Why UK policyholders are losing faith in insurance products —and how payments can fix it
Executive Summary
The UK insurance industry plays a crucial role in providing financial security, yet many policyholders face challenges that weaken their trust in insurers.
In a market where switching providers is easy and competition is high, poor claims experiences are driving customers away.
From lengthy claims processing to outdated payout methods, inefficiencies in the system contribute to frustration and, in many cases, customer churn.
This report explores the key areas where policyholder expectations are not being met and how insurers can address these gaps.
• Claims delays erode trust –Policyholders expect a smooth and efficient claims experience, but long processing times create frustration and uncertainty. When claims take longer than expected, confidence in insurers weakens, increasing the likelihood of switching. Improving claims speed, communication, and transparency is critical to retaining customers and preventing churn.
• Payouts don’t match expectations – Many policyholders expect quick and convenient disbursements, yet outdated payment methods continue to create delays. A lack of flexibility in payout options increases frustration, particularly at a moment when policyholders expect fast financial relief. Modernizing payout methods— such as real-time bank transfers and digital wallets—can help insurers meet policyholder expectations, reduce friction, and strengthen loyalty.
• Policyholders aren’t just switching for price – While competitive pricing remains a key factor, claims handling and customer service are major reasons policyholders leave their insurer. A poor experience during the claims process, whether due to slow responses, lack of transparency,
or rigid payout options, can be just as damaging as an expensive premium. Insurers that fail to modernize risk losing customers to competitors offering a smoother, more efficient experience.
• Many policyholders hesitate to claim at all – Some policyholders avoid making claims due to concerns about process complexity, potential premium increases, or uncertainty over approval. This disengagement reduces customer interaction and weakens their connection to their insurer—which, over time, can lead them to question the value of their coverage and switch providers. By simplifying claims initiation, ensuring clear communication, and making policyholders feel supported, insurers can strengthen long-term customer retention.
To remain competitive, insurers must streamline claims processing, enhance payout flexibility, and improve transparency.
Addressing these issues will increase policyholder trust, reduce churn, and create a stronger, more customer-focused insurance experience.
Introduction:
A market at a crossroads
The UK insurance industry has the second-lowest customer retention rate globally, with 40% of customers switching their home or vehicle insurance provider. In such a highly competitive market, where policyholders have more choices than ever, customer loyalty is becoming increasingly difficult to secure. Nine in ten policyholders have switched insurers at some point, and one in three do so annually.
To better understand the factors driving these behaviors, we commissioned independent research surveying 4,000 UK consumers currently holding at least one insurance product. The findings reveal that while price is often assumed to be the main driver of switching, that’s not the full story. Nearly half of those who leave their insurer do so for reasons beyond cost, with claims processing and payout frustrations playing a major role. When policyholders encounter delays, inflexible payout methods, or uncertainty about approvals, they begin to question whether their insurer will truly support them when it matters most.
At the same time, many policyholders hesitate to claim at all, which presents a hidden longterm risk for insurers.
• 40% avoid claiming due to fear of premium increases.
• 33% feel the claims process is too long or complicated, discouraging them from starting it.
• 24% hesitate due to uncertainty over whether their claim will be approved.
This reluctance means fewer direct complaints about claims handling, but it also reduces engagement. When customers do not interact with their insurer, they may begin to question the value of their coverage—making them more likely to switch when renewal time comes.
Outdated payout methods further exacerbate frustrations:
• 58% prefer direct deposit for payouts, yet only 35% actually receive funds this way.
• Many policyholders still rely on cheques or prepaid debit cards, adding unnecessary delays and friction.
THE RESULT?
A disconnect between what policyholders expect and what insurers currently provide. Switching behavior, poor claims experiences, and disengagement are all connected—if insurers fail to act, churn will only increase. This report examines the critical role that payments play in policyholder retention and explores how insurers can modernize claims and payouts to reduce friction, improve engagement, and rebuild trust.
By leveraging faster processing, digital disbursements, and transparent claims tracking, insurers can not only meet rising customer expectations but also gain a strategic advantage in an increasingly competitive market.
Key findings:
1 | The claims experience: A
growing pain point
For policyholders, insurance is meant to provide reassurance that, when the worst happens, financial support will be readily available. However, the claims process itself is often a source of frustration rather than relief. From delays in approvals to extended payout timelines, policyholders find themselves waiting significantly longer than expected to receive the funds they need.
The data underscores just how widespread this issue is:
• The average claim lifecycle exceeds 100 days, with policyholders expecting the process to take far less time.
• 60% of claimants said their claim took longer than expected, with 24% reporting that it took significantly longer.
• The problem is even more pronounced in renters’ and disability insurance, where claimants often face the longest delays despite being among the most financially vulnerable.
SURVEY QUESTIONS:
A“Last time you made an insurance claim, how long did each of the following aspects of the process take in terms of timings?”
B“In an ideal world, how long do you think each of the following stages of an insurance claim should take?”
