How COVID-19 Is Transforming Insurance Business

Coronavirus is unlike what we have seen in our lifetime, this time of the year typically we are on the road, doing most traveling in late spring, as professionals in general or for insurers. However today in a rapidly changing environment, situation is volatile out there and a lot of uncertainty.

The challenge is when data is changing so rapidly it's hard to really make any decisions based on facts, since they are constantly changing. The other way is through guesswork and insurers hate to do any guessworks.

As of now Insurers are starting to work on how to deal with this new order, work from, how to do the scenario planning, to remote working and business continuity. They are starting to realize that a comprehensive digital operating model is critical. A proper digitalization plan can help reinvent processes, improve quality and promote consistency. Digitalization of the last 10% of some key processes, are mostly on the back burner, arguable that it isn’t worth the cost to digitize. However in a world vulnerable to pandemics and shelter-in-place orders, this ignorance can cost business dearly.

According to a snap poll that usually comes from multiple research panels, insurers are keen to find what everyone else is doing in this pandemic and learn from experience and best practice.

Has other insurers and businesses formally invoked their BCP ( business continuity plan) and put it into action. We know some have formally invoked these plans, for work from home to stay connected, this is something every insurer, every employer and every business owner has to think about and put in place.

According to this survey 30% Insurers said work from home is mandatory otherwise for essential people, infra people, could avoid from the cloud, to collect mail, to cut check, out source payments, to take images etc.

Even though billing and payment is pretty non-strategic, people are coming to work to do these non-strategic work that can be outsourced.

With Covid 19 lot of insurers are looking to outsource lot of non strategic work and move to cloud, also digitize their process like payments, imaging, billing and more, these legacy process that we have trying to bring up to speed and update on priority, bring it on the cloud and digitalised processes and payment

Insurers are concerned and asking questions about.

1. What everyone is doing, have you made changes to your billing process post COVID 19 pandemic, and 90% have already done so and are required to do so
2. Second major concern is regarding sales. Are other insurers are still selling business disruption insurances, have they made any pricing or coverage change, most said we are still selling or changed guidelines.
3. What is the status of IT projects, are you postponing your projects, relocating, or putting on hold etc.

• 38% of insurers mentioned its business as usual, and they are continuing with current projects and there is no major change planned.
• 10% of insurers who took this survey mentioned they are putting hold on non essential projects.
• Another 10% said they are putting hold on new projects and postponing any new initiatives till things settle down.
• 28% of respondents said they are still think it through,
• 13% said they are prioritizing due to overload from work from home infrastructure deployment, bringing them up to speed with deploying with remote working.
• 1% Some are holding deploying of large projects due to risk involved, because people are working remotely. And are reevaluating since business is going to be slow to pick-up and a lot of projects will be on hold.

Typically Insurers are able to help people in times like this, and industry is doing a good job overall. However in absence of prior experience and no available working modeling in books or in data science to look at this kind of scenarios, you are faced with volatile and uncertain scenarios.

The better way to look at it of thinking of multiple scenarios and have a sound business continuity plan in each of the scenarios. It’s like jotting down your BCP various scenarios and putting your plan against each one of them and so what needs to be done.

According to Celent, insurers should be prepared for multiple working models including, but not limited to a Trainwreck situation.

Scenario A - where virus continues unabated even at the end of the year and we are in a prolonged lock down. No working cure is available and we faced with prolonged lockdown and minimal business & industrial activity. None of us are prepared for this scenario and its hard to comprehend the impact - It will be sure a complete Trainwreck.

Scenario B - The virus ends quickly and we're back to normal by fall this year end. We have an unprecedented level of unemployment, already over 15M are unemployed, and a lot of failed small businesses.

Scenario C - There is some respite in new cases however virus is still present, with no working cure and business are forced to reopened to survive and sustain. ( Already happening in Georgia, Texas and other states.)

Scenario D - Virus is curtailed for now, however hit us back early fall with much volatile intensity along with regular flu, a scenario already under discussion among medical experts.

Most insurers are anticipating a serious contraction, property/casualty market overall economic activity and employment levels in 2020. Consumers behavior is changing due to change in circumstances, both in commercial and personal lines.

While there will be fewer claims and losses in most lines of business, there will be serious challenges in new sales, retention, and cancellations. Also there will be real uncertainty about pandemic-related business interruption and workers’ comp claims. There will certainly be more litigation claims.

Life and benefits insurers were already facing the challenges of a persistent low-interest rate environment. That’s now compounded by the pressure of high unemployment on the benefits business and concerns about whether the face-to-face sales channel and premium-based underwriting will ever rebound.

The reduction in top-line premium will put pressure on fixed operating costs, and many companies will find they need to restructure their product offerings, service model, and organizations in late this year and early next year. They will have new products to cover new offerings to cover new services like, delivery services in commercial lines. In the long term insurers should take advantage of work from the home model. On the carrier side, there will be new products, to make money and to cover what is not covered in base products.

This pandemic has given us a long term working model applicable in our daily life for potential intervention, in our economy, A working model in which we are driving less during the week, with digitalization, it is possible. The big push and pull is how much we can shut down without creating more problems down the road, with the tools we have today it's possible. Data and processes to support people in situations, it's a great opportunity to create new products.

Based on the different scenarios here is what insurers and businesses should be doing to come up speed and plan for future.

1. Insurers should focus on BCP - business continuity planning.
2. Increase self service capability, give people ability to service themselves.
3. Implement mandatory work from home.
4. Outsourcing non strategic activity like - payment or mail collection, billing as service and other non core and non critical activities.
5. Automate and digitize as much as you can, not only to reduce cost but also increase efficiency and unwanted exposure. In some cases it will accelerate projects by sunsetting old systems and gain advantage in new projects, moving on to new systems.
6. Uptake your succession plans and ensure there is a clearly defined action plan in different scenarios.
7. Focus on capturing on underwriting rules knowledge of your experts ones who have most experience and knowledge and are most vulnerable. Put that knowledge and experience to work by creating new business rules to accelerate your use of data driven scenario planning.
8. Capturing expertise and data to put in use in different scenarios, as insurance companies we have to look at what are immediate pain points and trailing pain points. We going to talking about this is forever, we need to we can go back to normal and have and learn from in foreseeable future where did we go wrong how could anticipate it.
9. Telematics adoption and usage based insurance would be the dominant base for all auto programs that have not materialized. There are many reasons for this, but maybe the COVID-19 pandemic will be the impetus that consumers and insurers need to up adoption rates.

In the end, in the not-too-distant future, the highways will again fill up with more than medical professionals, first responders, and retail workers. Those who cling to the business structures and systems of The Before Times may not be able to adapt. But those that stay focused on “true north” goals of managing customers’ risk, meeting customers’ experience needs, and optimizing their organizational resilience will be positioned to thrive in the uncertain world ahead.Why waste the opportunity to utilize actual data to improve business outcomes.