That focus on the claims process is why so many insurers have poured time and money into reimagining claims filing as a digital-first, customer-initiated effort. It is a near industry-wide standard for customers to be able to initiate an auto or other damage claim using a mobile app to take photos, share details and receive claims estimates. From start to finish, this process can take just minutes.

But that's where the convenience ends and the friction begins. The majority of claims payouts today are still executed using paper checks or automated clearing house (ACH) deposits. These take time — including printing, mailing and eventual settlement; are expensive and risky for the insurer; and are disliked by customers. No one wants to wait days, even weeks, when it's time to repair their home or auto after catastrophic damage.

Beyond customer complaints, these legacy payment instruments also expose insurers to a number of hidden costs. Slow payments, especially non-digital payments, can become a drain in multiple ways.

1. Claims leakage

The cost of a payment is much more than the physical cost of a paper check and postage. The longer a claim remains outstanding, the more expensive it becomes. Imagine mold damage from standing water, ongoing rental car coverage, or even the cost of a claims administrator to manage an extended claim.

Confusing legacy payments can also raise the cost of a claim by forcing customer support to help sort out vendor payments tied to specific payments or track down lost or misaddressed checks. These delays and confusion can also lead to compliance issues surrounding payout deadlines. In those cases, insurers often resort to expensive wire payments, resulting in another hidden cost.