How will coronavirus impact the insurance industry?
What are the major challenges and how can firms operate in this new world as effectively as possible?
By Martin Stewart : 16th of April 2020
What does the coronavirus pandemic mean for the insurance industry? The last few weeks have brought waves of uncertainty and disruption to just about every industry in the world, and insurance is no exception.
Things have changed almost beyond recognition in an incredibly short space of time, and now as insurers adapt to this new environment they’re also dealing with a unique set of demands from their customers.
One thing is for sure—it isn’t business as usual. But what exactly has changed, what are the major challenges facing insurers, and how can firms operate in this new world as effectively as possible?
The main challenges for life insurers
The impact of the virus on the life insurance industry will depend on a number of factors. Effects will vary significantly between regions and countries, and different healthcare systems will face different challenges.
Death rates currently remain relatively low, particularly in Australia, but it’s still too early to predict what will happen to life insurance premiums with a high degree of confidence. What’s clear is that for insurers, the key issues will include:
A sudden and major shift to remote work. Social distancing policies across the world are forcing businesses to rapidly adopt a work-from-home model, abandoning offices and reducing human contact to the bare minimum.
This will create a sudden demand for new technologies and working methods; fundamentally changing working conditions with flow on impacts to how customers are serviced and how future campaigns are planned. It’s been encouraging to see how little productivity has been lost within this sector thanks to the significant amount of infrastructure that was already in place to support remote working.
The new environment of social isolation will impact new businesses and client work. Agents and brokers are unable to meet face-to-face with clients, having to resort to a more remote approach instead. This will combine with the spike in customer enquiries driven by the virus, may be putting additional pressure on teams adapting to new ways of remote working.
Major and ongoing economic uncertainty. The FTSE 100 recently suffered its worst quarter since 1987, and according to the Insurance Information Institute, this isn’t going away soon: “COVID-19’s impact on global growth and the insurance industry is likely [to be] deeper and wider than the current consensus and could last well into the third quarter and beyond.”
Economic disruption on a global scale, impacting investments for insurers. For example, the EU Solvency II regime (which covers the capital EU insurance companies must hold to avoid insolvency) is especially vulnerable to market volatility.
What should insurers do?
So how can insurance firms handle this unprecedented crisis? A few steps can be taken to help weather the storm and even strengthen your image.
- Be there for your customers. Respond to customer concerns as rapidly as possible, work to allay their fears and provide guidance. Make accommodations for their financial distress, make information easier to access, and review existing processes to make them more efficient.
- Communicate regularly with your customers and audience. Use social media, emails, and blog posts to provide the right amount of helpful and reassuring communication. Don’t bombard your followers with an endless stream of information but do make the important facts easy to find.
- Prioritise employee safety by relocating those that aren’t already using a work-from-home model; supply them the necessary digital and remote services such as VOIP software and the cloud. This will involve a change to usual working processes, and the insurers that adapt best to this new model will be those that invest in smart, secure digital solutions and plan for the long-term.
- Increase the use of remote communication channels like chatbots, live chat, and phones to continue helping customers without meeting face-to-face. For insurers whose customers are owned by agents or brokers, there will be an additional need to improve digital collaboration capabilities with them, too.
- Begin the process of implementing digitised workflows and eSignatures within the application and underwriting processes. This will help speed policy submission and approvals with a minimum of direct human contact.
There are also positive outcomes
It’s possible that some insurers are feeling deep concern over this unfolding crisis. And yet, some lasting positives may emerge from the wreckage of this pandemic, leading to permanent improvements for the insurance industry.
Some possible silver linings include:
- Improved telehealth options and a much more mature infrastructure for remote collaboration between insurers and customers, and within firms.
- People reconsidering their insurance needs, resulting in more business for insurers. For example, in the wake of the SARS crisis critical illness policy sales spiked in Asia.
- A push towards a more agile, digital, and convenient insurance industry with major upsides for insurers and customers.