In an industry built on trust, few moments matter more than when a customer files a claim. Yet for many policyholders in the UK, this critical interaction reveals a glaring disconnect between promise and reality. As digital innovation reshapes financial services, insurers are under increasing pressure to evolve in underwriting, risk modeling, how they handle claims and, more specifically, how they pay out.
According to recent research involving 4,000 UK policyholders, the average insurance claim lifecycle exceeds 100 days. By contrast, most customers expect and often need resolutions within weeks, not months. As a result, customer dissatisfaction is rising. Nearly half of policyholders who switch insurers cite reasons unrelated to price, with claims handling and payout frustrations topping the list.
This is more than a customer service issue; it lays the groundwork for a digital transformation challenge.
The silent risk of disengagement
What's perhaps more concerning is the
It's a hidden crisis — one that traditional metrics may overlook. Without interaction, insurers miss opportunities to reinforce trust and offer their support, whilst also losing opportunities to gather insights. In a market where digital-first challengers offer onboarding and support with a few taps, silence can quickly turn into a switch.
Payments as a strategic switch
The most overlooked and potentially most impactful lever for change lies at the tail end of the claims journey: the payout.
More than half of policyholders prefer to receive their funds via direct deposit, yet fewer than 35% actually do in practice. Instead, many still receive checks or prepaid debit cards, introducing unnecessary delays and additional effort to access their money.
Meanwhile, 48% of policyholders say they would pay more for faster payouts. The message is clear: payout speed and flexibility are not just operational details; they are drivers of perceived value and customer loyalty.
Modernizing disbursements through digital wallets, real-time payments, or even flexible instalment options for large claims gives insurers a powerful opportunity to reduce friction, increase transparency, and provide support that feels immediate and tangible.
Reframing claims as part of customer experience
In many insurers' operating models, claims and payouts are still treated as back-office functions. But the competitive landscape is forcing a rethink, and insurers now must view the claims-to-payout journey as a critical part of customer experience, on par with underwriting, pricing, and service.
The good news? The tools to address these challenges already exist. Automation can accelerate claims triage and approval. Real-time tracking can keep policyholders informed. Digital-first disbursement options can deliver funds in minutes, not weeks. Most critically, insurers can communicate proactively to reassure policyholders during uncertain times, thus turning claims from a pain point into a brand differentiator.
From obligation to opportunity
The UK insurance market has one of the lowest customer retention rates globally. That's a symptom of outdated processes struggling to meet rising expectations, and it's also a call to action. As more insurers recognize the role of digital transformation in delivering better customer outcomes, payouts represent one of the ripest opportunities for reinvention.
Transforming the claims experience isn't just about reducing costs or streamlining operations. It's about meeting customers where they are, with empathy, speed and transparency. In doing so, insurers can shift their role from being a safety net that's reluctantly relied upon to a partner that policyholders trust.
In the end, it's not just about paying claims. It's about proving that you'll be there for customers when it matters most.