Average
Prolonged wait times not only test policyholders’ patience but also weaken their trust in their insurer. Feeling unsupported during a stressful time can lead to increased inquiries, complaints, and lasting negative perceptions.
For those who have already gone through a lengthy claims process, dissatisfaction can become a key motivator to switch providers at renewal.
If a competitor promises faster, more efficient claims handling, these policyholders are more likely to move their business elsewhere.
Opportunities for insurers: Automating and accelerating payouts
By automating approvals and providing real-time updates, insurers can reduce claim processing times and minimize frustration.
• Risk-based automation for straightforward claims can fast-track approvals, allowing human assessors to focus on more complex cases.
• Real-time tracking and automated notifications help policyholders feel informed throughout the process, reducing unnecessary customer service inquiries.
• Data-driven decision-making can improve payout accuracy and minimize disputes, strengthening trust between insurers and customers.
2 | The payout gap: Expectations vs. reality
For policyholders, filing a claim is just the first step—the real test is how quickly and conveniently they can access their funds. While many insurers have digitized parts of the claims process, payout methods have failed to keep pace with consumer expectations.
• 58% of policyholders prefer direct deposit for their payout, yet only 35% actually receive funds this way.
• 18% still receive cheques, adding unnecessary delays and requiring additional steps to access their funds.
• 48% of policyholders are willing to pay more for a faster payout, proving that speed is a competitive advantage, not just a convenience.
SURVEY QUESTIONS:
A“How would you ideally like to pay your insurance vs. receive your payout?”
“Last time you made an insurance claim, how did you pay your insurance vs. receive your payout?”
C“Would you pay more for a speedy payout?”
Many policyholders expect immediate access to their funds, yet outdated payout methods introduce unnecessary delays at a critical time. Receiving a cheque means waiting days—or even weeks—for funds to clear, which can be particularly stressful when claimants need financial relief. Even when the claim itself is processed efficiently, a slow or inconvenient payout can damage trust in the insurer, making policyholders more likely to consider alternatives.
For insurers, payout speed and flexibility are no longer just operational concerns—they are competitive differentiators.
The fact that nearly half of policyholders are willing to pay for a faster payout underscores its value. Insurers that fail to modernize disbursements risk losing customers to competitors offering faster, more seamless payout experiences.
These gaps between policyholder expectations and reality can severely impact trust in the insurer, particularly when delays prevent claimants from meeting urgent financial needs.
Opportunities for insurers: Expanding disbursement options for greater efficiency
Policyholders want payout options that match their financial needs— insurers who fail to offer this risk losing them to competitors.
• Direct deposit adoption should be prioritized, reducing reliance on outdated methods like cheques.
• Offering digital wallet and instant payment options ensures policyholders can choose how they receive their funds.
• Providing installment-based payouts (e.g., annuity payments) can benefit those managing large claims, offering financial flexibility and reducing payout disputes.
For decades, price has been the dominant driver behind insurance switching behavior. However, the data suggests that policyholders are no longer making decisions based on price alone. Claims experience and customer service are playing an increasingly critical role in retention.
• 77% of policyholders have switched insurers, with 28% doing so in the past year alone.
• While 54% cited lower premiums as their reason for switching, 17% switched due to poor claims handling, and 25% due to poor customer service.
• Among those who have filed a claim in the past two years, the likelihood of switching due to poor claims handling increases significantly.
Reasons for switching insurers
SURVEY QUESTION:
A“Which of the following are reasons why you would look to switch insurance providers?”
This shift suggests that policyholders are not just looking for the cheapest option; they are looking for reliability when it matters most. A poor experience during the claims process, whether due to delays, lack of communication, or rigid payout options, can erode trust, making policyholders more willing to explore alternatives. This is especially true for those who have recently made a claim, as a negative experience makes them even more likely to leave.
Meanwhile, barriers to switching are lower than ever. Digital-first insurers offer seamless onboarding, and comparison sites make it easier for policyholders to identify better service options in minutes. As a result, insurers that fail to prioritize efficiency, transparency, and flexible payouts risk losing customers— not because of pricing, but because of dissatisfaction with how their claims are handled.
For insurers, losing customers due to dissatisfaction with claims processing is entirely avoidable—but only if they view claims and payout efficiency as core retention strategies rather than back-office functions.
Opportunities for insurers: Strengthening claims and payout processes
A seamless claims-to-payout experience can be a key differentiator, giving policyholders a compelling reason to stay.
• Offering digital-first claims submission ensures policyholders can start a claim quickly without unnecessary paperwork.
• Embedding flexible payout options directly into claims platforms creates a smooth, hassle-free experience.
• Building a proactive communication strategy— such as automated followups and transparent claim status tracking—can improve policyholder confidence.
4 | The cost of not claiming: How disengagement leads to lost customers
While much of the discussion around claims focuses on delays and inefficiencies, a significant number of policyholders never even file claims in the first place. This represents a hidden risk for insurers, with major implications for customer engagement, retention, and long-term trust.
