Evolving Trends In Insurance In A Post-Covid-19 World
In what was to be one of the most significant sports extravaganzas of the world, the Tokyo Summer Olympics 2020 was postponed after much dithering to 2021. Insurance firm Swiss Re faced a $250m (approximately £215m) loss if the event was canceled instead of being delayed. Nonetheless, the firm faces “mid-three-digit” exposures from other event cancellations. This is just a tip of the iceberg of the massive losses the Insurance sector is staring at due to COVID-19’s onset.
With the COVID-19 pandemic hitting most of the globe, so far, 1,954,724 people have been infected and 126,140 dead in its wake as of Apr 16, 2020. Most businesses are slowing down and experiencing tremendous losses due to restrictions imposed on the movement of goods and people, as lockdowns are part of the regulatory compliance to fight COVID.
The insurance industry —which, in the US alone, accounts for $1.2 trillion—works as the ‘shock absorber’ or ‘suspension’ of the economy vehicle. Hence, it is inevitable that during COVID-19’s economic disruption across the world, it has a vital role to play. In this article, we’ll examine the impact of the global pandemic on the insurance sector and also understand its response to the challenge.
The Insurance Information Institute, in its first-quarter “Global macro outlook,” reported that COVID-19’s impact on global growth and the insurance industry is likely deeper and broader than the current consensus and could last well into the third quarter and beyond.
Against such an outlook, here’s a view on the overarching trends in the sector in a post-COVID-19 scenario:
Rise in Claim backlogs/ Rejections
The impact of rising claims can be seen in all the stages of the claims process: Claim registration, Claim Adjudication, and Claim Payment. These may lead to Claim backlogs/rejections. There may also be delays in claim payment due to staff unavailability/ limited knowledge leading to customer’s dissatisfaction/ litigations.
Focus: Insurance firms must now focus on implementing Intelligent Automation & Digitalization for efficient Claim processing/adjudication, underwriting, etc. to provide better service levels to customers.
This is where increased adaption of enhanced analytics tools like OCR (Optical Character Recognition), (Computer Vision) CV, NLP (Natural Language Processing), and Synthetic Data Preparation can help the insurers scale.
A direct fallout of the troubled times is an increase in fraudulent claims. Learn how BRIDGEi2i adopted its Claims Fraud ManagementTM Solution to meet this challenge.
Changes in Underwriting/ Sales
The industry will see broad underwriting changes as a result of the pandemic. There will be increased/modified underwriting scrutiny, and insurers have to change their underwriting strategy as a result. A potential shift from traditional channels to digital channels from product recommendations to underwriting is expected.
Focus: Some insurance products may do better with Direct Sales via digital sales channels. Helping the traditional channels with broker/agent enablement with account/ customer intelligence with digital tools and better customer insights will be needed. Customer service will have to look at capacity planning, emerging topics & sentiments, and try a digital offload wherever required.
Change to a Remote Working Process
This would mean increased digitalization of processes and workflows. Companies have to figure out strategies to maintain productivity and trust while coping up with remote working for the long haul. Robust Information Security and audit processes will have to be built as a result.
Focus: Insurers have to review existing policies inclusions/exclusions and review coverages to adapt to the changes.
Changes in Policy/Product
During and after the crisis, insurers will have to initiate policy/product changes—including what to cover and how to price it. They may add to address coverage gaps that are currently missing and introduce Pandemic/Epidemic covered pricing on their products.
Focus: Insurers have to focus on Repricing, Rate calibration/Reserving. They will also have to calculate exposure estimation loss prediction (using structured internal data & proxy external signals) –by sub-industry, LoBs, and regions. They would also need the technology, platform, and assistance to usher in digital transformation to enable these products.
‘We deeply understand the challenges the industry is facing and can help them through the crisis by leveraging our sophisticated AI & machine learning capabilities and domain contextualization to deploy accelerators that are fully equipped to provide enhanced customer experience, drive better sales performance & effectiveness”, says Anirban Chaudhury, VP Insurance BRIDGEi2i.
With a renewed focus on these areas, insurers can hopefully be able to adapt to the changes and continue to cushion the various sectors of the economy from risks and shocks.
Learn more about how analytics can address insurance challenges!