An Insurance Leader’s Guide to Reducing Payment Declines

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Key Takeaways

  • Insurance payment declines are a customer experience, retention and compliance problem—not just a billing issue—because failed premiums can quickly lead to policy lapses and involuntary churn.
  • The most effective strategies combine prevention (reminders, ACH, account verification, Account Updater) with smart, mostly invisible recovery tactics and empathetic communication when policyholders must get involved.
  • Modern platforms paired with powerful tools help insurers reduce declines, cut manual work and protect premium revenue across the entire policyholder journey.

Payment failures are problematic for all businesses, but the consequences are particularly harmful for insurance companies and policyholders. Insurance payment declines can cause policy cancellations that decrease revenue and leave customers unprotected from catastrophic events.

Even if the policy is later reinstated, policyholders fed up with payment friction may switch insurers, reducing customer lifetime value. To protect and retain clients and revenue, insurers need effective strategies—and a modern online payments platform—to reduce insurance premium payment declines.

 

Why insurance payment declines hurt more than you think

When insurance premium payments fail, they set off a chain reaction of customer frustration, operational headaches and financial losses that erode an insurer’s profitability.

Payment friction damages customer experience: In an industry where “peace of mind” is the core product, online payment friction is particularly damaging because it forces the policyholder to do the heavy lifting during a high-stress moment. When communication regarding payment declines is vague (“payment error”), impersonal and arrives a week later by snail mail, customers must scramble to identify and fix the problem before the grace period ends. Paying bills is often the only contact policyholders have with the insurer, so a stressful payment experience may be the deciding factor about whether to switch providers.

Lapsed coverage leads to churn and revenue loss: If an insurance premium payment is declined and the customer fails to remedy the situation within the grace period, the policy is canceled and insurance coverage terminates. This involuntary churn results in a complete loss of future revenue from that customer, decreasing investment income from float. Even if the customer’s policy is reinstated, the frustration and hassles may send the policyholder shopping for another carrier (i.e., voluntary churn).

Payment failures increase operational expenses: Tending to insurance payment declines requires costly internal processes:

  • Policyholder communications (i.e., dunning management)
  • Payment retries
  • Reinstatement

Compliance risk: In many states, property and casualty insurers have specific regulatory requirements for notifying customers before policy cancellation. Failed payments complicate this process, increasing the risk of compliance errors and potential regulatory penalties.

 

Top causes of premium payment failures

Payment declines may be due to policyholder issues, technical/system failures, or fraud/risk flags:

  • Insufficient funds: The policyholder’s bank account doesn’t have enough money to cover the premium, or the premium exceeds the available credit card limit.
  • Expired or cancelled card: When the card used for recurring payments is no longer valid, the premium payment will fail. The typical life span of a credit card is about three years before it expires or becomes lost or stolen.
  • Invalid payment data (technical error): The payment information (e.g., bank account or routing number, credit card number, CVV or expiration date) was entered incorrectly by the customer or contains a technical error that prevents the payment gateway from processing it.
  • Technical glitches: Issues arise with the payment gateway, processor or card network.
  • Fraud detection/false declines: The issuing bank’s fraud prevention system flags a legitimate transaction as suspicious.

 

Best practices to reduce declines and retain policyholders

The best way to retain clients is to deliver a more convenient online payment experience. Follow these best practices to improve CX and prevent payment declines:

Send automated payment reminders well before the premium due date. If the reminder arrives the day before payment is due, customers may not have enough time to be sure there’s enough money in their account to cover the premium.

Encourage policyholders to pay via automated clearing house (ACH) instead of credit card. Because bank accounts are typically held for 14 years (meaning account numbers don’t change as often as credit card numbers), ACH transactions have lower decline rates.

Offer flexible payment plans and due dates. Make insurance premiums more budget-friendly by allowing policyholders to spread out payments (e.g., monthly, quarterly or biannual payments). Offer paycheck aligned plans that match customers’ pay dates.

Use a card account updater service. An account updater service automatically updates expired, replaced or reissued card credentials with the card network, eliminating the need for customers to manually refresh their payment details.

Implement an account verification solution. Verify the bank account and routing number for ACH transactions to reduce manual errors at the point of capture and reduce bad checks prior to processing.

Take advantage of payment orchestration. Use a system that intelligently routes payment attempts through different processors or networks if an initial attempt fails, sometimes leading to a successful transaction.

 

How to recover failed payments without damaging relationships

Payment declines may still occur, despite your best efforts to prevent them. When they do, you need to tread lightly to resolve the problem without pushing customers away.

