This article is by Michael Sharp, Insurance Payments Strategist, Duck Creek Technologies
A Growing Gap in Financial Experience
Over the past decade, financial services have undergone a profound transformation. In banking and fintech, real-time payments, seamless digital wallets, and fully integrated payment ecosystems have become the norm rather than the exception. Customers now expect instant transactions, full transparency, and frictionless experiences as standard.
Yet within the insurance industry, payments remain one of the most persistent areas of friction. Despite significant advances in underwriting, claims automation, and digital customer engagement, payment infrastructure has lagged behind. For many insurers, the gap between modern expectations and operational reality continues to widen.
This is not simply a matter of technology adoption. The reasons insurance payments lag other financial industries are structural, operational, and deeply embedded in how insurers manage financial flows.
The Complexity of Bidirectional Payments
One of the most defining differences is the bidirectional nature of insurance payments. Unlike banks or payment providers that primarily move money in single direction, insurers operate within a far more complex ecosystem.
They must collect premiums while also disbursing claims, often at high volumes and under time-sensitive conditions. Premium collection must be consistent and predictable, while claims payments must be fast, accurate, and responsive to customer circumstance. Add in commissions, reinsurance settlements, refunds, and vendor payments, and the result is a highly intricate web of transactions moving in multiple directions.
Managing this complexity requires coordination across policy administration, billing, claims, and finance systems, many of which were not designed to work together. The result is fragmented workflows, inconsistent processes, and limited visibility across the payment lifecycle.
Legacy Architecture as a Structural Barrier
Legacy systems are another significant factor. Many insurers still rely on core platforms built decades ago, before real-time payments and API-driven ecosystems became standard. As a result, these systems can struggle to support the levels of scale, interoperability, and agility required today.
While they continue to support critical operations, they can limit the ability to integrate with modern payment networks or enable real-time data exchange. In contrast, fintechs and digital banks were built with connectivity at their core, leveraging cloud-native architectures and open APIs to innovate rapidly.
For insurers, replacing core systems is complex and high-risk. As a result, many organizations layer new capabilities onto existing infrastructure. While this approach can deliver incremental gains, it often reinforces fragmentation rather than eliminating it.
Fragmentation and the Lack of Embedded Payments
Beyond legacy technology, the absence of embedded payment capabilities creates further inefficiencies. Payments are often handled through a mix of internal systems, external vendors, and banking partners, layered onto core platforms rather than integrated within them.
Without payments embedded into the core, insurers struggle to standardize processes or achieve end-to-end visibility. Transactions may follow different paths depending on product lines or regions, leading to inconsistencies in execution and reporting.
This fragmentation has tangible consequences. Manual handoffs delay payments, reconciliation becomes labor-intensive, and errors are more likely. For customers, this translates into slower claims payouts, limited transparency, and uneven experiences, especially when compared to the seamless interactions they encounter in other financial services.
Rising Pressure to Modernize
The pressure to modernize is intensifying. Customer expectations are being shaped by real-time experiences in banking, retail, and fintech. Policyholders increasingly expect instant claims payments, flexible payment options, and clear visibility into transaction status.
At the same time, regulators are demanding greater transparency, control, and auditability. Insurers must demonstrate stronger governance over financial flows while maintaining operational efficiency.
Competitive dynamics are also shifting. Insurtechs and digitally native entrants are bringing modern payment capabilities to market, raising the bar for the entire industry. Payments are no longer just a back-office function—they are a core component of customer experience and brand perception.
Reframing Payments as a Strategic Capability
Closing the gap requires a shift in mindset. Payments must be viewed not as isolated processes, but as an embedded, end-to-end capability that spans the enterprise.
This starts with aligning systems and processes around a unified payments strategy. Rather than managing premium collection, claims disbursement, and other transactions separately, insurers need a holistic approach that connects these flows and provides consistent control and visibility.
The Role of Embedded Payments
The shift is moving beyond standalone orchestration to a more integrated model of embedded payments within core insurance systems. Rather than treating payments as a separate layer alongside billing or claims, insurers are embedding payment capabilities directly into the core platforms that manage policy, billing, and claims.
This approach creates a single, connected payment journey that starts within the core system and continues through execution and reporting. Payments are initiated within familiar workflows and processed without handoffs between disconnected systems. Orchestration still plays a role, but as part of this embedded capability, handling routing, provider connectivity, and transaction management within one ecosystem.
This model also gives insurers flexibility. They can process payments through an integrated capability or work with external providers as needed, with connections managed through the core system instead of added on later. The result is less complexity, more consistency, faster execution, and clearer visibility across the payment lifecycle.
Unlocking Real-Time Visibility and Control
Equally important is the move toward real-time data and analytics. With improved visibility into payment flows, treasury and finance teams can make more informed decisions, optimize liquidity, and reduce reliance on manual processes.
Real-time insights enhance forecasting accuracy and enable faster responses to emerging risks or operational issues. They also support stronger governance by providing clear audit trails and greater transparency across the payment lifecycle.
A Phased Path to Modernization
Modernization does not need to be disruptive. Many insurers are adopting a phased approach, focusing first on high-impact areas such as claims payments or premium collection.
By prioritizing interoperability and scalability, organizations can build a foundation for continuous improvement. Over time, they can expand capabilities, reduce fragmentation, and move toward a more integrated payments ecosystem without compromising stability.
From Lagging to Leading
The industries that have led payments innovation did so by rethinking the role of payments in their business models. For insurers, the opportunity is clear.
By addressing the structural and technological barriers that have held them back, insurers can transform payments from a source of friction into a strategic advantage. Faster, more transparent payment experiences will improve customer trust and satisfaction. Greater visibility and control will enhance financial performance and operational efficiency.
Insurance may have lagged behind other financial industries in payments, but it is well positioned to leap forward. Those that act now will not only close the gap but help define the next generation of financial services.
Michael Sharp, Insurance Payments Strategist, Duck Creek Technologies
With over 20 years of experience across the insurance and payments industry, Michael Sharp brings deep expertise in the challenges carriers face across billing, collections, and claims disbursements. He understands how evolving payment capabilities are reshaping customer experience and operational efficiency and works at the intersection of insurance and payments to help organisations navigate complexity, modernise payment strategies, and respond to changing customer and regulatory expectations.
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