Insurance Payment Methods: What Online Merchants Need to Know

The way insurance is paid for is changing — and fast. For e-commerce merchants across the UK and continental Europe, especially those who sell insurance products or work closely with insurers (think travel, car hire, or electronics), keeping up with how customers want to pay is crucial. From monthly instalments and card payments to open banking and account-to-account (A2A) transfers, the payment landscape is evolving in real time.

So, what do online insurance merchants need to know in 2025? We dig into it below.

Why Insurance Payments Are Not Like Regular Checkouts

Paying for insurance isn’t like buying a cup of coffee at your local café or a new pair of shoes. Insurance transactions are far more complex. For e-commerce merchants operating in this space, payments involve both incoming and outgoing flows, from premium collections to claim payouts, while also navigating compliance-heavy environments and customer expectations around convenience.

Unlike traditional e-commerce, insurance sellers must support both one-off and recurring payments depending on the policy type. A single-trip travel insurance requires a one-time payment, whereas car, health, or home insurance typically involves recurring billing that can be monthly, quarterly or yearly. On top of that, insurers are responsible for sending timely payouts for claims, which means the payment solution must be built for both directions of flow.

This added complexity is why insurance businesses can no longer treat payments as just a backend process. It is a front-end customer experience, and it matters. In times where simplicity and speed are essential to European customers, insurance merchants must implement these changes into their payment gateways.

How People Are Paying for Insurance in 2025

Nowadays, insurance payment solutions span a mix of traditional and modern methods, tailored to different policy types and customer preferences. Here is a list of methods that the customers are using to pay for insurance in 2025:

1. Recurring Card Payments
Card payments are still widely used for monthly or annual policies like car, home, or health insurance. According to Statista, as many as 102.76 billion card payments were made just in the EU in 2024.

Customers set up recurring payments using their credit or debit cards. While convenient, these methods are prone to issues like card expiry, lost or stolen cards, and higher transaction failure rates. These failures often lead to manual follow-ups, missed renewals, and customer churn. In addition, card payment processing incurs significant costs for the merchant.

2. Open Banking and Account-to-Account (A2A) Payments
With open banking, customers pay directly from their bank accounts — no cards, no delays. Payments are confirmed instantly, making them more secure and far cheaper to process. For insurers, this means fewer failures and better margins.

Depending on the product, insurers might require either a single payment, such as for travel insurance, or regular ones, such as monthly car cover. While open banking does not automatically withdraw funds like a direct debit, the process is simple enough to repeat each month, and even faster for returning customers. With Noda, customers choose their bank at checkout, authorise the payment in their banking app, and complete the purchase in seconds, making it perfect for smooth, card-free insurance payments. It is not just about collecting premiums either, as Noda also enables instant, secure payouts for claims or refunds straight to the customer’s account. The platform also includes built-in data services such as identity and income verification, helping insurers meet KYC requirements without adding extra complexity.

3. Direct debits

Direct debits allow insurers to collect payments automatically from a customer’s bank account on a set date, making them a popular choice for ongoing policies like monthly car or home insurance. Once authorised, the payment is taken without the customer needing to approve each time. While reliable for regular billing, direct debits can be slower to process, may lack the instant confirmation offered by newer methods like open banking, and are prone to chargebacks.

4. Digital Wallets
Digital wallets like Apple Pay or Google Pay are increasingly popular for one-time insurance payments. They offer a fast and frictionless experience, especially on mobile devices. However, since they still rely on underlying card infrastructure, they carry the same vulnerabilities as card payments — including high processing fees and occasional failures.

5. Buy Now Pay Later (BNPL)
Although not yet widespread, BNPL is gaining traction in insurance for higher-ticket policies such as private medical or pet insurance. Customers split annual premiums over several instalments to buy insurance at a discount price and help with affordability. Adoption remains niche, but interest is growing, especially among younger consumers looking for flexible payment terms.

What Insurance Companies Actually Need

From a merchant's perspective, the ideal payment solution for insurance must go far beyond collecting funds. First, it needs to reduce transaction costs. Insurance is a margin-sensitive business, especially in competitive lines like motor or home policies. Second, it has to ensure payment reliability. Failed recurring payments can result in lost customers or necessitate time-consuming follow-ups from customer service teams.

There is also a need for faster settlement times. Delays in fund clearance can impact liquidity and disrupt claims processing. On top of that, insurers must remain compliant with regulations around anti-money laundering, data security, and identity verification. This means that the payment solution should also support the compliance process, not add to its complexity.

Why Open Banking Is The Best Insurance Payment Method

Open banking is emerging as the ideal solution for modern insurance payment services. With overall adoption being at an all-time high (in the UK, 1 in 5 customers and small businesses use open banking), it is time for e-commerce merchants dealing in insurance to embrace this innovative payment gateway.

Open banking lets money move directly between accounts, cutting out card networks altogether. Payments go through faster, fail less often and cost far less to process. With Noda, insurers get more than just a way to collect premiums. They can pay claims or issue refunds instantly into a customer’s account, with no delays or card reversals. On top of that, Noda’s built-in identity and income checks help with onboarding, underwriting and fraud prevention. Because it is all part of the same system, insurers can keep payment and data services under one roof, making operations simpler and more efficient.

Handling Refunds and Claims

Payment processing for insurance companies includes managing claims and reimbursements — areas where Noda excels. Refunds and claim payouts are another area where open banking outperforms legacy payment methods for insurance. Traditionally, paying out claims involved traditional bank transfers, which could lead to delays, reversal errors, and disputes. With open banking, insurers can send funds instantly to the same bank account from which the premium was paid, ensuring compliance with refund regulations and improving customer satisfaction.

In regulated markets, this also simplifies the audit trail, making it easier to track payments and meet reporting obligations.

The Rise of VRP Payments

Variable recurring payments, or VRPs, are emerging as one of the most interesting advances in the world of insurance payment methods. Currently, they are only used in the UK for transferring money between a customer’s accounts. Still, the industry is working on expanding this to commercial uses such as paying merchants or service providers. This could practically allow customers to set up recurring account-to-account payments within agreed limits, so amounts could vary each month without needing constant reapproval.

For sectors like insurance, this could be a game-changer, making it possible to collect flexible monthly premiums instantly and securely without the hassle of traditional direct debits. The rollout of commercial VRPs, expected to begin in the UK in the near future for certain industries, could set a new standard for automation, reliability and customer experience, even though similar developments in the EU are not yet underway.

With the added benefits of instant confirmation and fraud protection, this new approach will set a higher standard for automation and customer experience in insurance — and redefine types of insurance payment methods for the digital age.

Final Thoughts

Insurance payments are fundamentally different from standard e-commerce checkouts. They require reliable recurring billing, fast one-off collection, secure payouts, and built-in compliance tools. Open banking is uniquely positioned to serve most of these needs.
Noda delivers a complete solution for insurance merchants, from seamless pay-ins and real-time payouts to integrated identity and income verification. By adopting open banking, insurers can future-proof their insurance payment processing, improve margins, and deliver the kind of digital experience that keeps customers loyal.

Why Choose Noda as an Insurance Payment Method?

1. Broad Bank Connectivity
   Connect with 2000+ banks in 28 countries across Europe through a single, seamless integration.
2. Low Transaction Fees
   Optimise your margins with competitive, cost-effective pricing designed for high-volume growth from 0.1%.
3. Instant Settlement
   Get paid in seconds with real-time account-to-account transfers. No intermediaries, no delays.
4. Effortless Integration
   Go live quickly using plugins for leading e-commerce platforms or flexible APIs for custom setups.
5. Multi‑Rail Payments
   Offer customers more choice by combining open banking, cards, and digital wallets in one streamlined platform.
6. No‑Code Tools
   Accept payments with ease - create payment links or QR codes without a website or integration required.
7. Pay & Go
   Combine customer identity verification and the first payment in one convenient, quick flow.
8. Hands-On Support
   Enjoy expert guidance from a dedicated manager to ensure a smooth launch and ongoing success.

If you’re ready to upgrade how your insurance business handles payments, now is the time to act. Book a demo with Noda and discover what a modern payment experience can really look like.