Start with “invisible” recovery tactics. The best way to preserve a relationship is to fix the payment issue before the customer even realizes there is a problem.

Use a payment recovery service. When insurance premium payment fails due to insufficient funds, a payment recovery service automates and optimizes the process of reattempting and collecting payment, without the customer’s involvement.

Apply intelligent retry logic. The best recovery systems employ a machine-learning-driven process that determines the optimal moment to re-attempt a declined transaction. For example, debit card retries may be most successful at 12:01 AM, when banks refresh daily balances. Or the system may use payday logic, retrying payments on the 1st or 15th of the month.

  • Remove friction. If you must involve policyholders in recovery efforts, communicate promptly, transparently and empathetically—and make it easy for the customer to fix the payment problem.
  • Issue real-time payment decline alerts. Instantly notify customers via their preferred channel (phone, text or email) when a payment fails, explaining the reason (e.g., “Card declined due to insufficient funds”). Keep the tone friendly and supportive.
  • Include a one-click payment link. Make it simple for policyholders to update their payment method or make a one-time payment, without having to log in to the portal.
  • Allow partial premium payments to prevent policy lapses. Personalized messages and solutions are more effective than generic outreach.

 

CSG Forte: the best policy for insurance payment success

A modern online payment processing platform for insurers simplifies payments and revenue management. CSG Forte is your one-stop solution for accepting payments in person, by phone or online. Payment validation, card updater and NSF Check Recovery Services reduce insurance payment declines, boosting retention and revenue.

CSG Xponent, our customer journey management solution, improves policyholder CX by sending timely, personalized messages—such as payment reminders and claims status updates—via each customer’s preferred channel.

Ready to simplify payments? Let’s chat—reach out to our Forte team today and discover how we can help your business boost retention and revenue.

 

Frequently Asked Questions

1. What are the most common reasons insurance premium payments fail?

The main drivers are:

  • Insufficient funds or credit limit on the policyholder’s account when the premium is due.
  • Expired, replaced or cancelled cards used for recurring payments.
  • Incorrect or incomplete payment details, such as mistyped account or routing numbers, card number, CVV or expiration date.
  • Technical issues at the gateway, processor or network level that temporarily prevent authorization.
  • Fraud/risk rules and false positives, where the issuer flags a legitimate transaction as suspicious and declines it.

2. How does Account Updater reduce card declines for insurers?

Account Updater automatically refreshes stored card details for participating Visa, Mastercard and Discover cards when those cards are reissued, updated or closed. Instead of a recurring premium failing because the old card on file has expired or been replaced, CSG Forte:

  • receives updated card data from the card networks,
  • matches it to tokenized payment methods on file, and
  • updates the token with the new account number or expiration date.

This reduces declines due to outdated card credentials and lets many recurring premiums continue without the policyholder needing to call in or log into a portal to update their card.

3. Can CSG Forte BillPay integrate with my existing policy admin system?

Yes. CSG Forte BillPay is designed to sit alongside your existing policy admin, billing and claims platforms, not replace them. Insurers can:

  • use REST APIs and/or file-based integrations to exchange data,
  • synchronize balances, payment status and settlement details, and
  • feed reconciliation files and reports into downstream finance and policy systems.

The result is a more modern payment experience without a rip-and-replace of your core insurance systems.

4. What payment methods does CSG Forte support for insurance premiums?

CSG Forte supports a broad mix of payment methods insurers typically need, including:

  • credit and debit cards,
  • ACH/eCheck from bank accounts, and
  • leading digital wallets such as Apple Pay, Google Pay, PayPal and Venmo.

These can be offered across channels like web and mobile portals, IVR and call center payments, text-to-pay and in-person or agent-assisted payments, so policyholders can pay in the way that’s most convenient to them.

5. How can insurers track and improve payment recovery rates?

To manage and improve recovery, insurers should:

  • Track decline and failure rates by channel and payment method (card vs. ACH).
  • Measure recovery rate by value (how much failed premium revenue is successfully collected) and write-off percentage (what’s never recovered).
  • Monitor time to recovery (TTR)—the days from first decline to successful collection.
  • Compare automatic vs. manual recovery, aiming to shift more recovery to automated tools (Account Updater, intelligent retries, recovery services) and reduce labor-intensive outreach.

Improvement typically comes from:

  • strengthening prevention (payment reminders, ACH incentives, account verification, Account Updater),
  • implementing smart retry and recovery logic, and
  • using analytics to refine dunning strategies and channel mix over time.