After a year with Covid-19, how has the pandemic changed insurance and is it for the better?

With more than a year of lockdowns and restrictions, the insurance industry has changed following the Covid-19 pandemic and customer experience might be the new key to success for firms.

It has been more than a year since most of the world was forced to lockdown. Fears reached fever-pitch on how the Covid-19 pandemic would impact industries, with the future of insurance among the most uncertain. The industry has been largely reliant on in-person interactions and while traditional insurance firms have been updating their legacy systems for many years, it was unclear if they would be ready for the sudden dependence on the online. However, now the dust has settled and companies have adjusted to the new world, the insurance industry has come out fairly unscathed.

Inevitably there were business interruption losses hitting major (re)insurers, but otherwise, the sector continued fairly uninterrupted. CyberCube director of consulting Jacob Palmer said, “What has fundamentally shifted, however, is the way in which insurers operate. While insurance was traditionally seen as an ‘in-person’ market (as demonstrated by the traditional heritage of Lloyd’s), we have seen insurers make the transition to home working with relative ease, with minimal impact on customer experience. Some, such as Aviva, plan for this to be a permanent move.” founder and CEO Jon Cooper echoed this, ”For society at large, this has been one of the greatest disasters in a modern history, but for carriers, it has been a great opportunity. Sales were up. Claims were down. And the tools to optimize the business for the new normal are already abundantly available. Imagine if this had happened 20 years ago without high speed internet. The entire economy would have come to a standstill, except for Clorox.”

This change to business normality forced insurers to rapidly accelerate their digitalisation efforts – transforming five year plans to five month plans. Digitalisation has become a major focus for a lot of insurance firms and InsurTechs are in the prime position. Despite the trepid market, investment into the global InsurTech sector grew in 2020 to hit a new record, FinTech Global’s data shows. In 2020, a total of $7bn was invested across 325 deals, compared to 2019, the former record funding year, when $ was invested through 273 transactions. The momentum looks to be continuing into 2021, with a total of $2.3bn having been deployed through 126 investments in the first quarter of the year.

The pandemic has increased the desire for collaboration within insurance. A study from Capgemini claimed that 67% of insurers want to collaborate with InsurTechs, while 83% of InsurTechs wish to work with insurers. The report also stated 60% of insurers and InsurTechs are interested in collaborating with BigTech firms.

dacadoo president and CEO Peter Ohnemus added, “There is no denying that Covid-19 has changed the insurance market and I believe it definitely is for the better. The problem with insurance in the (recent) past was that it had stalled on its digitisation efforts. Insurers didn’t quite grasp the need for digitisation and implementing a #wecare strategy (what we call being relevant in the stakeholder economy) as much as they do now. Life and health insurers around the globe have woken up to the fact that they no longer can be simple payors; insurance has become more relational than transactional with the current pandemic and it’s become crucial to meet consumers where they’re at now.”

With the sector now accelerating its adoption of technology Akur8 corporate development lead Astrid Noël believes it is splitting technology into two main groups. The first is “must already have”, which are cloud-based solutions or data-driven pricing tools. The rise of remote working on the back of the pandemic has forced many firms to adopt cloud-based solutions, Noël stated.

The other category of technologies are the “must adopt now.” These are the tools that offer huge transformation potential and substantial value added reservoir, which are being revealed by the pandemic. A key example of this is pricing sophistication. Noel said, “The Covid-19 crisis has induced seismic changes in traditional risk profiles and consumer behaviours. These changes have demanded strong and unprecedented reactivity from pricing teams to reflect them in their risk and demand models. As a matter of fact, well-equipped and sophisticated pricing teams have been, from far, the best-positioned to take into account these changes and to quickly reflect them.”

The rising importance of customer experience

When the virus was reaching its first peak and fear levels were rising, many companies offered their support to people in need. For example, digital insurance platform Zego offered those to have contracted coronavirus with 14 days of free cover. Compliance management platform Waymark Tech was another to offer support. The RegTech provided free access to its regulatory horizon scanning module, which helps track announcements from regulators. Speaking to FinTech Global at the time, Waymark Tech CEO Mark Holmes said, “[making] our AIaaS platform freely available was the right thing to do to support the industry.” These are just two examples of many similar instances.

Ohnemus said, “We’ve experienced how at a time when we are stripped of our most basic freedoms (such as in strict home lockdowns or quarantines), what’s most important for consumers is empathy, timely and simple communication and value-added services that helped them stay physically and mentally healthy through the pandemic. It was a time to really show their true corporate colours and offer tangible solutions to their customers’ needs. I believe insurers that have responded to those needs by now are seeing significant shifts in their acquisition, retention and satisfaction metrics.”

Cooper echoed this, “During a time like this, it really highlights the difference customer experience can make, and not just creating an experience that checks the boxes in an RFP, but rather creating one that is human-centric and designed to help people improve their lives.”

The importance of customer experience has been one of the biggest outcomes of the pandemic. As consumers become more used to streamlined online operations, like those offered by BigTechs Amazon and Google, they will likely want this at all companies. This has encouraged many firms to put emphasis on improving their customer experiences.

Noël said, “Insurers’ ability to provide the most seamless customer experience and journey possible will be one of the most essential elements in maintaining and strengthening their competitive advantage.” Furthermore, customer-centric strategies that allow for deeper personalisation will be instrumental in their success.

OneSpan senior product manager, product strategy Yan D-Beaurivage said, “Before the pandemic, most insurance companies, direct and broker models alike, were already investing significantly and racing toward providing an E2E digitized experience to their customers. The purpose was to better answer the needs of younger and emerging market segments, mainly represented by generation Y and Z consumers. The Covid-19 crisis has acted as an accelerator of this existing movement—the demand to conduct remote business became a necessity.”

That said, not everything has been smooth. D-Beaurivage stated that the majority of the sales transaction was already done remotely via phone calls. The challenge for insurers was to offer a . contactless experience at the moment of the claims, where in many cases, typically the adjusters had to adjudicate the claims in person. There is also a challenge around document notarisation, which is tough to achieve remotely. However, insurance firms are adapting to this. D-Beaurivage added, “Digitization progress for the claims departments and the availability of remote online notarization will increase operational efficiencies and improve the customer experience in a way that we will never go back to a pre-Covid world for insurance carriers.”

Insurers have adapted well during the pandemic, but Ohnemus stated that the insurers to be most successful during the pandemic were those that helped calm policyholders. Ohnemus described them as similar to air cabin crew, who are supposed to respond to a mid-flight crisis with a calm composure to reassure passengers there is a high probability everything will be fine. The least successful ones were those that entered panic mode by cutting costs, not meeting customer needs and spreading fear through their organisation. The increased importance of positive customer experience could be the future of insurance.

Ohnemus concluded, “Through this turbulent time, we’ve witnessed the successful rise of the Integrated Insurance Operator, which I firmly believe will be the new normal within the next decade. At dacadoo we define as Integrated Insurance Operators those offering a consumer-centric, digitally enabled, and fully integrated health ecosystem to meet rising consumer expectations, build trust among their members and drive loyalty and customer engagement in the long term.”

Copyright © 2021 FinTech Global

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