COVID-19 has impacted regions across the globe, creating a whirlwind effect on consumers, businesses, and the entire workforce. Mid-sized property and casualty insurance companies have not been spared. Today’s market volatility is affecting these businesses, and technology has the potential to transform how workers adjust to the new normal of working. 

The insurance sector, both personal and business, could see a slightly delayed impact from the coronavirus spreading, due to a predicted shift in policy adjustments and resulting premium declines, and volume of claims being processed. The health and safety of workforces and clients remain a top priority for now. In parallel, there is a pertinent need for ensuring insurance companies remain operational and that their clients continue to be serviced. Small and mid-sized insurers are at risk of losing their customers to the insurance giants. Therefore, the need to cross-sell to existing customers is essential, along with enhancing the customer experience.

Impact on insurance premiums

With many businesses now closed either temporarily or permanently, and the resulting record-breaking numbers of employees now on unemployment, furloughed, or facing pay cuts will result in a direct impact on personal insurance policy premiums.

Take the automobile insurance industry, for example. Due to the short-term reduction in the number of vehicles on-road during the lockdown, the number of road collisions, hazards and auto thefts have reduced. However, the auto insurers will be impacted as the policyholders start to think “Why must I pay for my car insurance if I am not driving?” Insurance-as-a-service and usage-based insurance will be the new trend, and insurers will charge a premium based on customer’s driving duration and behavior.

On the other hand, home insurance policyholders will spend more time at home, leading to increased wear and tear with the same premium amount. This will not only increase the pay-outs but will also push the insurers to adjust claims digitally while ensuring high accuracy and superior experience.

The commercial insurance sector will also see a long-lasting impact from the temporary changes due to the pandemic, businesses going into limbo, or functioning at a smaller scale during lockdowns. Insurance companies will see a financial impact from businesses needing to reduce operating expenses, including lowering insurance premiums to manage losses that have occurred as a result of this market volatility. Companies will be looking for ways to save costs in every area of the organization. They may take measures like reducing real estate and facility expenses for leasing, rentals, and other related on-site office operating costs and capital projects.

Key considerations for insurance organizations today

What are the areas that the c-suite of the insurance industry should consider right now?

Business remodelling of Core vs Context: Historically, global crises have pushed organizations to alter business strategies and play by new rules. With the ongoing pandemic, insurers will need to profoundly change the way business is run. Identifying core versus context will be critical. Leaner organizations focusing on core along with vendors focusing on the support business functions will help achieve cost efficiency and faster time to market. Identifying the right partners to support IT, Operations, Marketing and other business functions will be imperative. This, along with a robust governance model, will empower insurers to recover faster and be resilient to face any business disruptions.

Vendor strategy: Organizations will be carefully evaluating their partners for critical business functions and will look to remove redundancies by consolidating and moving to multi-service vendors that can provide higher efficiency, lower cost, and improved service levels. Insurance companies will find partners offering innovative and advanced technologies more appealing, as that will help enable optimized operations at reduced costs, thus improving their competitive advantage. And partners that have more experience implementing these solutions and better teams of experienced subject matter experts are sure to win during this mass consolidation process. 

Continuity: Insurance businesses cannot afford to have a lag time in processing policies and claims. Many large projects now need to be put on hold with changing market conditions, and capital expenses will need longer review cycles. It is expected that insurance claims will surge, yet policyholders will still expect timely processing, if not quicker turnarounds. As claims inspectors will not be able to travel to on-site inspections as frequently as pre-COVID-19, digital technologies will come into play to conduct virtual evaluations. Now, more than ever before, there is a need for cloud collaboration and digital transformation tools to enable virtual productivity and ensure digital communications for operations to continue.

Thanks to a mobile-first approach, technical infrastructure, and direct to consumer method, the extent of the technological lead that digitalized insurers will have over traditional insurers will be quite an eye-opener for all. With the shift to remote workforces and organizations revamping their operations to continue uninterrupted through these challenging times, transformational technologies and digital resources are already in high demand for insurance businesses of all types and sizes. The COVID-19 situation brings us an opportunity to evaluate the advantages of a digitally augmented insurance process. 

Insurers must start adopting automation, analytics, AI, machine learning and digital to sustain their businesses in the post-COVID-19 world. Delivering a superior customer experience will be a key differentiating factor amongst insurers to attract customers. Digital and mobile platforms used by insurers will have to provide a top-notch user interface, seamless navigation, self-service functionalities and intelligent chatbots for customers to rely on the new way of insurance entirely. 

Even though COVID-19 has posed a considerable risk to the insurance industry, it must be seen as an opportunity to identify how to build resilience and better shape our businesses for a post-crisis world to emerge stronger than ever. 

Learn more about how insurers can mitigate the impact of COVID-19 to ensure business continuity. 

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Malay Verma

Posted by Malay Verma

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