UK insurers face competing pressures: FCA Consumer Duty requirements demanding demonstrable customer outcomes, digital-first challengers capturing market share, and legacy infrastructure constraining innovation. Yet many respond by launching multi-year core system replacement programs that absorb capital whilst overlooking the most customer-facing process: claims settlement.
Consider a typical home insurance claim. A policyholder's burst pipe floods their kitchen. The insurer approves repairs, but the policyholder must pay contractors upfront, collect receipts, and wait longer than expected for reimbursement. Throughout this period, they're effectively funding their own claim whilst experiencing the financial stress and uncertainty that undermines confidence in their insurer.
This operational reality creates immediate friction at the moment insurers should demonstrate value. Under the FCA's Fair Value Framework, such delays represent customer friction requiring mitigation. Claims operations modernisation addresses customer satisfaction, fraud prevention, and regulatory compliance simultaneously, delivering impact within months rather than years. Modern payment solutions, with lean funding architectures and delegated authorisation capabilities, enable this transformation without the implementation complexity of traditional payment modernisation.
In this article, we examine why claims settlement modernisation should be prioritised in digital transformation roadmaps, the operational improvements it enables, and the implementation approach delivering measurable results without wholesale system replacement.
Index |
The FCA’s Consumer Duty is no longer a "new" project; it’s now the standard for how firms are supervised. Since July 2024, the rules have applied to both new and legacy products. Now, as we move through 2026, the FCA is shifting its focus to enforcement. The regulator no longer wants to hear what your policy should do—they want to see the data on what it actually does. Firms must now use real-world claims and settlement data to prove they are delivering fair value.
The Fair Value Framework requires demonstrable outcomes at critical touchpoints. Recent analysis from the FCA highlights sluggish settlement processes as indicators requiring attention. Lengthy reimbursement may create foreseeable harm under Consumer Duty principles, prompting insurers to demonstrate operational improvements.
Digital-first insurance providers have demonstrated that superior user experience drives market share gains. Whilst these challengers represent a small share of total UK premiums, their high NPS scores and digital capabilities influence customer expectations across the industry, creating urgency around transformation initiatives that deliver tangible customer benefits.
Core system replacement programs typically span 3-5 years and require tens of millions of pounds, absorbing scarce IT resources whilst introducing significant implementation risk. This creates analysis paralysis: insurers recognise transformation needs but struggle to identify initiatives balancing impact, investment, complexity, and risk.
The solution lies in strategic modernisation of specific operational areas delivering disproportionate value. Claims settlement represents exactly this high-leverage opportunity - a customer touchpoint where modern payment infrastructure can deliver immediate improvements in experience, efficiency, and compliance.
Claims experience drives customer loyalty more powerfully than price or features. A policyholder experiencing smooth, rapid settlement becomes an advocate who renews policies and generates referrals. One who faces delays and unexpected out-of-pocket costs becomes a detractor likely to switch providers at renewal.
Traditional processes create systematic dissatisfaction: policyholders fund repairs upfront, collect receipts from multiple contractors, and wait for reimbursement. This creates financial stress and administrative burden at precisely the moment insurers should demonstrate value. Under the FCA’s fair value requirements, this friction represents an outcome requiring operational improvements to demonstrate Consumer Duty compliance.
Modern virtual card issuance with instant provisioning eliminates these friction points entirely. Policyholders receive funds immediately via digital delivery or mobile wallet integration like Apple Pay, enabling immediate payment to contractors both in-store and online. This immediate relief provides peace of mind whilst eliminating the out-of-pocket situation completely. Branded virtual cards displaying insurer logos maintain the customer relationship throughout the claims journey, reinforcing brand engagement at the critical moment when loyalty is earned or lost.