• 40% avoid claiming due to fear of premium increases.
• 33% feel the process is too complicated or lengthy.
• 24% hesitate due to uncertainty over approval outcomes.
• 19% of those who do file claims struggle to access their payout, reinforcing the perception that claiming is a hassle.
SURVEY QUESTION:
A“Which of the following factors are most likely to discourage you from putting in a claim on your insurance?”
At first glance, fewer claims might seem like a cost-saving advantage for insurers. However, when policyholders avoid claiming due to frustration or fear of financial penalties, they may begin to question the value of their coverage. Disengaged customers—those who never claim or interact with their insurer—are far more likely to switch providers at renewal.
With customer retention rates already low in the UK, the risk of churn is high. Acquiring a new customer can cost insurers between 5 and 25 times more than retaining an existing one, making disengagement an expensive problem. If policyholders don’t trust their insurer to support them when it matters most, they won’t hesitate to leave.
Unfiled claims aren’t just a missed engagement opportunity, they’re a warning sign of potential churn. Addressing the barriers that discourage claims—such as simplifying the process, ensuring transparency, and alleviating fears of premium hikes—can help insurers rebuild trust and retain customers.
Opportunities for
insurers: Making claims more accessible and transparent
Reducing claims hesitancy isn’t just about improving engagement, it’s about keeping policyholders from switching due to lack of trust.
• Upfront transparency on premium impacts can ease concerns about claim-related price increases.
• A simplified, digital claims initiation process with minimal paperwork reduces friction for policyholders hesitant to file a claim.
• Providing real-time status updates and decision timelines ensures policyholders don’t feel left in the dark, reinforcing confidence in their insurer.
Conclusion: Transforming insurance through smarter payments
The insurance industry is at a critical inflection point, where claims experience is just as important as coverage itself. While policyholders expect financial security and reliability, they are frequently met with delays, opaque processes, and outdated payout methods—leading to frustration, disengagement, and lost customers.
Customer loyalty is no longer a given. In a market where switching is easy and competition is high, insurers that fail to modernize risk losing customers who feel unsupported or undervalued.
This report highlights three key challenges insurers must address to retain policyholders and rebuild trust:
1. Claims processing is too slow, creating friction and frustration that weakens customer relationships.
2. Payout methods fail to meet customer expectations, adding unnecessary delays and stress at a critical moment.
3. Many policyholders hesitate to claim at all, and this disengagement can lead to questioning the value of their coverage, and ultimately switching providers.
Why smarter payments are the answer
By modernizing payment and claims strategies, insurers can:
✓ Reduce processing times with automation, real-time tracking, and faster settlements to prevent frustration before it starts.
✓ Improve policyholder satisfaction and retention by offering seamless, flexible payout options that align with customer expectations.
✓ Protect against churn by making claims easier, more transparent, and more customer-friendly—so policyholders feel supported when they need it most.
The insurance market is changing, and policyholder expectations are higher than ever. Those who invest in smarter, more transparent, and more efficient claims and payout experiences will not only improve customer trust but also secure long-term loyalty in an increasingly competitive landscape.
Final thought: Why insurers need an expert payment partner
To achieve these improvements, insurers need a payment strategy built for today’s policyholders. Partnering with a specialized payment provider can help insurers:
• Streamline claims-to-payout workflows, ensuring speed and efficiency.
• Enhance fraud prevention and security, increasing confidence in digital transactions.
By investing in payment innovation, insurers won’t just be reducing friction—they will be creating a competitive advantage in an industry where seamless claims and fast, reliable payouts define success.
Methodology
This research provides statistically robust insights into consumer attitudes toward online payments in the insurance sector.
Conducted by Sapio Research, the study examines policyholders’ experiences with claims processing and payouts, along with factors influencing satisfaction, retention, and engagement with insurers.
A quantitative online survey of 4,000 UK respondents ensured demographic and geographic representation.
The sample included a balanced gender split (49% male, 51% female) and a strong workingage segment (36% aged 25-44).
Employment varied, with 45% in full-time work, 21% part-time or self-employed, and 34% retired, students, or unemployed.
Regional distribution covered London (17%), South East (13%), and North West (11%), ensuring diverse perspectives.
The survey explored key themes such as claims processing times, payout preferences, trust in insurers, and switching behavior.
Rigorous quality controls, including pre-survey testing and response validation, ensured data integrity.
This structured approach delivers a data-driven perspective on policyholder expectations and the role of payment efficiency in consumer trust and retention.
About Nuvei
Nuvei is the Canadian fintech company accelerating the business of clients around the world. Nuvei’s modular, flexible and scalable technology allows leading companies to accept next-gen payments, offer all payout options and benefit from card issuing, banking, risk and fraud management services.
Connecting businesses to their customers in more than 200 markets, with local acquiring in 50 markets, 150 currencies and 720 alternative payment methods, Nuvei provides the technology and insights for customers and partners to succeed locally and globally with one integration.
