, inaccurate financial reporting, delayed payments and frustrated policyholders. Insurers should be monitoring their internal processes to understand where their weaknesses lie and evaluating strategies that can optimise their processes while strengthening their value proposition. 

Unsuccessful premium collections 

Failed collections are a growing problem, with increasing debit order reversals on even legitimate transactions. The issue has escalated to the point where a major insurer challenged the payment association’s rules on how reversals are handled between policyholders and banks.

Reversals create reconciliation nightmares, increase chargeback costs and divert valuable resources from critical operations. Additionally, the policyholder may breach contractual terms and risk a successful claim at a critical time. 

One way to mitigate illegitimate reversals is switching from EFT Debits to DebiCheck. With DebiCheck, payments are authenticated in advance, preventing unauthorised reversals unless they violate the agreed mandate terms. DebiCheck protects both insurers and policyholders from fraudulent transactions that lead to admin costs. It also increases successful collection rates through authorised payments and flexible configuration options.

Delayed payouts 

When claims are made, policyholders typically want their payouts made immediately. This holds true especially for life and health insurance sectors, where timely payments are critical. Delays undermine an insurer’s reputation and break customer trust.

When claims are legitimate and approval processes are automated, the payout stage should not slow insurers down. Instant, 24/7 payouts reduce friction, improve competitiveness, and drive higher customer retention and revenue.

Slow payment fraud detection

Without real-time monitoring, fraudulent claims or payments may be discovered only after significant losses have occurred. High dispute volumes and manual processing also strain resources, delaying fraud detection.

API and AI-powered fraud prevention systems can help insurers reduce financial losses. Real-time data and alerts accelerate detection, ensuring risk decisions are based on the most accurate and up-to-date information. Over time, these tools strengthen internal controls and enhance policyholder risk assessments.

Fragmented payments and reporting systems

The South African Insurance Survey also highlights that fragmented internal processes and systems create complexities and friction within insurance organisations. From a payments perspective, when high transaction volumes are processed on siloed systems, these pain points are exacerbated. At the same time, insurance businesses will have a difficult time gaining a holistic, accurate and up-to-date view of transaction activity and financial performance. 

Streamlining processes is essential, but a complete system overhaul isn’t necessary. At Stitch, we work with our customers to seamlessly integrate with existing systems and workflows, making what they already have work better for them while providing new opportunities to grow their business. 

Uncomplicate insurance collections and claims with Stitch

Driving growth in Insurance can be challenging and unpredictable, but payments don’t have to be. Stitch is an ISO 27001 + PCI DSS Level 1 Certified payments partner providing leading enterprises with an end-to-end payments platform that can integrate with existing systems and streamline financial operations. 

Our platform is engineered to:

Improve collection rates – Ensure reliable premium collections with Stitch DebiCheck, designed to reduce failed collections and disputes. Stitch DebiCheck includes automated fallbacks to recover missed payments and flexible authorisation options to complete your mandate requirements online or in person.

Payout instantly, 24/7,365 – Our consumer research found that 56% of consumers would choose an insurance provider based on how easy it is to receive payment after a claim. Insurers can disburse funds immediately and rapidly reduce wait times with our always-o,n instant payouts.

Detect fraud before it’s too late – Insurers can protect margins using Stitch Shield, our real-time, built-in fraud detection and prevention solution. Clients can create custom rules for their use cases and integrate Shield with existing systems to effectively protect their business and policyholders from losses. 

Deliver personalized, white-glove service – We act as an extension of client teams, from integration to ongoing optimisation. We help clients resolve disputes, customise services work within your existing infrastructure, ensuring seamless policyholder experiences.

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FAQs

Why are reliable payments critical in the insurance industry?

Insurance payments involve recurring premiums and time-sensitive claims payouts. Payment failures can lead to lapsed policies, delayed claims, and loss of customer trust.

What payment challenges do insurers commonly face?

Insurers often deal with failed debit orders, delayed settlements, reconciliation complexity, fraud risk, and limited visibility across payment flows.

How do bulletproof payment solutions reduce risk?

Resilient payment infrastructure uses redundancy, real-time monitoring, and secure authentication to minimise downtime, errors, and fraud.

Which payment methods are most effective for insurance premiums?

Debit orders, verified mandates such as DebiCheck, and bank-based payments are commonly used due to their reliability and suitability for recurring collections.

How do modern payments improve claims payouts?

Instant and reliable payout mechanisms enable insurers to settle claims faster, improving customer satisfaction and operational efficiency.

Are modern payment solutions compliant with insurance regulations?

Yes. Payment providers design solutions to support regulatory, security, and audit requirements common in the insurance industry.

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