Traditional settlement involves multiple manual touchpoints consuming substantial staff time. Claims handlers review receipts, finance teams reconcile payments, and approval workflows create bottlenecks that delay settlements and frustrate both customers and staff.
|
Settlement method |
Timeframe |
Reconciliation |
Approval workflow |
|
Cheque |
7-10 days |
Manual |
Multi-level |
|
Bank transfer |
3-5 days |
Manual |
Multi-level |
|
Virtual card |
Instant |
Automatic |
Dashboard-enabled |
Modern solutions automate this complexity through three key capabilities. Unique Virtual Card Numbers (VCNs) issued per claim simplify reconciliation - the system automatically matches transactions to specific claims without manual intervention. Dashboard interfaces empower claims handlers to create and manage virtual cards directly, removing multi-level approval bottlenecks that slow settlements during high-volume periods. Lean funding architectures provision cards instantly without requiring individual card funding, eliminating the treasury management complexity that traditionally constrains virtual card implementations.
Insurance fraud remains expensive and evolving. Detected fraud cases rose notably between 2023 and 2024. This trend was expected to continue through 2025 - official figures are yet to be released - with digital evidence manipulation emerging as a recognised risk vector according to the Association of British Insurers. Fraudsters increasingly use sophisticated technology creating realistic damage photos or invoices passing initial inspection, making traditional document verification less reliable.
Traditional bank transfers offer minimal prevention capabilities. Once approved, funds become available for any use without spending visibility or control. Post-payment fraud detection relies on identifying suspicious patterns after funds have been transferred and potentially withdrawn - recovery becomes complex, expensive, and frequently unsuccessful.
Modern payment infrastructure shifts the focus from detection to prevention through programmable spend controls. Virtual cards can be issued with merchant category code (MCC) filtering ensuring funds are only spent at appropriate businesses. A £2,000 plumbing claim restricts spending to plumbing and hardware suppliers, preventing cash withdrawals or off-category purchases even if the claim was approved based on manipulated evidence. Pre-configured transaction limits aligned with approved claim amounts prevent expense inflation regardless of invoice authenticity.
This "circuit breaker" approach proves particularly valuable against evolving fraud threats. Even when sophisticated attacks bypass initial detection, programmable controls prevent funds leakage. Delegated Authorisation capabilities enable real-time intervention - if suspicious transaction patterns emerge, insurers can block cards immediately pending investigation, then reactivate or reissue once matters are resolved.
The economic impact proves substantial: preventing fraud requires no recovery effort, write-off, or relationship damage. The operational cost of prevention through automated controls is minimal compared to resource-intensive investigation and recovery processes.
Traditional settlement methods retain fundamental constraints limiting both efficiency and control:
These constraints aren't execution deficiencies but inherent limitations of infrastructure designed for a different era.
Contemporary payment infrastructure purpose-built for insurance claims addresses fraud prevention, operational efficiency, and customer experience simultaneously through integrated capabilities:
Lean funding architecture - Modern solutions eliminate the complexity of funding individual cards separately. Traditional virtual card implementations require insurers to fund each card with specific amounts, creating treasury management overhead and liquidity constraints. Lean funding models provision cards instantly without individual card funding requirements, drastically simplifying implementation, reducing finance team workload, and enabling rapid scaling during high-volume claims periods without funding bottlenecks. These architectures operate under e-money safeguarding requirements compliant with the UK Payment Services Regulations 2017.
Instant disbursement with mobile accessibility - Virtual cards can be issued within minutes, enabling immediate funds availability via digital delivery through SMS or email, with mobile wallet integration supporting Apple Pay for convenient in-store and online usage. This eliminates policyholder out-of-pocket periods entirely whilst maintaining high accessibility across payment scenarios.
Programmable controls with Delegated Authorisation - Pre-configured spend parameters, including merchant category code filtering and transaction limits, aligned with claim values prevent inappropriate spending. Delegated Authorisation capabilities enable real-time card blocking and transaction intervention when suspicious patterns emerge, providing fraud prevention teams with immediate response capabilities rather than post-payment recovery challenges.
Agent empowerment through Portal dashboards - Purpose-built interfaces enable claims handlers to create and manage branded virtual cards directly without multi-level approval processes. This removes operational bottlenecks whilst maintaining appropriate governance controls, allowing agents to respond immediately to customer needs during critical claims moments.
