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6 min read

A Beginner’s Guide to Insurance Payment Operations

Within the insurance industry, payments stand out as a priority pain point that must be solved. Security risks, slow payments, low visibility into payment data, outdated payment systems and manual processes negatively impact costs, time and experiences throughout payment cycles and erode trust between insurers and their policyholders.

That is why it is critical for the insurance industry to elevate how it operates and delivers value. 

By adopting digital tools, platforms and strategies, organizations can remain competitive in a rapidly evolving digital landscape. Improved payment speeds and predictability address frustrations caused by outdated payment systems and manual processes. Not only does this enhance the policyholder experience, optimize processes and drive innovation, but it also reduces the negative impacts of unpredictable cash flow, manual errors and payment security created by legacy systems.

As the industry continues to expand, insurance payments and the demand for instant payments will only increase. In 2022 alone, consumers received $1.37 trillion in insurance claim payouts. Of this amount, 20%—or $277 billion—was delivered instantly. 

The future of insurance payments is a policyholder experience that is seamless, fast and convenient.

Examining the Traditional Landscape of Insurance Payments 

Like many industries outside of the technology space, the insurance industry's reluctance to modernize can be traced back to a lack of understanding of digital infrastructure and concerns over the amount of time and money required to digitize. This resistance is industry-wide, resulting in policyholders experiencing slow payments and errors, and insurance companies accepting cash flow inefficiencies and low visibility into payment data . 

The traditional insurance payment journey revolves around manual data entry, invoice processing and reconciliation. Policyholders file claims and wait for insurers to manually comb through data and process the claims. Once claims are approved and processed, policyholders receive payouts via paper checks.

Manual processes involving paper checks leave room for human error, increase processing times and create security risks. These labor-intensive processes can also lead to disrupted cash flow and prolonged payment schedules throughout the insurance payment lifecycle. 

As digital transformation takes over the insurance landscape, account-to-account (A2A) payments have emerged as a solution to these outdated systems. Organizations can automate and optimize operations to speed up payments in a cost-effective way, drive efficiency and increase payment security. 

The Impact of Digital Transformation in Payments on the Insurance Industry

With digital transformation overhauling the insurance industry, policyholders are starting to question these norms, seeking providers that can deliver faster payouts and a seamless experience. This shift has led more than one-quarter of policyholders to switch providers. As a result, 74% of insurance firms plan to incorporate real-time payment capabilities over the next 12 months.  

Insurance companies that work toward faster payments, automation and streamlined processes will meet the growing need for improved policyholder experiences and improve policyholder retention. Additionally, they can expect cost-saving benefits that will improve cash flow, payment predictability, payment security and operational efficiency. 

Deploying Modern Technologies Dwolla_Beginners Guide Insurance Payments_Social Posts_Content_Phone Graphic

One of the most effective ways for insurance companies to start their digital transformation is to replace legacy systems with modern technology.

Here are two use cases we have enabled with Dwolla’s solution:

  • One pet insurance company spent up to seven days processing reimbursements through manual ACH transfers and paper checks. With Dwolla, digital ACH payments improved reimbursement efficiencies by over 800%, distributing reimbursements to policyholders five days sooner and saving over 92% in costs. 
  • Another insurtech company was losing time and money by spending two days each week issuing reimbursement checks to policyholders. After embedding Dwolla’s solution, with same day and standard ACH automated disbursement processes, transaction volume increased by 45% over 12 months

Selecting a platform that seamlessly integrates with existing systems and offers faster, more convenient payment options is foundational to digital transformation. As a result, insurers remain competitive and increase policyholder loyalty, retention and acquisition. 

The Future of Insurance Payments 

By embracing digital transformation, insurance companies can better serve policyholders at a pace that reflects modern-day customer expectations. However, if they want to future-proof themselves, they must understand emerging technologies and practices in embedded finance, artificial intelligence (AI) and instant payments.

Embedded Finance

With embedded finance, non-financial platforms can offer payments or other financial products and services inside their application. This means companies like Uber, GOAT and Airbnb can embed a payments API, allowing customers to buy and sell goods or services on their platforms. 

To ensure customers’ payment experiences happen inside their own branded interface, organizations should embed a payment API and take advantage of the power of open banking. Open banking allows consumers to link their financial data from bank deposit accounts to trusted third parties for specific purposes like paying bills, investing and purchasing goods and services. This relationship between financial institutions, data providers and payment APIs creates a more interconnected customer experience.

Dwolla helps expand access to open banking by connecting financial institutions and data providers, enabling companies to embed financial services into their products and providing users with more access to—and control over—their data.


AI is rapidly transforming the insurance industry. It’s a powerful tool driving optimization, automation and enhanced processes, and frees insurers to focus on strategic initiatives, leaving the mundane to intelligent algorithms.

AI-powered chatbots can efficiently triage claim inquiries, analyze medical records and even settle straightforward claims – all in real-time. This not only speeds up customer service but also reduces administrative costs. On the underwriting side, AI can analyze vast datasets to assess risk factors with laser precision, leading to fairer premiums and personalized coverage options.

But AI's impact extends beyond operational efficiency. By detecting fraudulent activity with sophisticated algorithms, insurers can safeguard their bottom line and protect legitimate policyholders. And by analyzing weather patterns and other environmental data, they can develop new, dynamic insurance products that offer real-time coverage for evolving risks.

Instant Payments

Waiting to send, process, and receive funds is ancient history. People and businesses want to move and use money freely. With so many companies offering instant payment collection or distribution, failing to do so is no longer an option. 

Through the RTP Network® and FedNow Service®, businesses can send and receive payments to eligible bank accounts 24/7/365, making funds available in seconds as opposed to the 1-3 business days users might experience with the ACH Network.

Implementing Digital Payments with Dwolla 

With Dwolla Connect, insurance companies can send and receive payments directly from their bank accounts through a modern, developer-friendly, single API solution. Dwolla Connect’s bank-agnostic approach makes it easy to use existing commercial accounts at top U.S. banks to initiate payments by embedding Dwolla’s API into existing insurance applications and payment flows.

This provides the insurance industry with an effortless way to manage and reconcile payments across multiple financial institutions. Organizations can control the branding and user experience, and sensitive information is safeguarded by Dwolla Connect’s encryption and tokenization. It catalyzes digital transformation and facilitates the expansion of payment capabilities, automated efficiencies and real-time data visibility.


The insurance industry stands at a crossroads. Modernization through digital payments unlocks a future of seamlessly convenient experiences for policyholders, streamlined operations for insurers and a competitive edge.

Legacy systems hold back progress, riddled with inefficiencies, delays and security vulnerabilities. However, digital transformation through modern APIs like Dwolla paves the way for instant payments, automated processes and real-time data visibility. This not only enhances policyholder satisfaction and retention but also translates to significant cost savings and operational efficiency.

To thrive in this transformative era, insurance companies must move beyond the limitations of the past and embrace the future of payments. By modernizing infrastructure, leveraging innovative technologies and prioritizing policyholder experience, they can not only survive but excel as the insurance space continues to evolve. Will your enterprise be part of the digital transformation movement?

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