The option of instant payouts for insurance claims is proving to be a powerful drawcard in attracting and retaining customers, with an increasing number of digital-first insurers leading the way and promoting it as a point of difference. 

Advancements in technology, including automation, artificial intelligence and data analytics, mean insurers can now use technology to assess claims rapidly and accurately — thus eliminating the need for a lengthy review process, complex paperwork and an even longer wait for payment.

For consumers, there is a growing expectation that instant payments will be on offer for straightforward claims. For insurers, increased competition from emerging insurtechs underscores how crucial it is to get the digital claims experience right. 

How it works 

Arijit Chakraborty is managing director of Asia Pacific at Cover Genius, which partners with digital platforms, e-commerce marketplaces, travel companies and other businesses to embed insurance products directly into their user experiences. 

He says parametrics is a key component for accurately determining instant payments. 

“Consumers select insurance products at the point of purchase and Cover Genius utilises advanced data analytics and machine learning algorithms to calculate insurance premiums in real time,” he says. “Customers receive instant quotes based on their specific needs.”

To enable instant payments, predefined triggers are established, which are typically based on objective and measurable events such as natural disasters, flight delays or cancellations. Data sources such as weather monitoring services or travel databases are used to access accurate information related to these triggers. 

“This data allows us to determine if the triggering event has occurred,” says Chakraborty. “For example, in travel insurance, a trigger could be a flight delay exceeding a certain duration.

Since the parametric triggers are predefined and easily verifiable, the payment process can be expedited and customers receive instant payments directly using their preferred payment method, whether that is cash, credit or loyalty points with a provider.” 

Managing fraud 

While instant payments are growing in popularity, the concept can require a fundamental shift in thinking from insurers and relies on robust technology to help prevent fraud, notes Peter Klemt, CEO of travel insurer PassportCard, which offers instant payouts for some claims. 

“The reality is the technology is available to do this, but it requires more than just the technology. It requires … an understanding of data and sound predictive analytics to manage the triage processes that you want and need to offer instant payments,” says Klemt. 

“We have payment limits — and we’ll ask some specific questions to validate the claims and go through our fraud indicators. Algorithms and data analytics can analyse claim patterns, detect anomalies and assess the legitimacy of claims before initiating instant payments.” 

Similarly at Cover Genius, Chakraborty says a rigorous approach makes it easier to manage the risk of fraud. 

“Because we’ve got access to more data and advanced technology, we can pinpoint where the risks of fraud may be and develop methods to control that risk,” he says. 

Setting up for real-time payments 

Beyond fraud, capital risks are also a factor to consider, particularly during natural disasters that may impact a large number of customers at the same time. 

Insurers must maintain enough liquidity to settle a potential surge of instant payouts, which can reduce their working capital. 

The risk parameters built into parametric models can help predict the amount of required funds reasonably accurately, but insurers also need to make sure they have robust banking arrangements to facilitate greater-than-normal volumes of real-time transfers. 

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