Branded customer experience - Customisable virtual cards display insurer branding and logos, maintaining customer relationships and brand engagement throughout the claims journey. This reinforces the insurer's presence and commitment at the moment customer loyalty is earned, rather than presenting as a generic bank transfer.
Unique VCN reconciliation - Issuing unique Virtual Card Numbers per claim automatically matches transactions to specific claims, completely eliminating manual reconciliation requirements. Finance teams gain real-time visibility without administrative burden, whilst unique identifiers enable precise tracking for compliance and auditing purposes.
Real-time reporting and intervention - Comprehensive visibility into settlement status, spending patterns, and operational metrics enables continuous improvement whilst supporting Consumer Duty evidence requirements and fraud monitoring.
“Virtual cards and embedded finance are streamlining the claim payout process. These technologies enable instant access to funds; eliminating delays and reducing paperwork for policyholders, while also offering insurers better transparency and fraud prevention tools.”
Rehana Mitha
Managing Director
Edenred Payment Solutions
|
Capability |
Traditional approach |
Modern solution |
|
Funding model |
Individual payment per claim |
Lean funding without individual card funding |
|
Fraud intervention |
Post-payment detection |
Delegated Authorisation for real-time blocking |
|
Claims handler workflow |
Multi-level approvals required |
Portal dashboard with governance controls |
|
Reconciliation |
Manual matching of transactions |
Unique VCN per claim, automatic matching |
|
Brand presence |
Generic bank transfer |
Branded virtual cards with insurer logo |
|
Spend controls |
None (full funds available) |
Pre-configured MCC filtering and limits |
|
Treasury management |
Complex per-card funding |
Simplified lean funding architecture |
Integrating modern payment capabilities doesn't necessitate wholesale infrastructure replacement. Contemporary platforms offer API-based integration augmenting existing claims management systems. Implementation connects claims systems to payment platforms via secure APIs - when handlers approve claims, systems trigger card issuance with configured spending controls and deliver card details through chosen communication channels.
Critical implementation factors:
|
Consideration |
Requirement |
Approach |
|
Data security |
PCI DSS compliance |
Payment platform maintains certification |
|
System integration |
API connectivity |
RESTful APIs without core system changes |
|
Funding complexity |
Treasury simplification |
Lean funding model eliminates individual card funding |
|
Scalability |
Volume spike handling |
Cloud infrastructure manages catastrophic event surges |
Selecting platforms providing lean funding capabilities minimises integration complexity and treasury management overhead. Implementation timelines prove substantially shorter than core replacements, depending on governance and IT approval cycles.
Claims settlement modernisation enables phased rollout delivering measurable value at each stage, reducing risk whilst building organisational confidence through demonstrated results.
Select claim categories where traditional settlement creates most friction whilst offering clear merchant category parameters for spending controls:
Ideal pilot categories:
Define success metrics upfront:
Prioritise platforms offering lean funding capabilities, Delegated Authorisation for fraud intervention, and Portal dashboard access for claims handler empowerment. Document baseline performance across all metrics before launching, enabling rigorous ROI assessment and Consumer Duty evidence gathering.
Expand across additional categories prioritising volume impact, customer friction reduction, fraud vulnerability, and operational efficiency gains. Configure appropriate spending controls for each category - contents claims might warrant broader merchant permissions than specialised repairs, whilst higher-value claims might require additional workflow steps within simplified approval frameworks.
Capture operational feedback systematically. Claims handlers provide insights into customer reactions and process refinements. Finance teams identify reconciliation improvements enabled by unique VCNs. Fraud prevention specialists monitor transaction patterns, refining MCC restrictions based on emerging threats. Customer service teams gather policyholder feedback on settlement experience improvements.
Document quantified results building stakeholder support for full deployment. Successful rollouts typically demonstrate settlement time reductions from days to minutes, measurable NPS improvements, quantified fraud prevention through spending controls, and operational cost reductions from reconciliation elimination and workflow simplification.
Scale across all suitable categories, integrating capabilities into standard workflows rather than maintaining separate processes. Complete comprehensive training equipping all claims handling staff with dashboard proficiency, fraud teams with Delegated Authorisation intervention protocols, and customer service representatives with policyholder communication approaches.
