Digital Payment Fraud Threatens Insurance Sector

Global insurance companies are facing escalating financial risks from payment-related fraud, with annual losses reaching approximately USD 1.14 million per company. The rapid expansion of digital and mobile payment channels has intensified this threat, prompting experts to warn that delayed detection of fraudulent transactions could escalate into large-scale claims fraud, resulting in significantly higher financial damage.

These insights are drawn from the Adyen Index: Singapore Digital Report, which analysed digital payment trends within the insurance industry. The report highlights a generational shift in customer behaviour: Generation Z and Millennial clients increasingly prefer purchasing insurance through mobile devices, posing challenges for traditional insurers still reliant on legacy transaction systems. According to Adyen, 27% of insurers globally report annual losses exceeding USD 1.14 million due to fraudulent transactions.

Adrian Davis, Adyen’s Commercial Lead, emphasised:
“Many insurance providers underestimate the impact of modern payment systems. Upgrading payment processes not only mitigates fraud risks but also enhances operational efficiency and drives sales growth.”

The report underscores that digital-first insurers are better positioned to meet evolving customer demands, while traditional players face high operational costs and slower adaptation due to outdated infrastructures. Subscription-based payment models are gaining importance: currently, less than 30% of insurers worldwide offer subscription payments, but 79% plan to invest in such solutions within the next year.

Preferred Payment Methods Among Customers

Failed payments remain a critical challenge. Outdated card information, insufficient balances, or technical errors can result in lost policies or unintended policy lapses. In Singapore, 89% of customers cancel transactions if their preferred payment method is unavailable, highlighting the need for flexible systems.

Adyen recommends solutions such as automated card updates, intelligent retry processes, and tokenisation. For example, HDI Seguros leveraged Adyen’s real-time account updates and intelligent retry systems to increase authorisation rates from 88% to 91%, generating an additional USD 226,600 in annual revenue.

In conclusion, modernising payment infrastructure and adopting flexible digital payment solutions are no longer optional for insurers. They are essential strategies not only to maintain competitiveness but also to safeguard against rising fraud risks in an increasingly digital marketplace.