Extra checks before sending insurance payouts — worth it or overkill?

roarrory33

Following on from a recent thread I had about Open Banking apps, I’ve been thinking more broadly about payment safety from a cost and error-prevention point of view.

In a small claims setup, payouts are usually sent directly to the bank details provided by the claimant. It generally works fine, but there’s always a risk of mistakes (wrong details) or, in worst cases, fraud — which can be expensive to fix after the fact.

I’ve seen mention of account/name checks before sending payments, but I’m unsure how practical or cost-effective these are in real life, especially for smaller teams that don’t want to slow things down or add lots of admin.

From a money-saving angle, do these kinds of pre-payment checks tend to reduce costly errors enough to be worth it, or do they end up adding more hassle than they save?

eskbanker

If you're referring to Confirmation of Payee, it's a process that's already built in to the mechanism of setting up a new payee for transfers from participating banks (most), rather than something you choose to invoke?

Edit: I recall now, you were asking previously about companies using software to automate bulk payments, so you'd need to establish whether those include such checks…

MyRealNameToo

https://forums.moneysavingexpert.com/discussion/6666064/extra-checks-before-sending-insurance-payouts-worth-it-or-overkill

If you are manually creating payments via the banks portal then its normally built in… they're a mix of things, they do catch people who have miskeyed/written the account details so thats good but you also get false positives where you ask the person for their account they give you their wife's account details (for a legitimate reason) and so the check fails and you have to go back to them and advise the accounts in the wrong name… it then also comes down to your policy, are you happy to pay into the wife's account? If so it's a small effort to change the name and start again, if you arent then there may be a bit of a debate why you insist on paying them rather than paying their nominated recipient.

Most business are using 4 eye checks and some layering AI on top so one person creates the payment instructions, checks their own work and then a second person reviews it to make sure the details do match. This should significantly reduce human error by your team but obviously doesnt help if the person asking for payment gives you the wrong details to start with though some may argue that your duty to pay has been met by the payment made to the details they gave you and the fact they gave you the wrong details is their problem not yours.

carwheelsonfire

I think the balance probably depends on payment volume and how expensive mistakes are to fix afterwards.

For smaller teams, adding lots of manual checks can easily create more admin than it saves. But equally, one incorrect payout can take quite a bit of time to unwind if the money goes to the wrong place.

What I’m seeing more often is businesses trying to make the payment information clearer before approval rather than adding endless extra steps. Some use basic account/name checks through the bank, while others structure the payment data first using tools connected to Open Banking feeds. The aim seems to be reducing obvious errors early without slowing the whole process down too much.