Address change management through clear communication about benefits, visible executive support, and operational success stories from rollout phases. Update process documentation covering operational procedures, fraud intervention protocols, and customer communication templates.
Establish quarterly review processes for continuous improvement, Consumer Duty evidence gathering, and fraud pattern monitoring. Reviews should assess transformation impact against original objectives whilst identifying expansion opportunities based on category performance and customer segment preferences.
Rigorous measurement determines whether claims modernisation achieves intended objectives whilst providing regulatory compliance evidence.
|
Metric |
Key performance indicator |
|
Settlement speed |
Approval to availability |
|
Customer satisfaction |
NPS for claims experience |
|
Fraud prevention |
Prevented losses through controls |
|
Operational cost |
Total cost per claim |
|
Staff productivity |
Claims processed per FTE |
|
Approval efficiency |
Multi-level approvals eliminated |
|
Consumer Duty |
Fair value evidence |
Performance varies based on baseline processes and implementation approach
Settlement speed provides immediate quantifiable metrics addressing Fair Value Framework requirements. Customer satisfaction comparisons between traditional and modern settlement demonstrate experience improvements supporting Consumer Duty outcomes. Fraud prevention effectiveness, measured through spending control impact and prevented leakage, quantifies security improvements. Cost per claim analysis capturing processing, reconciliation, and approval workflow efficiencies demonstrates ROI. Unique VCN reconciliation impact on finance team productivity provides operational efficiency evidence.
In commoditised markets with standardised products and frictionless switching, operational excellence in claims handling represents a primary differentiator. Superior claims experiences build brand loyalty, reduce acquisition costs, and create sustainable advantages difficult for competitors to replicate.
A seamless claims experience is a strategic advantage:
The FCA's intensified supervision through 2026 means demonstrating good outcomes through data becomes regulatory necessity rather than competitive choice. First-movers building a reputation for superior claims handling benefit from compounding brand advantages as customer expectations rise.
Digital transformation doesn't require wholesale infrastructure replacement. Strategic modernisation of claims settlement delivers measurable improvements in customer satisfaction, fraud prevention, regulatory compliance, and operational efficiency within months rather than years.
Claims settlement represents the highest-leverage transformation opportunity available: the customer touchpoint most profoundly influencing loyalty, the operational area with greatest efficiency potential, the fraud domain where programmable controls enable prevention over detection, and the regulatory touchpoint where Fair Value evidence is most readily demonstrated.
Implementation follows a proven path:
The business case strengthens as regulatory requirements intensify and fraud threats evolve. The FCA's Consumer Duty makes customer outcomes a compliance imperative with intensified supervision through 2026 focusing on empirical fair value evidence. Digitally manipulated fraud evidence demands payment-level controls preventing funds leakage. Programmable virtual cards with MCC filtering and Delegated Authorisation provide circuit breaker functionality limiting damage even when sophisticated fraud bypasses initial detection.
Lean funding architectures eliminate the treasury management complexity that historically constrained virtual card adoption, enabling rapid implementation without individual card funding overhead. Portal dashboards empower agents to respond immediately to customer needs without multi-level approval delays. Unique VCNs per claim eliminate reconciliation burden entirely whilst providing audit trail clarity. Branded virtual cards maintain customer relationships during the critical moments determining loyalty.
Insurers evaluating transformation priorities should assess current processes against modern standards, identify specific friction points affecting customer outcomes, quantify fraud exposure to evolving digital threats, and build rigorous business cases using measurable KPIs across customer satisfaction, operational efficiency, fraud prevention, and regulatory compliance.
The transformation opportunity is clear. The implementation path is proven. The regulatory imperative is established. Modern payment infrastructure with purpose-built capabilities for insurance claims enables this transformation without the complexity, cost, or risk of wholesale system replacement.
The time to begin is now.
Edenred Payment Solutions provides virtual card technology designed specifically for insurance claims settlement. Our platform enables UK insurers to modernise claims operations through: